> Rents jumped 30.4% nationwide between 2019 and 2023
I don't understand how this isn't a major national emergency. The fact that your average voter cares more about, say, immigration, than this problem is absolutely ludicrous
It is a major national emergency, but average voters don't care about it, because almost no politician is willing to address it -- there's no one to vote for, who would try to fix it.
Even politicians who are struggling with this specific issue themselves refuse to address it. (Members of Congress struggling to afford to maintain housing on $174k salaries, would rather petition for more money, than to make housing more affordable)
It's 18 minutes and 37 seconds of your time. I encourage you to watch it. The answer to the question Professor Galloway asks (I won't spoil it) is a resounding "no", based on policy decisions being made.
> The median age of voting House lawmakers is 57.9 years, down from 58.9 in the 117th Congress (2021-22), 58.0 in the 116th (2019-20) and 58.4 in the 115th (2017-18). The new Senate’s median age, on the other hand, is 65.3 years, up from 64.8 in the 117th Congress, 63.6 in the 116th and 62.4 in the 115th.
A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it ...
An important scientific innovation rarely makes its way by gradually winning over and converting its opponents: it rarely happens that Saul becomes Paul. What does happen is that its opponents gradually die out, and that the growing generation is familiarized with the ideas from the beginning: another instance of the fact that the future lies with the youth.
It's an observation, not an proposal. And its are worrisome one if true, because the young people are constantly exposed to quiet extreme opinions, lies and outrage influencers etc.
I.e. we've got people unironically saying they'd rather have their kids encounter a brown bear in the woods then an unknown man. That's how delusional people are becoming.
If the observation holds true, then the next 60+ years are basically locked into getting extremely bad...
That seems exceptionally high, and maybe true in some areas, but in others a "total home" permit is a flat fee on the final price, and that flat fee isn't 60%.
I think Galloway missed the mark on new housing construction (he's right wrt supply, but falls short wrt causes, from my quick review of the talk he may have been scoping to Vancouver BC specifically), there is a ton of nuance. It is a combination of permitting, zoning ("NIMBY/YIMBY" here fore brevity), cost of capital, and builders incentivized to deliver supply only so quickly.
Part of it is also that trying to solve local problems at the federal level can often just result in more insanity.
Around here from empty lot to built house is about 6 months, and that's within an hour of a major airport.
However, the builders are taking relatively little risk on each house/development, because if it falls through (unlikely) they're only out one house, and might lose a small amount or just hold the land and wait.
When the only developments you can do are multi-million, the risks now rise.
Homeowners still make up the majority of voters by a pretty significant margin [0]. And one could argue that immigration is related, which is a serious problem in Canada, whereas there are much better solutions than curbing immigration in the US (increasing supply).
The "average" person that votes for national politicians (specifically those from swing states) are likely not being impacted by higher rents.
In fact, a significant majority of the voters (and non voters by not voting) themselves are likely responsible for voting for local government leaders that intentionally reduce supply of housing.
The root cause being that once someone is on track to owning property or already owns property, they are then incentivized to not want those below them on the socioeconomic ladder near them.
In the UK, hilariously we've gone the other way by ramping up regulations on landlords to the extent that tons are simply exiting the market.
To name a few: making evictions much harder; changing tax law so that mortgage interest isn't fully allowable; aggressive energy efficiency requirements that I don't even see as worth it as an owner occupier; HMO regulations preventing students etc sharing a house; the list goes on.
All of this at a time in which mortgage interest rates (generally only fixed for a few years in the UK) have quadrupled and net immigration is going gangbusters.
There is a pervasive mindset that landlords should be "punished". Well, they have been, and the result is that they're leaving the market - if you can't afford to buy, you're now competing against far more people in a supply restricted market.
California is similar. Its progressive caucus does everything possible to make it risky and expensive to be a landlord, then acts puzzled when rents go up and tenants have a hard time finding a place.
Yea, they're disincentivizing the wrong thing. It should be difficult and expensive to own multiple properties, regardless of whether or not you are renting them out. And it should be progressively (quadratically) more difficult and expensive to own the next property, the more properties you already own. That's the evil here: Single entities owning hundreds of properties for the purpose of value extraction rather than to live in.
You're falling into the same trap. Doing that would mean indirectly that renting out properties should be disincentivised.
Do that and the market price for rentals will increase as no-one wants to do it. The only rentals on the market will then be people who temporarily move, until they sell up, but even that will dry up as they won't be able to find anywhere to rent on the other side.
You don't want a world in which renting is twice (or more) as expensive as buying.
We should disincentivize landlording and renting by both 1. making it harder to landlord and 2. reducing/eliminating the barriers that drive people to rent: home prices, down payments, closing costs and fees, the real estate market itself being illiquid, the variable nature of home-related expenses.
If it was as easy and cheap to own as it is to rent, and if homeowners weren't so locked into their owned homes, then there would be little reason to rent.
That's not a world I want to live in as it would have made it impossible for me to study at University, impossible for me to start my career, impossible for me to leave my hometown, and many other things.
It's honestly somewhat terrifying to see skyscrapers flying up in my neighborhood. You'd think I'd be delighted, increased supply should decrease prices, right? Only, my kid is having a terrible time in school in large part because the student:teacher, and student:classroom ratios have been flying up as well. For all the dozens of luxury condo towers we're building, we are not building out commensurate services for the kids who will inevitably occupy those towers.
Many years ago, my dad worked down in Dallas. And there were so many people moving there, that schools had classrooms in trailers while they built new, larger schools. And then when those larger schools were completed, so many people had kept moving that they still had classrooms in trailers. I don’t fully understand why planning for growth is so hard. I believe that it is, I just don’t get it.
More likely building them. It's zoning policy that makes sure those homes are overpriced, oversized, and out of reach of most people looking to transition into home ownership.
From the rules: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith. "
The OP meant "available supply" or "relative supply". Assuming they meant "absolute supply" feels like it fails this rule on your part.
So if I say "supply" when I mean "demand", everyone should just disregard what I actually said and assume I actually know what I'm talking about? Words matter
Higher demand leads to higher prices and doesn't lead to anything become net-net cheaper. That's a supply-side thing entirely and usually requires a massive regulatory or technological change.
Super high gasoline production today doesn't change the fact that it was so cheap in the past they would burn it off to get rid of it.
> why am I being downvoted for pointing out a flaw in the premise I'm responding to?
This is not a good look for HN, but that's what you get in just about any discussion of economics on here. You're 100% correct, and the post you're responding to makes a statement that's at odds with everything we know about economics, with no elaboration.
HN has a predominantly progressive audience that tends to view perspectives challenging their idealistic vision as misguided or offensive. When faced with specific, pointed issues that their position may not adequately address, some users feel compelled to downvote or suppress these viewpoints rather than engaging in constructive dialogue to find solutions. They seem to struggle with the notion of not having all the answers. Even expressing this sentiment sounds hyperbolic, but the evidence appears quite clear when observing discussions here and elsewhere online.
The wording is imprecise. They meant, immigrants live somewhere, so there wind up being fewer places in the available supply.
You're being downvoted for being so quick to jump on an apparent flaw, without seeming to have made much of an attempt to understand the actual point. HN is a place for thoughtful discussion, not "You worded it wrong! Gotcha!"
(I know, I'm supposed to choose to interpret your position charitably, too. I leave open the possibility that you truly didn't see their point. But I found the GP's actual point really obvious, despite the imprecise wording, so I'm really having to struggle to do so...)
the wording is important! We're talking an issue of economics, so when we say supply when we really mean demand, that deserves to be corrected. Fixing a supply issue looks very different from fixing a demand issue. I thought maybe OP had some reasoning as to how he meant what he said, which is why I asked the question
Thoughtful discussion =/= pointing out flawed premises
The premise is, given an inelastic supply of housing, more immigrants means more of the supply occupied by them, leaving less of the supply available for non-immigrants. Point out a flaw in that, if you see one.
Provided 10 citizens occupied all 10 houses the supply was 0 and remained 0 so it could not decrease even more since there is no negative supply. But if any of the houses had been for rent then immigrants moving into them decreased the supply of houses for rent, pretty straightforward.
No, supply in this case is the number of units available for rent, units being rented are unavailable on the market. Same as real estate market, when they talk about housing supply they don't count houses that are already sold.
In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual.https://en.wikipedia.org/wiki/Supply_(economics)
The powers that be would rather you quibble over inconsequential immigration than notice the other hand reaching into your wallet. It’s just that simple.
Why are you citing homeownership stats? I saw fox news on tv in public recently. The headline cited “millions of migrants overwhelming border.” These are the powers that be who I am referring to. The powers who craft those unhinged headlines and also stand to benefit in some way by entrenching those headlines into the formative minds of their dedicated political base.
I solved this problem by finding a place with no fire/building code inspections and built a shack for 40k.
People build whatever here and all the stuff paranoid people claim would happen, didn't. Code inspections eliminated 20 years ago.
I imagine the code scam and it's costs result in untold deaths and exposure, or money lost that could have been spent on healthcare, education, or healthy foods .
I've been in places of the country like that, and it's even odds if houses from > 50 years ago are falling over due to poor framing, etc.
Having said that, we built a house in California, where the NIMBYs have weaponized code enforcement, and we could have built the same house (to higher quality and lower environmental impact) for about half the price and in half the time if it weren't for the planning commission.
The time mattered a lot, since that meant we paid rent + mortgage interest for an extra year.
To add insult to injury, the building inspectors missed all sorts of obvious problems, and the planning commission approved plans with gaping issues. I don't think they found anything that improved the house itself, but they definitely repeatedly rejected permit applications, and failed inspections for nonsense reasons.
So, in true Monty Python style, we'd have been better off financially if we'd built a house or two that fell over, sank into the swamp, etc.
Weaponized bureaucracy may be the #1 thing holding this country back, and I don't see a good path forward. Entrenched interests are just that, entrenched. Outside of an extreme strongman gaining political power, how do you get past the plague of a thousand little fiefdoms all demanding their toll?
I guess the best way (not an option anymore in many places) is to not let the bureaucracy take hold to begin with. Because once it exists, it will defend and expand itself forever.
I have a friend who bought land in my community (suburbanish/ruralish California) with the intention of building his "dream home" and moving in. He's finding that the costs of permitting, studies, hearings, inspections, engineering, and other bureaucracy are about 1.5X what building the actual structure will cost. Granted, he should have done more research first before buying the land, but he didn't and now the land may just stay vacant forever or until he finds a new "sucker" buyer for it. It should be dead simple. Buy the property, start pouring the foundation the next week.
For starters, the city council and state legislator should set rules so that most things don't get a public hearing. You can't NIMBY if you are not even invited stick your nose in someone else's business.
100%. Issues with planing/zoning should be addressed legislatively and not on a case-by-case basis in a room full of geriatrics with nothing better to do than pull the ladder out from behind them
Public hearings actually sounds nice and democratic, if it's not just a simple vote but a proper debate with a requirement to provide objective arguments, where personal preferences and select issues (like cost of property going down) are explicitly rejected. In such scenario it should be possible to differentiate between NIMBY "I've got my things the way I like it and I want to keep everything just as it is, at least until I decide to sell" and sane "this is actually a bad idea to build and here's a proof why." It requires an independent and unbiased moderator and well thought out protocols (to avoid abuse), though.
Problem is, only people with an excess of time on their hands can participate, which is totally undemocratic. Just because a bunch of boomers are retired and have nothing better to do doesn't mean they represent the will of constituents. People with jobs, children, school, etc are effectively not able to participate, which is why we have elections where these things should be decided
Good point, thank you! Move it online and make it async (collect the arguments for a set period of time, then debate it over), or that's too weird or possibly exclusive for non-technical folks? (And using traditional mail is probably going to be too slow for anything meaningful)
The problem I see with legislative approach (esp. if it's a bureaucracy - unelected officials making decisions), is that they could be biased (e.g. lobbied) too, representing the interests of developers - which can be good in some cases (The Dog in the Manger NIMBY areas), but can be bad in other situations. There must be some middle grounds.
There are many different ways to do code and enforcement. CA does a lot of things that are not good. Code should be prescriptive - do this and it will pass - that way all builders know the rules and can do things. Most buildings the planning commission should have zero say - the builder already has rights to build what they want to build. Sometimes they may go in and ask for an exception, but that should be less than 10% of all buildings - if it is more you have your zoning rules wrong.
I've been in places with code enforcement (at least the dollar sign side) up the wazooo and anything 50+ has a 50/50 chance of being a shithole.
Perhaps a law requiring that every municipality have a "standard plan" for a 1x, duplex, quad, and 10 unit building that cannot have any disapprovals once the lot is passed.
Are US fire/building codes tend to require some costly processes and/or materials that can be argued to be sort of a diminishing return, or are they're more of a sanity thing, like using GFCI outlets in wet rooms or using fire-retardant materials?
Some time ago, outside of the US, I rewired my grandpa's old shack once, which was gradually built from whatever he had at hand back then (totally not to any code, like literal twists of copper and aluminium wires, idk how that shit held up for over 60 years), and the local code was mostly a bunch of "do things the right way please, don't do stupid shit"-grade standards that totally made sense to me. Plus some local opinionated defaults (so anyone looking at something wouldn't be caught by surprise). Although, I haven't went through any formal inspections (only unofficial LGTM nod from a friendly certified electrician), just replaced obvious "to scared to live here" hazards with less obvious ones.
But I have no idea about the US codes and how complicated those are.
The codes can be a bit of a problem but it's usually minor (like requiring sprinklers where they didn't before, adds $10k, etc - though enough of these and it adds up).
In most places its the bureaucracy - sometimes two cities with identical rules on the books will be completely different, because one is using permits and permit re-application fees as a major budget item, the other has one inspector who is always gone fishing.
Generally US code is good. Sometimes perhaps a bit too strict (read expensive to follow), but the rules are clear and built for engineering/safety reasons.
However US zoning is often a mess. Often you are not allowed to build something you might want to because the neighbors say no.
The US broadly does not have residential building codes; that's a job that is generally left to the States.
And some States have not elected to enact building codes, leaving that responsibility for bodies like cities and counties.
And some cities and counties within those states have also not enacted building codes, or they might even do their own thing.
So, it's largely impossible to generalize a thing like that in the US, where we've got 50 different states, ~3,000 counties within those states, and nearly innumerable cities within those counties.
A person in Chicago, Illinois (home of the Great Chicago Fire) will have a very different set of rules in their area than a person in Meigs County, Ohio (which is approximately "what rules?") would.
I've been saying for years that regulation is written for the wealthy.
Someone who will never be able to afford a home doesn't give a fuck if their wiring has an 0.1% chance of going wrong or if their bedroom has a window or whatever. It's better than a tent or a shitty landlord, and it's how most people lived only a couple of generations ago.
> result in untold deaths and exposure, or money lost that could have been spent on healthcare, education, or healthy foods
This type of policy often get so entrenched precised because its benefits are visible and wildly publicized in such cases of disaster, whereas its downsides are hidden (by all the people who lose out on having a home of any kind because they cannot afford the higher costs of code-burdened construction). It's the political equivalent of "privatize the profits, socialize the losses".
The real minimum standard of housing is not what is mandated by code; it's sleeping on the street.
Perhaps I should have brought up the Kowloon Walled City then.
We have real world case studies of situations where building code didn't exist and the outcome wasn't a magical utopia for lower income housing.
There are plenty of ways to increase housing supply and lower costs that don't compromise on building code, safety, livability, etc.
The government as a whole has many levers it can, should, and does pull: zoning and planning reform, tax breaks for affordable developments, supporting/subsidizing more people getting into trade jobs, etc.
But those levers should not include letting people build sketchy shacks piled up on top of each other.
Where would the people who lived in Kowloon Walled City have lived instead, had it not existed? That's the question. Four drafty walls and a roof that sometimes leaks is better than none.
> building code didn't exist and the outcome wasn't a magical utopia for lower income housing
Well, yes, a magical utopia isn't going to exist no matter what we do.
> those levers should not include letting people build sketchy shacks piled up on top of each other
In the US, building codes mandates a floor in building quality (and therefore the price) that goes far, far beyond "sketchy shacks", and zoning in large parts of the country simply forbids high-density (and therefore more cost-effective) residences.
As a concrete example of the former, the 2020 National Electrical Code mandated that outdoor HVAC units (e.g. the condenser that sits outside of the house) be protected by ground-fault circuit interrupters. This turned out to hopelessly front-run market reality, because existing GFCI breakers caused nuisance trips all the time when applied to HVAC equipment; so much so that the NFPA walked it back and issued an exemption to this rule until late 2026, when hopefully better breakers can be on the market. But in the meantime, this caused additional expense, delays, and uncertainty in homebuilding. This is just one minor example out of countless additions to the various building codes in recent years.
Of course, the people who write such codes like to say that "every line is written in blood". But remember, making something safe, like anything else, doesn't come without a cost. There is no free lunch, and everything is a tradeoff. We can build an amazingly well-insulated, net-zero house that is very comfortable to live in, has no VOCs, will never cause an electric shock to an occupant, will not catch fire, etc. for $5,000 a square foot; but approximately nobody will be able to afford such a house.
> The government as a whole has many levers it can, should, and does pull
Often times they're not levers, they're ratchets ;-)
If you live in the US you are wealthy by world standards. Most people reading this live in a country where they can say the same. if "their wiring has an 0.1% chance of going wrong" implies you have wiring in the first place - which is not a given. If you have wiring you should make it safe, it doesn't cost much more to do it right. "if their bedroom has a window" - if you live where the climate is tropical you care.
You say this but it's death by a thousand cuts, tons of building code is crap like "a kitchen has to have an extractor fan" because you know, opening a window like Grandma did isn't good enough, wealthy people care about air pollution because they can afford to. Then there's zoning.
Buying some tools, using some common sense and building a structure on a plot of land is accessible.
Once you do everything "by the book" and allow no room for gradual upgrades (it all has to be there from day 1) it's now a profession and is essentially out of reach of the average person.
I'm not in the US but I can afford to buy multiple homes now as a result of aggressively pursuing wealth when I was younger. Not everyone is in that position, most people are bus drivers or nurses or whatever and struggle to make rent.
To be fair, many towns don’t actually want to only attract guys with trucks. They also want families, professionals, schoolteachers, etc.
It’s not evil for a town to prefer that developers come in and build housing in volume to enable the growth the town desires versus individuals coming in and building one offs.
The city I grew up in has never adopted a residential building code. Beyond requiring a working septic system or sewer connection,
it simply has never been a thing.
Houses aren't falling over or catching on fire. Neighborhoods look like any other fairly prosperous area in the Midwest.
Getting a mortgage and an insurance policy was not arduous or particularly expensive.
I was being a little facetious with my example; the point is that home insurance includes more than loss insurance for the cost of the actual structure
This forum can't take a joke or read intent at ALL -- bunch of fucking stiffs
"self insuring" a house that's not built to code is like driving a car without insurance because you finished paying it off. If someone is harmed by your property and you don't have accidental death and dismemberment liability insurance you are f. u. c. k. e. d. fucked.
Even in a wet area, wood has the nice property that it usually (but not always) starts to feel unsafe long before it falls over and hurts someone. Unless there is a storm - tornado resistance is very hard and needs the best engineering (which code enforces)
Do you really think the fact you found this solution to work means it would work just as well if everyone did it?
A self selecting group of people willing to build their own places taking on their own risks is not a good model for ‘what would happen if we got rid of building and fire codes?’
People who aren’t willing or able to figure out how to build their own house to an adequate safety standard are going to need to rely on being able to do things like buying a house someone else built. Inspection codes protect those people.
And when you factor in people wanting to live in denser groupings like in a town or city… well, how many times did San Francisco burn down before they figured out fire codes?
Inspection codes are supposed to protect those people. As currently implemented, they often don't because they force people into ... alternate living arrangements due to strangled housing supply. It's not even the code per se that's the problem. It's the weaponized bureaucratic incompetence around its enforcement.
Wyoming has been reported as such. Note that many places only have plumbing and electrical inspections, and some have that and roofing/framing, nothing else. It takes time to search, and can vary from county to county and even as few as a few blocks apart.
You're not alone. I can testimony it's happening in Italy too, at least in larger cities (Rome, Milan, Bologna, etc)
It's even worse here cause salaries are not rising at all
It's been like the perfect storm: high inflation, high interest rates, people cannot afford a mortgage anymore (or banks are not lwnding them money) and rents have become the only option available, reaching record highs. To add insult to injury energy prices are among the highest in the whole EU and you can imagine how grim the situation really is. Except for owners of multiple homes/apartments of course.
This is the major problem that neither political party seems to have anything to say about (let alone a viable plan to deal with it). The party that gets serious about the housing affordability crisis could do very well, but for whatever reason they don't seem to want to focus on this issue.
I was just looking at the reddit for our town yesterday and a guy with a family was posting about how they had been forced out of their rental house recently due to a sale and are now living in motels while trying to find a rental they could afford and qualify for (he'd had an eviction years ago and that was on his record). He said that that having to live in a motel was quickly draining their funds. Seems like this family is just about to be homeless and this is becoming more and more common for middle class people now given the level of rents.
> but for whatever reason they don't seem to want to focus on this issue
printing money funds the cancerous growth of government, so there's no way a major party can focus on that when it causes the monetization of shelter (and other hard, scarce assets)
One aspect over long periods of time is the number of single-parent households, as some of those would have been combined in the past. That increases pressure.
Reduction of "roommate/quasi-renting" because of tenancy laws. That increases pressure.
Proliferation of AirBNB - that increases pressure.
Everything is increasing pressure, but the number of new dwelling units isn't increasing as fast as needed.
This was already a problem when I moved to Atlanta in 2017. And the six years before that in the smaller town I was living in. The only time I got a raise above my rent increase is when I switched jobs.
It didn't feel like a supply crunch either. Plenty of apartments for rent in both places, but still rent everywhere increased in lockstep in both cities. Made the whole thing seem very arbitrary and cruel.
> The only time I got a raise above my rent increase is when I switched jobs.
This is the American economy in a nutshell. Wages have been going up faster than inflation for the last year or so, but if you dig into it, it's only for workers who change jobs and union members.
2 groups of people in the US: homeowners and renters. Homeowners want housing prices to go up. Renters want housing prices to go down. Homeowners vote.
Same in Greece both for renting and selling. People got rich just because they had some old apartment from the 80s which was worth 100k 5 years ago but they can now sell it 200-250-300k. And here we also have lots of foreigners buying houses at extraordinary prices. Situation is bad in cities, but way worse in the touristic destinations.
Could someone explain why this is happening? Older generations of home owners knowing they can get away with it? Corporate interests buying up real estate and also tightening the ratchet? Construction not keeping up with population growth?
Not at all an expert in this area, but would love to understand the underlying dynamics here?
If you go to local hearings and listen in on city council meetings, you start seeing a pattern of people who "got theirs" trying to stop homes from being built:
the existing housing stock would be fine if the population wasn't growing. With birth rates as they are, increased demand and increased crowding is a choice made through immigration policy.
unpopular political stance, I know, but you can't welcome in unlimited residents without expecting the existing inhabitants to get used to more crowding or fight over the available space
Oh, also, in any case the existing housing stock would not be fine, because people migrate around the country, too, to places with jobs, or away from places in decline. A vacant house in Cyanide Springs, Oklahoma doesn't do much good if your job is in Mountain View, California.
It's really a basic supply and demand issue. Austin TX had skyrocketing housing prices and rents during the pandemic. It also built a shit ton of new apartments that have come online during the past year (and are continuing to come on line), and rent prices fell considerably:
It used to be that when you moved from point A to point B (for retirement, career-change, whatever), you'd sell your home in A and buy a home in B.
Modern communications + financial tech have converted homes into cash-flowing assets that can be managed at a distance at 1/10th the risk-adjusted cost of 40 years ago.
Home-owning people of the age 55+ do not sell homes when they move, they rent them out and use the cash flow as leverage to buy a new home. This has been happening at least since 2008, but is a secular trend. In my opinion, talk of "not enough housing" is a mind trick to get you to ignore the fact that we actually do have adequate sqft/people in desirable areas, but ownership of that square footage is distributed incredibly unequally.
The % of homes that are lived-in by owners is approaching all-time lows in most high-COL regions in the U.S..
Those people pass their assets on to their children, who often have no ties to the region, and to whom real estate is purely a financial asset to be squeezed for maximum cash flow to subsidize their unearned lifestyles. We live with the consequences: rent that is increasingly unhinged from reality, and allows for dismal savings rates for our youth.
IDK, it's pretty bleak as somebody who wants to be a homeowner in a community that feels like home. I keep suspecting that there'll be a populist anti-landlord policy movement in my urban area (NYC) but outside of maybe 2-3 months during COVID it remains a pretty fringe idea.
These people have been getting away with it because of the relatively continual appreciation during that time.
When the worm turns, and it will turn, these people are in for a surprise and world of hurt. I saw it in the 80s and in the early 2000s and will see it again.
Some people have been doing that all along. I've seen fiction books from the 1930s talking about some person doing that. It sometimes works sometimes doesn't.
Lack of housing growth seems to be a factor. Housing starts in 2023 were still not even close to 2000 numbers. And the dip from the GFC lasted a long time (6 years). Looks like COVID stalled the recovery as well.
Given "Florida markets occupy three of the top five spots where rent growth has most dramatically outpaced wage growth since pre-pandemic," and "Houston saw the greatest annual wage growth of any metro — nearly double the national average — and was one of only four markets where wages outperformed rents," it seems like the cause is migration and insufficient new housing [1].
(Counterfactual: "In three areas — San Francisco, Portland, and Austin — rents actually declined from 2022 as market heat began to moderate, while wage growth in those areas continued to climb.")
Not enough supply. Even with the US population growth of 0.4%/year one has to build a whole new Phoenix,AZ worth of housing. That's just not happening.
All the posts here addressed the immediate cause, zoning and NIMBY. If you look into the issue from the viewpoint of American policy, the US has a long tradition of promoting home ownership as it is viewed as promoting a more responsible citizenry who care about their neighborhood and will make good long term decisions.
The fact that this stated goal of American policy is out of reach for many means American policy is broken. There are now too many vested interests against new home ownership.
If you ask many current homeowners they will tell you they have debt up to their ears. Their one asset is their home which they will borrow against, reverse mortgage, or sell to fund their retirement. That is they will do everything in their power to prevent their homes from losing value.
- Prices are determined by comparables. When home owners sell, and can push prices higher, it pushes all possible future prices for all properties nearby higher simultaneously.
- Corporate interests are buying up real estate, and especially rentals. (public and private equity purchases are 6x higher than they were a decade ago here). Higher rental prices encourage people to leave rentals faster, making people more desperate to buy, increasing their willingness to take on more debt.
- (in a few areas) construction is limited and not keeping up with growth. In most of Midwest US, construction outpaces growth, but since prices are determined by comparables, new construction in an area can be priced at top of the market, resetting those comparables higher too. Paradoxically, even though we do need new housing construction to have housing, our financial system is setup such that new housing construction generally raises all prices for all housing on average -- the "more supply" benefits don't really take effect for about 30 years, when they become normal mid-market units.
- In some areas, new Hotels entrants are escaping basic regulation by lying about who they are. (see AirBnB, Vrbo and similar hotel chains). This removes housing supply, and can't be market corrected by other competitive hotels (since they would have to follow basic hotel regulation, but AirBnB and Vrbo are allowed to break the law)
- Unlike in 2008, corporate interests are willing to just eat massive losses to prevent property prices from falling. And the federal government is willing to extend massive amount of lending to them to allow them to do this almost indefinitely. So even in places where there's a massive supply of empty units, those units aren't making it to the market at any reduced prices because it's too affordable to simply sit on them instead and hope they're eventually able to rent out again at ultra-high pricing. I suspect we'll never see a gentle market reset back to real-world-based numbers like we saw in 2008 for that reason.
Any one of those problems would raise property prices for everyone. But we're dealing with all of them, simultaneously.
Corporations only buy housing because it is a good investment. Its only a good investment because supply is severely limited by the government. If you think corporate ownership is a problem the solution is building more, LVT wouldnt hurt either.
> Its only a good investment because supply is severely limited by the government.
The entire American Midwest exists, and proves this point severely wrong. Supply can be infinite and unlimited, and it's still profitable for companies to exploit housing.
> Corporations arent buying housing in the vast midwest for this exact reason
Except they are buying lots of housing. Even in nothingsville-small-city Midwest, we're experiencing exploding housing prices, despite no real barriers to construction at all.
There was a basically "one-time burst" where prices rose to match the nearby cities as covid allowed people to escape, but prices are definitely plateauing if not cooling off, and once builders build through their backlog we will see some serious competition (I've noticed builders already offering "free upgrades" which is how they first do price cuts).
> Prices are determined by comparables. When home owners sell, and can push prices higher, it pushes all possible future prices for all properties nearby higher simultaneously.
Prices are determined by supply and demand. What you're describing is only true because supply is so choked relative to demand.
Offering prices are roughly set by comparables (and loan officers look at them) but you definitely can have prices start to drop, and drop fast. Anyone who didn't live through the last two house crashes will be in for a world of surprise when the next occurs, and it will - at some point; because something's gotta give.
- build a platform that tells landlords, algorithmically, how much they can feasibly afford to raise rents YoY, based on what other landlords in their area are charging for similar properties
- write terms of service that require them to use your pricing suggestions most of the time
- target large-scale landlords in big metro areas, to get a lot of market penetration relative to the size of your customer base -- so that when you tell your customers it's based on the behavior of other landlords in your area you actually mean that it's the behavior of their other users, who are also bound to these same terms
I keep losing track of which ones are where, but there have been several price-fixing lawsuits over this -- they range across a couple of AGs, private parties, and I think DoJ
I should also note that just the first one amounts in practical terms to collusion as a service -- in that what they're ultimately doing is gathering a dataset of pricing data from a bunch of "competing" landlords, who:
- are informed that their data is being collected for this
One factor I’m not seeing mentioned in these replies is the rise of price fixing software meant to maximize profit for landlord companies. Multiple investigations have found the behavior replicated in many cities, with many of these companies being sued.
What is considered to be a high interest rate? Looking at this[1] chart, it looks like rates right now are close to average for the past 50 years or so.
The root cause is zoning and NIMBYism (Not In My Back Yard).
It's not difficult. Prices are determined by supply and demand. When local and state governments restrict supply via zoning and other laws, prices go up. If you want prices to go down, increase the supply.
Taxes, utilities, heating costs, construction costs, insurance cost, the cost of a new property (build or buy) are all going up. The title on this article could have easily been '$insertAnythingHere going up faster than wages'
I can speak to the 'mom and pop' landlords. The best you can hope for is that your properties are paid for. If they're leveraged, it's a razor thin margin where are one roof replacement, furnace replacement, or state/local government deciding failure to pay isn't grounds for eviction away from losing money.
The average "mom and pop" landlord (who owns a house or two) is almost always subsidizing their tenants if you honestly do the math. The only thing that has keep it worthwhile at the rental rates we've seen for years has been the appreciation they're booking and the low interest rates.
If you do an actual cap-ex spreadsheet for a property and compare it to what it's renting for, it's almost never worth it.
If I had to speculate, I'd say its a combination of rebound from covid rent furloughs, and market capture by capital management firms like trammel crow (who really, really want you to think theyre a property management company now)
Some might say deposit regulation and reform is a driver, but all that really did was set up a scumbag market of fintechs that replaced outrageous renters deposits with slightly less expensive non refundable premiums.
Not that it matters. We are building plenty of apartments you can't afford for other reasons. Paid parking, pet fees, 3 figure application fees, move in fees, and common area fees not to mention Arizona's renter property tax all raise the bar.
Even if you can afford it you'll likely not qualify. Credit, criminal and prior landlord checks all have to come back spotless. You'll need to submit 2 pay stubs after that.
Wealthy boomers control politics and wealthy boomers (mostly - a portion but obviously not all - of the first half of their generation years-wise) own housing. Why would they want to allow their rental incomes to decrease or their home values to decline by allowing new housing to be built? They are the me-me-me generation after all.
Anything they can do to set the future on fire in order to maximize their returns while they live, they will do. Whether that's bail out failing businesses with government-owned debt that future generations (including their grandkids) have to pay back or destroy the planet and environment.
The only solution is to get younger people to vote or to wait for them to die.
It isn't bad news - but it feels like it. The forget that they have a place to live during that time and so most of their house payment would go to rent anyway. They also forget that in 30 years they get a place to live rent free (well property taxes - and of course this breaks if you take cash out). House prices generally don't go down so much as stagnate compared to inflation.
House prices have dropped in nominal dollars a number of times, specially the five years from 2008-2013. Of course, that's on a national average; localities can deviate.
That annoys people and makes houses go underwater; if you instead hold house prices mostly steady whilst inflation goes up, most everyone is happy. People who bought think they're financial geniuses for locking in a low rate, and non-owners see their affordability slowly improve.
The problem is it's slowly; even 5% inflation would take a few years to be really noticeable.
The "older generation" mismanaged the economy for 40 years, and now their children are paying for it.
This is what happens when you base an economy purely off of what equities trade at in two exchanges.
EDIT:
Downvote me all you want, but it's true. I'm 32. I have no debt, a good paying job, no spouse, no kids. I live in the same county my parents did at my age, in a major-ish American metro in the lower Midwest.
I cannot afford the same standard of living they did at my age.
Why? Because of inflation. Why is inflation high? Because we had to print a bunch of money out of nowhere to keep the economy from collapsing during COVID. Why did we have to keep the economy from collapsing during COVID? Because the average American household is living paycheck-to-paycheck and has no emergency savings. They're living paycheck-to-paycheck because the average wage has not kept up with both the costs of living and the value created by labor for the last four decades. The value created by labor went to earnings-per-share on stocks, bonds, and other investment instruments issued by companies. The average person cannot afford to have the returns on such investments factor into their five-to-ten-year financial goals. More and more, they cannot afford to have returns on such investments factor into their 20-30-year financial goals, either.
This shift did not come from nowhere; it came from human behaviors, modalities, and policies. There were people alive and in a majority to make this happen during that period of time.
> I cannot afford the same standard of living they did at my age.
I think you have to carefully define "standard of living", because I doubt your parents had a better cell phone, more reliable car, larger TV, and a more energy-efficient dwelling than you do.
(I also don't know enough about my parent's exact finances to be able to determine if I am "better off now than they were at my age" though I suspect I am.)
I don't think there is a reasonable definition of 'standard of living' that weights phone specs or TV size over access to housing, healthcare, childcare, education.
Technological advances in luxury goods do not make up for outpacing increases in inelastic necessities, even if off set by some abstracted purchasing power parity.
People forget, finances for Millennials weren't great pre-COVID either. Lots of student debt taken on by a generation who were told they'd be absolutely nothing unless they got, at the very least, a bachelor's degree.
> they'd be absolutely nothing unless they got, at the very least, a bachelor's degree.
I have long told people what degree you get matters. There are a lot of interesting areas of study that are not valuable in the workplace. If you want your degree to get you a good job - which is the implication of the statement - you need a degree that is valuable. If you can afford to not have a good job (either because you are rich or you already have one) then go ahead and study something interesting to you that the market doesn't value.
I think you’re naive to think that even a hypothetical affluent highly responsible nation of hundreds of millions of people with excess savings in their bank accounts is supposed to magically deal with an unemployment rate of 15% that occurred basically overnight without doing any kind of quantitative easing.
I think the lack of housing supply is still the core culprit and that major reforms need to be made to the US’ approach to building.
It might not have completely negated the need to print off all of that money, but it would have negated a good deal of it. The alternative would have been to have backed the checks with pre-existing money. That would have meant having a sane tax policy and a lack of military adventures in the United States over the last 30 years.
The lack of housing supply happened because some geeked-up bankers 15-20 years ago decided to gamble the nation's economy on its ability to pay for mortgage rates that had gone out of their teaser rates. That destroyed the residential construction industry. We never caught up, because catching up means that the people responsible for the whole mess to begin with would have faced real financial consequences. The fact that building codes and zoning laws are what they are doesn't help, but it all comes back to money, and remember, there's a reason those zoning laws and building codes were there to begin with.
People act like this stuff is magic. When Biden came into office he pushed the build back better plan(luckily Manchin did not vote the largest portion of the bill) - 6.25 trillion even though Trump had already pushed a huge stimulus package during covid(which I think was too big also). Massive increase in cash supply led to skyrocketing inflation. Its why houses, cars everything is like 40-60% more expensive since 2019. I mean you can't get away with sending hundreds of millions of people thousands of dollars for free and expect things to just keep on going as if nothing ever happened.
Except you are obviously wrong. If US monetary policy had been the cause then the inflation would have been due to the dollar losing value and you would have seen a change in exchange rates against other currencies. But you didn't.
US monetary policy didn't exist in a vacuum! The dollar did lose value relative to actual things you can buy, like groceries and houses, but did not lose value relative to other currencies because other countries were also printing money like mad.
> Which currencies appreciated significantly against USD in this period?
Very few did. A quick snapshot is the Dollar Index, which is a basket of six "major" currencies (pound sterling, yen, Euro, Swiss franc, Canadian dollar, and Swedish krona), which remains higher (stronger dollar) today than even the Covid crash peak, during which basically everything that could be traded did so in a huge range due to extreme market volatility.
The Swiss franc is stronger against the dollar since 2019, and so is the Mexican peso, both by roughly 9-10%. That's about it for what I can think of in terms of globally relevant currencies. Most everything else is weaker against the USD than back in 2019.
The US dollar, by virtue of being the global reserve currency, can likely absorb more abuse than others. It's often called the cleanest shirt in a pile of dirty laundry.
> the UK didn't. It borrowed instead. Why didn't GBP massively increase against USD?
It looks like the UK spent roughly ~5k per capita as a response to Covid[0]. When the spending comes from budgetary deficits (that is, absent a commensurate increase in taxes) financed by new bond issuance ("borrowed", as you said), and a large part of said bonds were absorbed by the central bank[1], it's effectively printing money.
Inflation makes everything more expensive (light bulbs, nails, electricity). Regulations to make stuff "safer" also makes stuff more expensive. Places like CA have had a housing shortage for decades - they are short on houses built vs needed by tens of thousands a year for decades.
An "investment" in rentals doesn't take supply away, even converting from a rental to an owner-occupied doesn't.
What you need is more supply, and without that prices will continue to go wild because the number of people who want to live in the area outstrips the supply of spaces.
In the past, you'd have new cities pop up and take some of the pressure off, but that's slowed down (though places like Austin have gone wild).
It doesn't take supply away... but it does add overhead and middle men - which increases costs. Those investors need returns on their investments - whether you agree with capitalism or not.
"more supply" which is why I included places like CA that have had DECADES of shortages because of regulation, corruption, NIMBY, etc.
When you add the need for "more supply" to the need for investors to recoup costs, increased costs to build (IE: More safety features, solar requirements, etc), increased interest rates, etc?
It's easy to say supply and it's easy to say "towns used to pop up"... it's harder to admit that there's only so much space and those easy to pop-up areas are becoming fewer because there's fewer places to put up "towns" out of nowhere.
I don’t think there’s one simple and satisfying answer, it’s a complex system.
The only simple broad-stroke answer is that the government is incredibly powerful so violent uprising/revolution by the working class is essentially impossible.
Higher interest rates are not that much a hit on new building - the construction loans don't last long and so while there is more cost it isn't very significant compared to all the other costs. They are a problem to owners though - if you want to own a building you will pay a lot more. There is a subtle difference, and this is why new house construction is still going strong - there are enough people who can afford a loan who want a new house as to make it worth building.
Having been in construction I call tell you a contractor can build two identical houses in the same neighborhood, with the only difference being the contractor is planning on selling one after it is built, while the other a buyer is exists for the house. The second house will costs at least $20,000 more than the first, the only difference being the buyer will upgrade lights, doors, flooring, countertops and so on. All those little $300 upgrades add up.
The biggest thing higher rates is doing is preventing people from moving when they might otherwise want to, because going from 3% to 7% will double their monthly.
This results in fewer people "upgrading" into new construction, which further constricts the "starter home" pool (nobody builds starter homes).
OP said "higher interest rates" relative to historic lows in '20-21.
Your comment does not negate the effect that interest rates have had on affordability. The last time interest rates were this high, home prices were significantly lower than what they are now. Wages have not kept up with inflation.
This is going to have long-term economic and sociopolitical ramifications, and it's mainly due to the fact that we put the value of equities above all else.
The next generation isn't being born, because their would-be parents are saying "I cannot afford to give my children as good or better of a life than I had". The equities that labor's value is stored in are beyond their reach.
There's really only two ways to deal with this:
1) Get the older generation - the Baby Boomers - to work longer and rely on their stock-based savings less. Given that we've structured our entire society around them getting to retire to Florida for golf and wife-swapping until the dementia sets in, I don't see them being willing to stick around the office longer to produce value for the economy.
2) Import labor through immigration. Given that one candidate for President right now is running on a platform of severely curtailing certain types of immigration, and is doing so successfully, I don't see this being a viable option.
Birthrate seems to have little correlation with income. The Scandinavian countries have made hard pushes to incentivize having children and they still wont. More likely that people just dont want kids.
Birth rate has generally been inversely correlated to income. AFAIK this is true in almost every country. The plot of Idiocracy was derived from this phenomenon.
Humans are complicated and there are probably multiple reasons for this. But the most convincing one that I've heard is tied to education.
Higher income generally means better education. And the better educated are more likely to use birth control.
I mentioned before that birth rate and income are generally inversely correlated. But that isn't completely true. The relationship is more of a j-curve. That is, past a certain income (think top 5% or more), the fertility rate begins to tick up.
When half your babies aren’t dying of disease and you have life and career aspirations for yourself the idea of raising more than 1-3 kids seems pretty insane.
Arguably low birth rates are a very good thing and we should adjust our society more to embrace them (like not building the economy so that it depends on being a giant pyramid scheme).
Do you have some numbers on this? I suspect it's a couple of issues.
1. If you just give people money to pay for childcare or whatever, but there's not enough labor, then all that happens is that the price gets bid up higher.
2. I suspect that the 'hard push' wasn't arrived at by figuring out how much money it would actually take to make someone have kids, but by fighting for whatever Euros could be diverted. There is definitely an amount of money that people will have kids for, but I think it is a lot higher than governments/electorates are ready to confront.
> 1. If you just give people money to pay for childcare or whatever, but there's not enough labor, then all that happens is that the price gets bid up higher.
All of these countries have universal childcare starting at 12-18 months with over 90% attendance. I think point 2 is worth investigating, it could be a truly ludicrous number though for all I know.
Or you know, there's this crazy idea, every country or city can just invest into affordable housing and make it so that you can actually get some place to live, even if you're in poverty.
In practice it's just reasonable, it works in places like Vienna, it doesn't have to be luxurious housing, but it should be relatively ok, cheap to maintain, but also safe to live, with enough space to have children.
Why can't we regulate and subsidize such fundamental stuff? Everyone needs some place to live, some food, some water, some way to move, some basic services and utilities.
What's the reason that some wealthiest countries in the world can't provide even bare minimum for most people? It's only greed of the wealthy. It's too expensive for them to treat us all as humans, with some empathy. They prefer to keep things as it is, so about 2000 people controls about 90% of all capital.
> The next generation isn't being born, because their would-be parents are saying "I cannot afford to give my children as good or better of a life than I had".
I'd say it's more like they're saying "I cannot afford to raise a kid given the high cost of housing and childcare" period.
> 1) Get the older generation - the Baby Boomers - to work longer and rely on their stock-based savings less.
A couple problems with that: 1) As BBers close to retirement (and able to retire) tend to be in higher level positions delaying retirement blocks advancement for younger people. 2) it's not always their choice when to retire - if you're laid off in your 60s you're unlikely to be able to find another job that was paying anywhere near as well as the one you had. A lot BBers are finding they don't have a lot of choice about when they're going to retire.
> Import labor through immigration
This is the way. Being able to attract immigrants in a demographic environment where your population is aging is a big plus for an economy. Unfortunately large parts of the electorate don't appreciate this.
> This is the way. Being able to attract immigrants in a demographic environment where your population is aging is a big plus for an economy.
Only if it isn’t used to express preference for a largely pliant/easily controlled workforce.
> Unfortunately large parts of the electorate don't appreciate this.
When one generation loses its manufacturing job, the next one loses it to early offshoring efforts in tech, and the current generation loses theirs to COVID era inspired offshoring, sympathy is a luxury.
Give them a sizable citizens’ dividend that offsets their individualized losses, coming from immigrant-involved firms, industries, and professions.
1 is true, but 2 feels more like of a "well, tough" moment. Plenty of people have to take jobs that don't pay as well as they used to, and these layoffs often happen to inflate stock prices on already-profitable companies. Why do they want to inflate stock prices? Because we've made equities the sacred cow of wealth stores in this country, and the very same people who manage the BB's retirement portfolios demand it to make the number on the 401k go up.
It's important to remember that these shifts did not come from nowhere. The shifts towards financial instability for the average person took place during a specific period of recent history, and people - including average people - who really should have known better, given all of the expert advice made it happen.
There were very much people saying "shore up Social Security", "don't offshore manufacturing", "increase capital gains taxes", "invest in more sustainable infrastructure", "increase wages at the expense of equities prices", etc. and these people were all ignored, at least in the United States.
> There were very much people saying "shore up Social Security"
And there's the solution. It's not making people work longer - many can't for health reasons or due to ageism. The easy way to shore up social security is to significantly raise the wage base limit (which is currently $168,600). Double or triple that.
There are few simple things that can possibly help?
1) Increase property tax considerably on housing that is empty, low-usage or switches tenant as often as twice a year. Easy to check for empty/usage by correlating the electricity bill.
2) Increase tax on housing owned by out-of-country people/companies.
3) Increase tax on properties owned that exceeds 3 (people playing the airbnb game buying up housing just to rent it to tourists suck).
Had 2 more but I think the friday beer turned off the brain..
I'd say not surprising when rates were down to 2-3% for years. I haven't seen anyone make a rigorous argument as to what rates should be, but it is clear that when they get too low - as they did - you cause inflation and that has been happening. (note that inflation is never even across the economy - this time it housing early)
That graph is awful. What is it showing aside from "bigger arrow more bad"? Does color mean anything? What variable does arrow size actually represent?
I think the inevitable conclusion is returns to capital is rising versus the returns to labor. Put your money in investments because that's what we (as a society) reward.
Wage growth has been really strong lately, 4-5% for a number of years now. Capital gains on the contrary have been very choppy last few years. Broad correction after 2021, and some sectors have still not recovered. Housing is now dropping as well.
The taxation and obligatory contributions on labor in Europe are brutal. Very quickly reaching over 40% in total in most countries. In the cities where there exist employment options, salary pays for housing, food, some going out, tiny savings and that's it. There is no point in working.
Actually many countries heavily tax all of them - labour, dividends, and capital gains. Especially Nordics, Benelux, France, Germany. Sometimes I wonder what's the point even of working and investing in countries like France, Belgium, or Denmark... yeah everything is so tidy, clean, and nice but you'll never afford any of it through employment.
Aside that's a good example of why ownership is good and so why homes instead of apartments are good as well and as a corollary why WFH for all eligible jobs should be even mandatory by default with derogation only for proven reasons (yes, WFH means also the possibility to work outside big cities for many who do not WFH, thank to the mere spread mass of humans WFH produce)...
I don't understand how this isn't a major national emergency. The fact that your average voter cares more about, say, immigration, than this problem is absolutely ludicrous