Returning to the initial point, should people just build more houses?
because we can't say that real estate is basically a cartel [1] and that big cities (where everyone is supposed to move because all the jobs are there + RTO) have staggering levels of empty houses (e.g. 19% in Paris [2]), and god forbid to apply any type of policy to adjust the situation.
[1]: e.g., Berlin - https://en.wikipedia.org/wiki/Deutsche_Wohnen_%26_Co._enteig...
[2]: https://www.ouest-france.fr/societe/logement/a-paris-pres-de...
For exemple, the 19% you quote in Paris include occasional occupation which is partially driven up by the insane price of hotel for which people who need to spend time in Paris regularly have to compete with tourists.
But I disagree with you on the absence of policy to adjust the situation. Paris has been doing a lot in the past few years.
The city severely limited the ability of owners to turn their property into short term rentals to try to increase the long term rental offering.
Then there was the rent cap but its impact is more difficult to estimate. On the one hand, it made renting properties less interesting and probably incitated some owners to keep their appartments empty. On the other hand, it severely limited the possibility of borrowing money for buy to rent project as it doesn't make much sense financially and therefore lowered the market pressure for people buying to live.
Last year, they significantly increased the vacant property tax. It's calculated on the rental value and quickly raise to 34% of it so it rapidely doesn't make sense to keep an appartment empty if you are not going to be in Paris very frequently.
You can buy land for X. You can spend Y to construct housing on it, and sell it now for Z, or you can sit on the land, safe in the knowledge that housing policy means prices will keep rising, and then you can spend Y+inflation, and sell it for Z times a factor far higher than than inflation.
If you finance X via investors or loans, this is effectively leverage. You finance Y the same way, but short term during construction, so you get a leveraged return on the growth of house prices in return for investing to buy only the land.
Couple this with constraining supply by sitting on underutilized land.
Another of the developers in the same area has still only built about one third or half of the buildings they're meant to build on another set of parcels that were first also available 20 years ago. They have no incentive to rush until investors want to exit.
I can give you plenty of stories of people who bought an empty chunk of land for $350k and then 20 years later sold it for around $350k. They would’ve done better investing in Pokémon cards (or anything).
Add on the flip side developers usually want to move fast and cash in now, in my experience, not do what you’re describing.
And, yes, one of the plots has had planning permission for years, and had the owners re-apply regularly for buildings in the 40-75 floor range, and the council has fallen over itself to approve it each time. The other involved a lengthy planning process with a plan agreed around 20 years ago for developments that are still not complete.
What you're describing makes sense in a market where there's plenty of options. In London land is scarce, and developers hoarding it makes it scarcer, and so both land values and housing prices have skyrocketed.
Where I live the ratio of dwellings to households has increased during the three decade long property price boom.
The most significant cause in my opinion is the financialisation of housing, fueled by three decades of ever decreasing interest rates allowing those with capital to use leverage to accumulate more (often removing them from the stock of permanent housing).
Higher interest rates are the catalyst that solves this problem.
Opportunities are concentrated and building in concentrated areas is inherently hard. We still don’t know how to scale mega cities fast while still operating them at capacity.
So the problem will not go away anytime soon.
WFH was an opportunity to escape from geographical concentration which is the main cause of the high cost of housing.
500 square feet for a couple is standard (that would be seen as a small appartment in the USA) and living in 300 square feet or less is fairly common for someone single.
Same thing with New York I guess. I had a cousin move from Paris to Manhattan, and it didn't really feel like an upgrade.
And thankfully, because of that our suicide rates are lower than in East Asia.
People aren't chicken and hell even poultry will show signs of aggression, depression and other mental health conditions when cramped in too tight conditions.
Then there is the question of wasted resources. We spent all of these resources to build up Detroit. Now what?
I used to live on a road with ~660 houses. The road, the houses, and the yards combined took up ca. 40,000 m^2. Near the local well-connected train station, a few new-builds in the 20~ floor range added more homes than that entire road took up in ~2,000 m^2.
On top of that, because of its location, the strain added on transport was far less - most people would be a short walking distance from both shops and commuter trains to the centre.
There are hundreds of major transit hubs like that in the UK where you could easily add do relatively modest hubs of higher-density housing and add a massive amount of capacity.
What's lacking is the political will to solve the massive problem of house owners who have been trained to see rising house prices as financially beneficial to them.
When most of those house owners are in an older demographic more likely to vote, it's a huge challenge to fix.
I think Dubai is a counter-example to that.
Complaining now is a bit like complaining there's no milk after you sold the dairy farm to build a casino.
I read TFA but I'm not seeing anything but useless outrage that would have been better placed 20-30 years ago
I became a first time property owner at 36 and it took a top 2-3% percentile income + my partners more median salary to do it on the outskirts of London
My mortgage runs until I'm 70 and I, like most owners now, are entirely dependent on the housing casino game continuing. If houses ever return to good affordability I'm screwed.
I have to refinance every 5 years, because that's the game in the UK, so if rates spike I'm also screwed.
Everyone in UK housing, owner or rented, is screwed and it's been this way for decades.
A prior condition for building houses is having permission to build them. We have found that the planning system is exerting a significant downward pressure on the overall number of planning permissions being granted across Great Britain. Over the long-term, the number of permissions being given has been insufficient to support housebuilding at the level required to meet government targets and measures of assessed need.
In particular, we have seen evidence of three key concerns with the planning systems which we consider are limiting its ability to support the level of housebuilding that policymakers believe is needed: (a) Lack of predictability; (b) Length, cost, and complexity of the planning process; and (c) Insufficient clarity, consistency and strength of LPA targets, objectives, and incentives to meet housing need.
We have also seen evidence that problems in the planning systems may be having a disproportionate impact on SME housebuilders.
1) Green belt policies prevent the expansion of cities outwards. Compare the footprint of London to other major European cities and you'll see it's barely moved at all for decades.
2) Discretionary planning policies that mean local councils can turn down development, even when it adheres to stated rules. See for example this brownfield development in Brighton, a city that has one of the worst housing delivery records in the country: https://www.bbc.co.uk/news/articles/cwygkz57k1vo
The professional planning board recommended it for approval, but it was turned down by the political committee because of local complaints. A well specified zoning system would avoid this. Reduced uncertainty would make it possible for smaller builders to enter the market
3) affordable housing mandates (known as Inclusionary Zoning elsewhere). These specify that some amount of the new building must be offered at below market rates. Although there's a strong moral case for capturing some of the value produced by giving planning permission, this effectively acts as a tax on building homes in places with shortages. Ideally, people would be most incentivised to build where prices are highest, but this policy removes that incentive.
Uhh, why? Unless you were planning on selling up and spending it all on a cruise or something house prices are immaterial to home owners.
> I have to refinance every 5 years, because that's the game in the UK, so if rates spike I'm also screwed.
This is the real problem. It's partly our fault, of course, for agreeing to a mortgage which we couldn't afford if the interest rates doubled. You know exactly what you're signing up to, but you still do it.
The trouble is there's no choice. The finance industry has us by the balls. I don't even think of it as a housing crisis, I think of it as finance crisis. The real problem is banks control far too much of our lives. The entire money supply is essentially just mortgages. This abstraction we call money has been taken way too far.
I don't know how it is in the UK, but in Paris, I hear from a lot of people that their retirement plan is to sell their Parisian apartment and move to a lower cost area with what they've gained. Doesn't work out if your "investment" is underwater.
With climate change it will be literally what will happen to many homeowners in low lying coastal areas some decades from now.
In other words, housing will always be a huge chunk of your income because it's hugely important. The only way it could be less is if it stopped mattering where you live. Then housing would be essentially a commodity and priced accordingly.
It's important to realise that money is an abstraction that we use to do trade, but it's not trade itself. Pricing is a reflection of market forces. You can't just magically change the price of housing and suddenly have more of everything else with no compromises. You have to change the market.
People always say "more housing*, but that's incredibly naive. More housing in the UK means tiny plots of land crammed in next to a dual carriageway in the middle of nowhere. People don't want to live there, but there's no choice. As long as there's inequality there will be high house prices. Turning housing into a commodity such that you can allocate only a small part of your income to it would take a lot more fundamental changes towards equality like vastly improved public transport, decentralisation of business, turning the most beautiful areas into national parks instead of estates owned by the rich etc.
No, it's not immaterial. If you paid $1M for something and next year that something is worth $500K, it's a problem, regardless of whether you own it or it's mortgaged, regardless of whether you plan to sell it or live in it. You lost $500K, it's as simple as that.
Which creates a huge pool of people who are opposed to making houses more affordable.
A sibling post has stats from 15 years ago but a lot has changed since then. My gut feeling is that more people are struggling to buy than to pay back mortgages but I have no stats to back that up.
Almost every country has more home owners than renters, so no. In USA its 65%.
"A slave dreams not of freedom, but of his own slaves."
That’s not the same as the number of voters, obviously, but I’m not sure it’s a safe assumption, even before it gets into the actual voting dynamics from FPTP… there’s also presumably a lot of renters with their eyes on Mom and Dad’s home as an inheritance.
Of course it won't be as valuable as an asset, but assuming they are primarily using it as a house rather then an asset then lower housing prices may not significantly affect their voting behaviour.
Unlikely unless they’re an only child
The biggest reason for nigh house prices (particularly relative to incomes) is the affordability of mortgage payments as a result of low interest rates. Interest rates may have to be raised to control inflation.
It is a mistake to think of supply vs demand as "how many people want a house" vs "how many houses are there". Both supply and demand are curves against price. Interest rates shift the demand curve. As the supply curve is inelastic it has an even greater impact in the short term
Any attempt to fix the housing situation will need to provide owners, not just with housing, but with a passable income for 40+ years.
So, the actual discussion is this one: https://www.youtube.com/watch?v=747X0M7Keyw
And this discussion is hard because to just maintain current pension levels young people will need to be a LOT more productive (ie. work more, and keep less of the fruits of their labour) ... and if we're going to assign blame, the reason is that the pensioners refused to have enough kids. It's not really the kids' fault.
We all know what's going to happen too, in general. Some economic upheaval, some drastic event will create enormous disruption and then, finally, it will be politically acceptable to make the hard choice.
I thought they did have enough kids but that the next generation(s) need to breed faster.
In New Zealand and Australia ~30% of population were born in another country. I suspect our government will try and fix the working-age population hole by more immigration? New Zealand is building houses (necessary when increasing population by 50% through immigration). You can see both higher density and new suburban growth (replacing farmland) in my city of Christchurch.
It is silly to plan your retirement by looking at the situation right now. The economics of demographics will require grim changes. I'm sceptical of retirement funding, superannuation, and house sales. Even preppers seem like they have some sense. There's little information on potential solutions - everything is based on the presumption that decades away will be just like it is today.
New Zealand property market is weird: https://www.imf.org/external/research/housing/
Genuine question by the way, I would like an answer.
It's probably only something you can fix across generations.
Seeing as the olds control almost all of the wealth of industrialized nations, they should as a group be held entirely responsible for paying for entitlements and benefits for other elderly. The young should not be burdened with this. They have more burdens than they can handle already and are soon genetically extinct unless the olds take the boot from their neck.
I have more things in common with any young person from the other side of the world than I have with the olds from my own nation, city or street. It is what it is.
The olds have been waging a vicious economic war of extermination against the young for the entire 21st century. And now the cycle has to stop, because there are almost no more youth to exploit, and will be even less in the future.
No previous generation behaved like the current olds. We have to be much better than them, and let their twisted ways be forgotten.
I think the premise is worth questioning though: It's true that many people have most of their wealth tied up in their house. But unless they want to substantially downsize, they can't access these savings.
In general it seems bad that it's common for people to have most of their wealth in an illiquid, undiversified investment that they also live in.
The only difference it makes it that if your lender gives more favourable interest rates when your loan to value ratio improves. So if you purchase a house and the price doubles, your LTV is already 50%. Conversely if it drops after you paid off half the mortgage, your LTV might be shit
It would also involve building more houses, which is bitterly and loudly opposed by a subset of home owners. Home owners are also richer, older, and vote much more than the (generally) poorer, younger renters.
I think the solution is to artificially build new cities with ideal logistics. Distant cities inevitably draw away housing consumers but by least influential first and are outside each others influence for NIMBYs.
It's fake savings unless you are speculating on properties.
Most people only own the place they actually live in and only resell to buy another place. A general property market crash doesn't affect the value of your house compared to other house so it's mostly neutral in this regard.
Of course people who borrowed before the crash will be in debt for longer than people who bought after but that doesn't actually change their debt situation. You might say it's unfair but well, not wanting other to be better of doesn't seem like a good reason to not solve the housing crisis.
In the end the only people who trully stand to lose are multi-owners but they are a significant part of the problem in the first place so that doesn't make me sad.
And that you will be able to keep the expensive property with expensive costs. Plus compare if living in the expensive vs cheap place gets you more savings...
No, it does not make sense. I can see holding a property for a child, but not as retirement.
If you're in negative or reduced equity your mortgage costs can increase dramatically when you refinance. This alone can easily cripple a large % of the population and tank the consumer economy
Of course that doesn't eliminate the economic impact. It just shifts it elsewhere.
An decent case can probably be made for the government to take on such loans and offer some scheme to forgive the difference if certain criteria are met.
However to do this would require inflation of other goods, matched by wage rises, which would require actions that the British political establishment is not willing to take.
This is the core issue with all modern capitalist economies. They rely on infinite unbounded growth.
Obviously real estate prices cannot trend to infinity or the system collapses. You are here.
It's unfortunate, and at an individual level you can't blame people that felt compelled to purchase a home (only one!). However, if people are honest with themselves, they would admit that the only reason they were willing to pay such a high price is because they expected the price to increase. In other words they were speculating. After a certain point, nobody was buying for the actual ROI (i.e. income potential or substituted rental value). Not only was this mistake made, but it was made using massive leverage in most cases.
TLDR; Nobody was willing to admit that they were making a risky investment. A risk that it may turn out that they couldn't afford to make.
So, I'm really into municipal finance and fixing the housing crisis, which got me into Strong Towns. There is a solution, but it's not one that is going to make everyone happy (obviously), it is the state facilitating or even gently subsidizing incremental development.
If everyone is, by right, allowed to build the next larger "unit" of housing (for simplicity's sake, suppose 2x sqft[m2], height, and housing units of the median residential building within a half-mile radius), but not allow to massively build piles of housing on one site, then we effectively solve both problems.
Firstly, this allows for a massive amount of housing construction, with market incentives driving it. Out of the gate, you have the potential to easily double the housing supply. Secondly, the profits from the housing must be more-or-less distributed to the existing homeowners, and the potential to lower property values by building non-like for like housing doesn't exist. Neighborhoods slowly evolve, they don't rapidly change. Third, it incentivizes homeowners to build-to-last with the next stage of growth built in, because it's much cheaper in the long run to build a structure with the capacity to stack another unit on top than it is to tear down a building and rebuild the unit at double the capacity. Finally... and this is the thing that most people miss. It's fast. Smaller-scale developments need a much smaller planning phase, and there are many, many more of them to be constructed. This supports economies of scale, instead of the existing system, with all it's red tape that only allows a few actors to wade through the legal system for large developments. This should create a wide construction industry instead of a narrow one.
I really think the housing crisis is solvable with the top level government insisting that incremental development be allow by right, and that larger scale developments be put up for local review. This allows a city to grow organically, instead of all at once, but only at specific sites.
If they put 1M into a house, prices fall, they sell it for 100k and buy a bungalow for 50k, that unlocks only 50k to live on.
They lose decades of saving/investment money even though they can still sidestep one house to another.
Money is made up numbers. Food is real, energy is real, houses are real. The numbers are literally just numbers.
Could anyone explain why is that the case? If the mortgage is till 70 then why are you forced to remake the agreement every 5 years? Can't you stick to original one?
US loans on the other hand are government backed to allow for longer fixed terms (30 years etc.)
Fixed-rate mortgages are time-limited (typically between 2-5 years) and after that you either switch to a variable rate mortgage or you take out a new fixed-rate mortgage based on the interest rates at the time.
People that bought properties just before COVID got dirt-cheap fixed-rate mortgages as the Bank of England base rate was 0.5%. Anyone sensible locked it in for 5 years which is typically the maximum available. After those 5 years were up, the base rate was about 5% which is a huge jump. I think most people have locked theirs in for 2 years now in the hopes that in a couple of years the base rate will be much lower.
I got a place 5 years back and did not overstretch at all ... now, the biggest challenge is our place is too small and has other inconveniences (lack of commute) that is painful. Selling and rebuying is trauma I don't want to inflict again.
Mainstream media made fun of China for building “ghost cities” in the middle of nowhere.
Now, those cities are full of people.
“Chinese ghost cities are finally stirring to life”
https://norcalapa.org/2021/09/chinese-ghost-cities-are-final...
https://www.bloomberg.com/news/features/2021-09-01/chinese-g...
https://en.wikipedia.org/wiki/Underoccupied_developments_in_...
First Edit: removed unnecessary snark.
Second Edit: Added sources.
I don't believe that, a billion is a lot.
Remember that market rents are higher than they need to be due to the artificial scarcity imposed by a NIMBY-friendly planning system and the inaction of successive Governments who have chosen to look the other way.
And who would do the cleaning and serve you coffee if social housing didn't exist? It might cost you a lot more.
The page has been down for ages.
Do-gooder liberals are gonna worry about what policy mistake was made in the last 50 years. No. You have competing interests and the people who own something have the leverage as well as something to lose if too many people get what they already have. What’s difficult to understand?
Don’t try to “grow the middle class”, this selfish NIMBY sociological construction (it’s just gonna compact anyway, and it is). Decommodify having a dang roof over your head.
That said, a 100 year wait for social housing in Westminster is not surprising, and not as bad as it sounds. A typical professional couple in London could not afford a family home in Westminster, and it's extremely common for people in their 30s to move out of the centre when they have kids. I don't think this should be any different for social tenants: they should certainly not have to wait 100 years, but it seems reasonable for them to be offered housing outside of Westminster. The Guardian article I read about the 100 year wait specifically mentioned 3 and 4 bed family homes, and my immediate reaction was that no one else can get them either!
I think the bigger problem is the lack of affordable housing particularly for young families (social or otherwise) outside of London
bwb•23h ago
What other benchmarks would you throw out there if you were going to grade gov effectiveness?
boredatoms•23h ago
bwb•23h ago
westmeal•23h ago
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gonzo41•22h ago
vidarh•22h ago
But as a result, a more enduring part of his legacy became that due to economic stagnation, a large proportion of this really poor quality housing that was indeded as a stopgap to meet desperate short-term housing need, survived not just Khrushchev, but the Soviet Union...
antisthenes•19h ago
The alternative was people living in sheds and 19th-century timber huts that were falling apart.
The Khrushchev apartment blocks, despite their many disadvantages, were a godsend to the ballooning (at the time) population and necessary to support the rapid urbanization without homelessness.
The HN bubble will never understand that you can't solve the housing problem with only high-quality desirable housing while still making it cheap enough for the bottom quartile to afford it.
That's not even getting into the regulation side of it and local council/town NIMBYs
vidarh•13h ago
It is just also a cautionary tale of how easily a temporary fix becomes semi-permanent, but that was on his successors and the failure of the longer term Soviet economy.
irjustin•23h ago
Key items being first time owners are highly prioritized (effectively no one else). Must be owner occupied for first 5 years before allowing rental or resale. Government sets initial sale pricing to be quite affordable with special loans being cheap for the BTO. Average 2 year wait from lottery to build. Was 5 during covid.
lwo32k•23h ago
forgotusername6•23h ago
bwb•23h ago
iamacyborg•23h ago
Mine are up >50% since 2018, that’s despite gaining no new services and work on the building being put on hold due to it not being essential. The fact that it’s a relatively new build (about 12 years old) is almost irrelevant as construction is shoddy.
Putting new buildings up is only part of the problem, the entire system is fucked.
mschuster91•23h ago
If it's building insurance hikes, for fucks sake it should not be allowed to roll these over to the renters - they have had zero say in shoddy construction, the developers should be the ones held liable.
iamacyborg•22h ago
Hell, my building recently lost it’s fire safety certificate because one guy decided to scam the system which has caused a ton of knock-on impact for owners looking to move out.
milesrout•22h ago
Why should the owner of a unit be expected to absorb the cost? It isn't like they chose the cladding.
People obviously do go after the developers but it isn't like they are picking and choosing from materials lists during construction either.
iamacyborg•21h ago
mrspuratic•23h ago
https://hoa.org.uk/advice/guides-for-homeowners/i-am-improvi...
iamacyborg•22h ago
The replacement was done so poorly that panels come loose and we have to request the building management company sort it out.
vodou•23h ago
Qem•19h ago
logicchains•23h ago
graemep•23h ago
logicchains•23h ago
AlexSW•22h ago
graemep•22h ago
Post Brexit changes make it easier for high skilled workers and harder for low skilled. I have not idea how big the actual change has been.
There have been other events and rule changes that have had an impact - covid and Ukrainian visas.
Some interesting data here: https://migrationobservatory.ox.ac.uk/resources/briefings/mi...
graemep•22h ago
https://ourworldindata.org/grapher/gdp-per-capita-worldbank?...
greenie_beans•22h ago
here is counterpoint: i live in a place where housing prices rose higher than the national average during a time period when the state experienced out migration.
ReptileMan•22h ago
BlueTemplar•19h ago
ReptileMan•18h ago
HDThoreaun•19h ago
jsk2600•23h ago
As someone living in a country where it can take five or more years to get approval to build a new house and 10+ for commercial buildings due to the government bureaucracy, I'm scared by the idea of getting the government more involved. The key issue is that the government makes it very hard to build -> less housing -> expensive housing.
tryauuum•22h ago
jsk2600•21h ago
greenie_beans•22h ago
serial_dev•22h ago
All this only makes sense in the context of large groups; at the individual level, many factors determine whether someone has children.
What the puppet masters will tell you though that a country’s fertility rate are declining, because women want careers, the men are incels, and fertility drops due to climate change and microplastics.
Most people I know around my age, either limit the number of children or delay having them because they don’t feel safe bringing a child into this world.
jstanley•22h ago
I actually thought that wasn't the case. Across the entire world, people in more precarious circumstances have more kids. I don't know why.
YouWhy•22h ago
Did you consider that the judgement of precariousness of the people's situation is in your value system, and does not necessarily transfer to their value system? Especially this could be due to you having access to more information than them
lazide•22h ago
YouWhy•20h ago
lazide•20h ago
morellt•22h ago
graemep•22h ago
The consequences of having more kids is very different for a subsistence farmer vs an affluent urban person.
watwut•14h ago
HDThoreaun•19h ago
const_cast•8h ago
Gigachad•22h ago
Not sure why this kind of housing just doesn’t really exist elsewhere.
baxtr•22h ago
switch007•11h ago
tmnvix•9h ago