[dntbnmpls]

This is the problem. Homes shouldn't be an investment. It should be a depreciating asset like cars at worst and a human right at best. Especially in a country as large as the US with so much resources, we shouldn't have turned homes into an investmens. Productive assets like companies should be investments.

But at this point, we are trapped. The largest retirement asset for most people are their homes. It's political suicide to do anything that would hurt the valuations of homes. If you are an older individual with your home making up a bulk of your retirement nest egg, you aren't going to vote for policies that make homes more affordable. And older folks vote more often and in larger numbers than younger voters.

[zamfi]

> It's political suicide to do anything that would hurt the valuations of homes. If you are an older individual with your home making up a bulk of your retirement nest egg, you aren't going to vote for policies that make homes more affordable.

I hear this argument a lot, but it completely ignores the fact that development can allow more housing and continue to increase the value of existing housing.

The key is that more housing isn’t going to look like existing housing: it’s going to be condos and other apartments. Older folks in single-family homes are not going to see their houses lose value — if anything, the increase will continue, because now a developer can buy their house and turn it into four apartments.

Here’s how it would work: family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.

This is how densification happened almost everywhere until zoning laws spread mid-century.

Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.

What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity.

The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.

[jrumbut]

That only works if you have 4 new people who want to live there.

We could probably achieve that through immigration for a while, but there is still a sustainability problem that keeping some constraints on housing construction solves. I say this as someone who would love cheap housing in a desirable area.

Empty buildings tend to create problems, and the energy to tear them down/convert them to something else often isn't there once the population begins decreasing.

[1stcity3rdcoast]

Most California cities are 40-70 years (years!) behind demand in housing production. There aren’t 4 people waiting for that development; there are 40.

The population of the US continues to grow. Empty buildings are not something you need to be concerned about when the current supply is so inadequate.

[kelnos]

> That only works if you have 4 new people who want to live there.

I don't know about the rest of California, but in the bay area you can find those 4 people with your eyes closed.

[smsm42]

> Homes shouldn't be an investment

Try explaining to somebody who just bought an asset that costs 10x their annual salary, at 5x leverage, that they shouldn't care whether this asset appreciates or not. Be prepared to duck quickly.

> Especially in a country as large as the US

I'm pretty sure there are places in US where housing is literally 20 times cheaper than Santa Cruz. Somehow it doesn't make anybody feel better.

[cgiles]

Well, for those of us who live in those flyover states, it does make us feel a little better about our own situations, as well as mightily perplexed about what people in SF, etc, are thinking.

Where I live, a mid-sized metro in the central US, I had some graduate student coworkers recently outright buy a 1500 sqft 2-bedroom house within walking distance of our university for $30K (from foreclosure). Not the best area of town, but it was a perfectly fine house and you can't beat that price. Elsewhere, one can easily get a 2000-2500 sqft home with a sub-$1000 mortgage payment. And everything else, like food and gas, is much cheaper than CA, usually about half the price. And salaries, while lower, are still high enough for this to be a beneficial trade, not to mention the lower tax brackets from having a lower nominal income.

Now if you are pulling down $250K as a tech worker, of course it makes sense to live in the Bay Area. But all these housing insecure people working service jobs? They should come to the central US where they could have a much higher quality of life. And if they did, the housing crises in coastal metros would solve itself, because of decreased demand, and because the local authorities would be forced to make the cities livable for service workers -- assuming wealthier inhabitants want to have any Starbucks, bars, etc.

Another strange paradox is that zoning restrictions are much looser, and more sprawl is allowed in these mid-sized metros, than in places like Santa Cruz, despite the lower overall demand for housing. So there is a double-whammy effect causing a huge difference in housing prices between a few select cities and, well, everywhere else in the US.

[zachthewf]

I completely agree. It's not just retirement-age people either. I've noticed many Bay Area peers in their ~early 30s buy their first home and (understandably) swap camps from "very concerned about housing prices" to "happily watching their massive investment grow."

Is there any realistic path (even a very optimistic one) towards the Japanese model of house-as-depreciating-asset in the US?

[magicsmoke]

Japan tears down their houses because they're worried about older houses being unsafe due to earthquake damage.

So I guess the most realistic path would be for the big one to hit California and destroy all the housing stock.

[fiblye]

Also because they get moldy and stink from the humidity, and because many people believe they have ghosts.

The absolute quickest way to kill home value in Japan is have someone die in it. Absolutely nobody will want to live in the place and property owners will warn you before you consider looking at it.

If old people in the US saw their homes as a time-limited investment where they needed to sell them while they still can in order to ensure their spouse/kids have money, prices might drop. Maybe bringing back superstitions is a way millennials can finally take back the housing market.

[legolas2412]

I think I should move to Japan and buy cheap haunted houses.

[smsm42]

Realistic plan for what?

[AnthonyMouse]

> Is there any realistic path (even a very optimistic one) towards the Japanese model of house-as-depreciating-asset in the US?

One path toward that would be to eliminate property taxes. Governments want high housing costs because it increases property tax revenues. Take that off the table by generating the revenue some other way and it becomes a lot easier to pass policies to reduce housing costs. Meanwhile you throw the homeowners a bone, because even though their house isn't appreciating anymore, that's offset by all the property tax they no longer have to pay.

[legolas2412]

I don't think that's true. Building more houses would also definitely increase property taxes, but the government is not doing that.

Currently, people are already spending a really big part of their incomes on rent, and hence property. It is not possible that they'll spend any more.

[AnthonyMouse]

Building more houses increases property tax revenues, but it doesn't increase them per capita because now you have more people. The government's costs are per capita, so that doesn't help them.

By contrast, increasing property values generates more revenue per capita, so property tax gives the government a perverse incentive to increase housing costs.

[alpha_squared]

How do you fund all the programs currently funded by property tax? Not the least of which is local public education.

[AnthonyMouse]

By using other taxes, like income tax or VAT. The point isn't inherently to change the amount of government revenue, only to shift where it comes from so that existing property owners don't revolt when they paid a certain amount for a property expecting it to appreciate and then it doesn't without anything to offset it.

[kelnos]

> If you are an older individual with your home making up a bulk of your retirement nest egg, you aren't going to vote for policies that make homes more affordable.

The thing about this though: this only matters if you intend to sell your home and move to a completely different area before you die. Alternatively, you're willing to sell your home and stay in the same area, but move into a much smaller home (and/or ditch your single family home for a condo or apartment).

For some retirees, sure, that's their plan. But for those that just plan to stay in their home until they die, the home value really doesn't matter, since they're not going to realize that value in their lifetime.

The one counterargument to that I can think of is that a dropping home value would also drop the amount of money a retiree could extract via a reverse mortgage, but I'm not sure those are all that popular (but I could be wrong).

[foogazi]

There is affordable housing available all over the US even in California

People would rather live in the nice areas and that drives prices higher and then they complain about it.