[noahbp]

It's frustrating that the problem is acknowledged (Housing prices are too high) but the solution seems to evade the author and nearly everyone involved in setting housing policy; not because of a lack of rent control.

Housing is too expensive because it's illegal to build enough of it.

No, multi-generation households will not save us. We should not make it impossible for young people to move to cities where high-paying jobs are, or force anyone to stay in abusive homes because we have made it impossible to live on your own.

[fortedoesnthack]

Housing is too expensive because it is an investment, full stop.

I live in Tokyo, famed for its "housing affordability".

Guess what, it's completely unaffordable for normal people now, because of people purchasing homes for investment purposes. Rent is still affordable but has a rapid upward trend as well.

[OneMorePerson]

I do always find it funny when people online bring up Japan as the leader of keeping housing affordable. Pretty sure the average income to house price ratio in Tokyo is much worse than it is in major US cities. (If I'm wrong on that data someone correct me, I'm basing it off of mental math of house prices I saw on a sign and salaries friends told me).

[fortedoesnthack]

I think it was true for a long time, and home prices were a good deal. There is also a fair bit of distortion due to near zero interest rates, where banks are willing to loan higher multiples here with 0 down payment.

But house prices have exploded upwards since covid, and wages have not.

So it's an extremely similar situation to everywhere else in the world. And the underlying reason is the same: people buying because they think real estate will go up in value.

By the way, as a fun fact, the most common mortgage in Japan is a ARM. Last I checked, 70-80% of mortgages in Japan are variable rate. The BoJ is currently on a path of adjusting rates upwards. So we will see how this all shakes out. If a situation like the GFC happens, it will not be pretty.

[OneMorePerson]

This is very imprecise data that I have, but my understanding is that pre-covid Tokyo was around 8M yen median household income, and a median home was around 60M yen, so roughly 7-8x the median HHI. Now it's around 80M for a new home and wages are the same.

Seattle even right now is ~110k ish HHI, median home price is ~$800k, so that's 7-8x, before COVID I think it was around ~650k, so around 6x. Also Seattle is known for being pretty expensive, a lot of cities like Houston have an even better multiplier.

It just doesn't seem that different to me. Feels like a lot of people are unhappy with property prices and think it's uniquely a US problem, whereas the system in the US actually works decently well compared to a lot of places. (It would take many essays for me to list all the flaws, I'm not saying it's perfect I'm just looking at it relatively speaking).

[fortedoesnthack]

You should search based on Tokyo 23-wards or vs the greater metropolitan area. Most people when they refer to Tokyo are referring to the 23 wards.

In that case the numbers are far worse.

[xnx]

> Housing is too expensive because it is an investment, full stop

OK. Why is it an investment?

[torginus]

The fundamental problem is that building quality housing is a society-level project - you don't just need to build a house/apt but supporting infrastructure, such as water, power, waste, public transport, supermarkets, and figure out how to connect it to the city's infrastructure.

There used to be political will to do this. Nowadays what I see around me, is that developers keep plopping down housing projects either in the middle of nowhere or in some highly undesirable area (like next to the train tracks, or some old industrial development) and sell the resulting apartments at crazy pricess. Zero infrastructure of course.

[potato3732842]

No, it's not. Society needs to back the F off and let anyone and everyone who owns property build what they can where they can as they want.

> just need to build a house/apt but supporting infrastructure, such as water, power, waste, public transport, supermarkets, and figure out how to connect it to the city's infrastructure.

No, you don't. 40yr ago, before you people <broadly gestures at HN with a certain finger on each hand> ruined it, it was common for even small time developers to build entire streets of houses on well and septic with 100a panels and pay the utility for a transformer at the end of the street. Obviously they weren't doing this downtown and obviously this doesn't work in all climates but there's no reason it can't be done everywhere east of the Mississippi.

[lotsofpulp]

There still is political will to do this, it happens all the time around the USA. Do you think all these neighborhoods with hundreds of new houses get built without water, power, waste, and supermarkets? See DR Horton/Lennar/Toll Brothers/etc websites, and they will all be connected to utilities and have retail mixed in or somewhere near.

[bombcar]

If you spend enough time at city council meetings you’ll often discover that not only are those developments paying for their infrastructure; they’re also paying to modernize/maintain other supporting infrastructure - it’s literally often how they get the projects approved!

“You can build this 100 home development but it will need to pay for remodeling the school” type things happen all the time.

[Velofellow]

At least in Texas, I've seen this go both ways in practice. There is definitely some 'give something to get something' action that helps grease the wheels early on in the permitting or development process.

Years later, Some developments / developers will petition to annex themselves from the outer reaches of their adjacent jurisdictions to prevent the city from growing into these areas and 1) exerting control and 2) obtaining the roads, utilities and treatment facilities, and drainage facilities. Municipal Utility Districts (MUDs) are a popular avenue for this, and arguably works in some cases. Adjacent cities may not have the existing tax base, utility infrastructure and operations, and public works to support the type of growth in some areas. My experience is just in the past ~7 years working in the Civil field in Texas. Probably variations on this across the US at least.

Funny you mention schools, because on at least one project of mine, we've constructed a public middle & high school along with a charter school on-premise. No doubt that was a big selling pitch during the early development meetings.

[bombcar]

Schools are really the big one - utilities are cheaper and simpler (for some value of simpler!) and existing cities really don't want that to get out of control.

(This is one of the reasons that senior developments slide through easier, as they don't impact the student base much but do provide tax revenue, which usually makes the city's job better.)

[cman1444]

Exactly. Funnily enough though, these city council requirements are a big part of the reason we aren't building enough housing around the US.

[tptacek]

No it isn't. We deliberately hobble home construction with zoning and permitting rules, which aren't based in any infrastructure carrying capacity concerns (in fact, dense housing has advantages for infrastructure and energy uses --- few things are as inefficient as a single-family home).

Fixing exclusionary zoning rules isn't a society-scale project.

[expedition32]

The political will disappeared as soon as we became a boomer society.

In the 1970s and 80s there were riots. Now most voters are old and own a house so they don't really give a shit. Hell they WANT prices to go up because it is their pension.

[Aurornis]

> Housing is too expensive because it's illegal to build enough of it.

This is a factor in some places, but a gross over-simplification in others.

There are neighborhoods full of affordable new construction houses not far from where I live. They sell slowly because people would rather live in the popular areas.

There are affordable high density housing options for rent here. They stay on the market because everyone wants their own house.

It's not even about remote work here, as the popular location for office builds and jobs is actually closer to those affordable housing neighborhoods few people want to live in. Being near the office buildings is actually a reason why they're undesirable.

There are some obvious broken housing situations like San Francisco, but I don't see permitting reform as a magic cure-all in every city.

[noahbp]

https://x.com/nickgerli1/status/2006872715316121750

Permitting reform made Austin, Texas the second-most affordable city in America by rent to income ratio.

>There are neighborhoods full of affordable new construction houses not far from where I live. They sell slowly because people would rather live in the popular areas.

Mortgage rates rose and property prices have not yet fallen to match reality. I would bet that this is a much stronger factor in preventing those new homes from selling rather than buyers simply having a preference for different neighborhoods.

[bombcar]

The mortgage rate change has an insanely huge effect (which means that keeping them artificially low for 20 years has a similar effect the other way) - and it’s worse right now because anyone who owns a house with a mortgage would significantly increase their payment if they sold and bought an identical house next door. So people just aren’t moving.

[lifestyleguru]

> Housing is too expensive because it's illegal to build enough of it.

A lot is being built. The problem is ruthless cost extraction, parasitic chain of agents and agencies, and oftentimes real estate is the only investment vehicle free of capital gains tax. Have you seen what is being built everywhere from Australia, through Europe, to America? 20-30 sqmt apartments where you walk in straight to the kitchen and sleep next to the oven and dishwasher, if the place is even large enough to fit the full kitchen.

[maxsilver]

> Housing is too expensive because it's illegal to build enough of it.

A lot of us are in the US, where (except for SF and handful of specific cities) housing is legal to build practically everywhere, municipalities are handing out free money for any form of development, so people do build tons of new housing all over...

...and the prices still rise anyway.

80% of the buildings within a 1 mile radius of me did not exist at all 20 years ago. There's almost 5,000 new units around. Half of the new apartment buildings are only at like 70% utilization. We barely hit 1% population growth year-over-year.

Prices are at 40 year record high prices anyway (yes, even after factoring for inflation).

[fkfkafjfjk]

> Housing is too expensive because it's illegal to build enough of it.

This is part of the problem, and one that many people actively want to avoid discussing so it is important to discuss it, but it is only part of the problem.

I think for real reform in this area you need to have the government strictly regulate rental properties.

That includes determining the rental price, and imposing fines for empty units.

Every time there is a stimulus check or an increase in minimum wage the detractors say "this will just be captured by the landlords".

We need to have clear stipulations for rental prices and ideally link it to another value that also changes over time.

I would argue a 1 bedroom apartment should have its rent capped at less than 40% of the monthly take home of someone on minimum wage.

Let the landlords and employers battle over who gets the bigger slice of that pie, while allowing the workers to survive their petty skirmish.

Here is Adam Smith talking about a minimum wage:

> A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation. Mr Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that, one with another, they may be enabled to bring up two children; the labour of the wife, on account of her necessary attendance on the children, being supposed no more than sufficient to provide for herself: But one half the children born, it is computed, die before the age of manhood. The poorest labourers, therefore, according to this account, must, one with another, attempt to rear at least four children, in order that two may have an equal chance of living to that age. But the necessary maintenance of four children, it is supposed, may be nearly equal to that of one man. The labour of an able-bodied slave, the same author adds, is computed to be worth double his maintenance; and that of the meanest labourer, he thinks, cannot be worth less than that of an able-bodied slave. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what is precisely necessary for their own maintenance; but in what proportion, whether in that above-mentioned, or any other, I shall not take upon me to determine.

https://www.gutenberg.org/files/3300/3300-h/3300-h.htm#chap1...

In what US city can someone on minimum wage raise two children? On the US federal minimum wage?!

[BigParm]

Children aren't being produced. Birth rates are declining.

People conflate the carrying capacity of the economy with GDP, but these are different. The economy grows but requires fewer workers over time. As the carrying capacity decreases, the population decreases. On the ground, this manifests as the inability to afford child rearing.

The excerpt you cited assumes that this race of workers must afford to perpetuate itself in order to be viable. It cannot perpetuate itself, and it is not viable.

[fkfkafjfjk]

I wish this site had a lot less ill conceived free market fan fiction woven into racially charge eugenics.

[noahbp]

>That includes determining the rental price, and imposing fines for empty units.

We already have a fine for empty units. They're called property taxes, and they're the strongest and easiest-to-use tool that local governments have for reducing vacancies.

>I would argue a 1 bedroom apartment should have its rent capped at less than 40% of the monthly take home of someone on minimum wage.

Then you're making it de facto illegal to build new housing. No bank is going to lend money to anyone to build more housing if they can't charge enough rent to cover the loan.

>In what US city can someone on minimum wage raise two children? On the US federal minimum wage?!

Maybe not the US federal minimum wage, but Austin has become the second-most affordable city in America (median rent price to median household income ratio), just by permitting a huge number of apartments.

https://x.com/nickgerli1/status/2006872715316121750

[fkfkafjfjk]

"Affordability" is more than just rental prices which is why I think building more units is insufficient.

You need to address wages as well.

> Then you're making it de facto illegal to build new housing. No bank is going to lend money to anyone to build more housing if they can't charge enough rent to cover the loan.

This implies you think landlords are trying their best to lower prices, only charging enough rent to just cover their loan payments, which is absurd.

[bombcar]

No, it’s the other way around - they won’t build if they can’t sell and if the buyers are landlords …

But landlords only provide a service when rents and mortgages are roughly similar - they’re buying long and selling short as it were.

[Aurornis]

> In what US city can someone on minimum wage raise two children? On the US federal minimum wage?!

Federal minimum wage is a strawman in large cities.

I'm in a medium cost of living city and I doubt I could find a minimum wage job listing if I tried. Fast food places and government buildings even advertise $15-20/hr jobs because they can't hire enough people.

[fkfkafjfjk]

Both assertions display an offensive level of detachment and ignorance.

> Federal minimum wage is a strawman in large cities.

I did first mention city minimum wage, and only referenced federal minimum wage after to drive the point that federally this discrepancy is even more grotesque.

States with "large cities" that use the federal minimum wage:

> Five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Three states, Georgia, Oklahoma and Wyoming, have a minimum wage below $7.25 per hour. In all eight of these states, the federal minimum wage of $7.25 per hour generally applies.

https://www.ncsl.org/labor-and-employment/state-minimum-wage...

> I'm in a medium cost of living city and I doubt I could find a minimum wage job listing if I tried.

Tell me your city and I will find you a minimum wage job posting.

[Aurornis]

> Both assertions display an offensive level of detachment and ignorance.

The number of jobs paying minimum wage was around 1% several years ago. It’s certainly gone down.

Minimum wage jobs are also highly biased toward young people, not parents raising two children.

> Tell me your city and I will find you a minimum wage job posting.

Show me a minimum wage job posting and I will find you a higher paying job with better conditions in the same area.

[fkfkafjfjk]

https://en.wikipedia.org/wiki/Appeal_to_the_stone