But I’m glad we’re trying SOMETHING in order to combat the problems with affordability; let’s just hope we don’t even up reviving how the other half lives.
As with all types of housing, there is no one type of housing that solves the problem. Whether we live under capitalism or socialism, the only way we solve housing is when everyone who wants to live in New York, can, everyone who wants to live in Kansas, can, everyone who wants to live in Fort Myers, can.
With markets, a shortage results in high prices and rates. Without markets a shortage results in long waitlists. There’s no way out, without quantity.
If we want people to live in large indoor spaces, and not SROs, we can’t get there in 99% of our land use regime is focussed on limiting the total amount of floor space that is allowed to exist within a given area. Legalizing SROs is insufficient, but necessary, just like legalizing larger apartment buildings in more places, abolishing single-family zoning, etc.
- turn the place into a hellhole nobody wants to live it
- build more
There’s no other option.
Continuing to grow the population under these conditions doesn’t help either.
Unfortunately, in North America and other Anglosphere countries, we have decided that a scarcity in residential floor space is a public good and our planning rules tend to create such scarcity and enforce it. This allows incumbent homeowners to profit, and they fight for vociferously to protect that profit. Of course, if a company also invests in residential floor space they can also profit, but it’s not clear why we are so concerned with who profits, rather than the fact that we are enforcing the scarcity that produces the profits.
This doesn’t mean nothing should be done and things are great, but if we mischaracterize a problem we have little hope of solving it.
On affordable housing: there’s no such thing. There are enough millionaires around that will live in a 600sqft apartment if it gives them the lifestyle they want.
In fact, it might blow your mind to know that building luxury accommodation actually lowers house prices as well as affordable housing, because wealthy people have to live somewhere, and if all that’s available is mid-range housing then they’ll live in that. That will push the middle into the lower income housing, pushing the lower income people out of the city.
Additionally, if you only build cheap housing to make it affordable, you end up with a city of cheap housing. If you build a ton of luxury housing, then in a few decades you have a ton of older high quality housing coming into the more affordable range as “luxury” buyers follow the new luxury construction around.
Of course well located land is special and will never behave like a durable good. But whether there exist 250 sqft of livable residential floorspace or 250,000 sqft of livable floorspace on that land is at the moment, an entirely political decision that we can reverse at any time.
The core reason SROs threaten larger spaces is that landlords can often extract more total rent from a single apartment by chopping it into pieces than by renting it as a whole.
Hypothetically: A landlord rents a 1,000 sq. ft. 3-bedroom apartment to a family for $4,500/month.
In order to extract more value, the landlord converts that same space into 4 separate SRO rooms with a shared kitchen. Even if they charge a "cheaper" rent of $1,500/room, the total rent roll becomes $6,000/month.
The Result: the SRO format is more profitable ($6,000 vs. $4,500). If landlords can legally choose between the two, they will naturally favor creating SROs over family-sized units.
Then there’s the potential for cannibalization of supply:
If SROs become the most profitable way to use residential space, the market may see a "cannibalization" of family housing.
Landlords of market-rate buildings may subdivide existing large apartments into SROs to capture the higher yield.
Seeing this, developers then planning new buildings will design them with fewer large family units and more micro-units/SROs to maximize revenue.
This reduces the supply of 2- and 3-bedroom apartments. If the supply of family units drops while the number of families needing them stays the same, the price for the remaining large units goes up.
This will then potentially lead to increased land value as real estate prices are determined by the potential revenue a property can generate.
If a plot of land can now legally host a high-yield SRO building (generating $100/sq. ft. in revenue), the value of that land rises.
A developer who wants to build a standard family apartment building (generating only $60/sq. ft.) can no longer afford to buy that land because they will be outbid by the SRO developer.
To compete, the family-building developer must raise their projected rents to justify the higher land price. This raises the "price floor" for everyone.
Yes, this is the whole point! And the reason it's more profitable is that there is pent-up demand for them. There aren't enough of them. We want them to be more profitable, so more are built/converted.
Here's the thing, though -- that's a temporary situation. As supply goes up, demand gets met. Once enough are built/converted, the price comes down, and an equilibrium is reached where a landlord will make the same profit whether it's a 3-bedroom or 4 SRO's. This means the market is now maximally efficient for both types of tenants.
In a free market, the most efficient balance of apartment types will naturally come into being. By prohibiting smaller units, we prevent that balance and discriminate against people who can't afford a full-size studio with bathroom.
So it's not cannibalization of family housing. It's just reducing the proportion of lots of other types of apartments a little bit -- including studios and one-bedrooms. Because this is desirable.
This will happen with these too.
I honestly don't know what you're proposing instead. But for some reason you're pessimistic about what all traditional economists agree on what is the solution -- remove more zoning regulations that constrict what can be built.
It's literally just supply and demand. Prices come down when you increase supply to meet demand. Just because increasing supply a little bit doesn't work when demand is increasing even faster, doesn't mean the basic principle is falsified. It's just that you need to increase supply much, much more.
Demand for floor space in these places is very large, no doubt, but it is not infinite.
If you don’t believe we can or should allow private landowners to build as much floor space as they want for everyone who wants to live in these places, then somehow you’re going to have to have a mechanism to control who is allowed to live there. What will it be and who will get to decide who is worthy?
With the collusion of corporate entities setting prices, it raises the overall market prices of properties. As small-time landlords observe the markets, they naturally also raise their prices to increase prices.
Additionally, because of corporate capture and collusion in other markets, prices broadly increase for owning property. This forces everyone who keeps rent lower to raise rents.
The way to fix this is simple. Stop the corporate collusion by making laws that make it functionally impossible.
This can be done by the following:
- tax the hell out of corporate ownership of residential properties
- an increasingly expensive multi-home tax. First home is tax free. Second has yearly taxes and those taxes exponentially increase for each additional home.
- a vacant home tax. On top of any second home taxation, for homes besides your 1 home, there should be a vacant home tax. If a home does not have a resident in it, it should be taxed. That tax should be around what it would cost to rent the unit out.
There are some other additional factors such as penalizing foreign non-resident owners, but this covers the bulk.
Being a landlord should not be easily profitable. It should be a job that you work your ass off at.
Then and only then will the free market begin to function and optimize.
Collusion on rent is a relatively new phenomenon around RealPage and is being banned. Meanwhile, regulations like rent stabilization in NYC benefit existing tenants, not landlords.
And the taxes you describe having nothing to do with collusion. Collusion is fought using anti-collusion laws. What could possibly lead you to believe that multi-home taxes would reduce corporate collusion?
Yes, obviously RealPage should be banned everywhere. But corporate capture is not the underlying economic issue at all behind high prices. Lack of supply is.
Whether my theory on what is occurring is true or not, the proposed solution would solve it along with countless other issues, while have very little downside for anyone but a tiny group of lazy parasites.
Houses are not investment instruments. They are spaces where people can freely exist as they are. A domain that they have full dominion in to authentically explore who they are, who they want to become, and what they want to share with others. A place to raise a family, to rest without a mask, and to be safe as they are.
Notice how I didn't mention economics at all?
Just because you have a house / houses doesn't mean others don't. Do you have any idea what it feels like to be homeless? I dare you to try it. Do you have any idea what it feels like to be a renter under the thumb of a landlord with no hope of ever having your own home?
My "policies" originate from empathy for real people. The majority of people, actually. It does not give a single shit about economics only benefiting the rich.
But that said, if you give most people the ability to have a true home, the economy will explode in activity. Instead of spending money on rent, people would spend on goods and services. They'd be happier, so they would spend money on having fun.
Making housing affordable is a no brainer.
The nice thing is, we already know what the alternative is. The economy is collapsing right now, in no small part due to the housing crisis that has been going on for a long time.
Since my policies won't be occurring now or ever, let's both sit back and enjoy the lack of these policies, and see how wonderful a world that is.
You say that the landlord industry has captured its regulators, but you give no example of any action or ruling by an regulator that benefits landlords at the expense of tenants.
Landlords should be an exception, not the standard.
But the latter is gross.
I feel like a toilet, shower, and sink could be added to an efficiency apartment for 3m².
If people want to see how small a room could get, see ships, especially crew quarters. I could probably design something with a kitchen, bathroom, washer and dryer, bed, desk, and storage for 15m².
Just like the generations-long shift of families needing two incomes instead of one. Like the growing share of renters vs. homeowners. Like the growing ratio of home prices to income.
You reading this may believe you're among the few because you've stayed ahead of it so far, but you're not.
CraigRo•2mo ago
Kind of a shame, as lots of people basically just want a room to sleep in and a place to sit