It is illegal to build dense housing. Car-centric suburbia is fiscally unsustainable and people are feeling the effects via rent. See San Fran and Miami for ground zero.
Agree about dense housing, but a lot of that means more expensive builds: if you want to build a 5-over-1 with commercial on the ground floor, that's great, but the construction loan you need to do that is going to be $$$$ right now.
I agree completely. Legalize it all and see what works out. Still though, the loans are more expensive right now, and that is a Fed thing. Perhaps they affect that kind of housing you're describing a bit less in some cases, but it's still a problem there for some developers.
It's partially a Fed thing. Higher interest rates in general lead to higher interest rates for construction loans. But if you're trying to spur housing construction without causing general inflation, maybe offer lower interest loans only for housing construction?
I'm not sure how you get that without getting the government involved in providing those lower rates. I'm not opposed to that, but it makes everything a bit trickier...
This attitude is why we have a housing crisis. Not banks or Blackstone, not RealPage, not foreign buyers, not short term rentals. Those things may not help, but the lid on the housing supply are people in your city who, ironically, generally are a small but involved minority who show up to say NO to housing and NO to a diversity of housing types.
It is a reasonable concern. So reasonable in fact that everyone has it and thus the natural state of things is American cities all try to ban dense housing. Hence the housing crisis.
This is the logic behind some states like California trying to reduce the amount of local control over how dense housing can be. It is a state-wide problem that every city is disincentivized to solve.
While you were probably using hyperbole, I don’t think it’s easy to 5x the population of a city with infill housing. Just financing, land acquisition, demolition, construction, and sales takes a while. Government redtape only adds more time.
Do we really need to 5x the population? Or would adding a studio apt to the basement of every SFH solve it (not saying this should be the solution, just thinking scope of problem)?
FWIW, I spent a few weeks working remote/vacationing in Cape Canaveral, FL two years ago (the town, not the military base). It has mixed housing - SFHs, duplex, and two-story (~8 unit) apartment blocks - it seemed to work well. It felt like a place I could happily live (other than the heat).
Same reason you have a say in whether there’s a strip mine or a landfill across the street from your property. The residents come together and decide on the rules by which they will be governed.
Just because they don’t jive with exactly how you’d want things doesn’t mean the system is not working as it’s intended.
But that's a silly example, because proving net-harm from industrial uses across from residential is easy. Proving net-harm from denser residential is generally an exercise in NIMBY-ism that slides very smoothly into classism and racism about who would live in those denser units.
Residents coming together to decide on rules by which they are governed can get us public lynching too. It doesn't mean it's good governance.
The example is meant to be silly to demonstrate that there’s clearly some limit of what is acceptable and it’s the stricter intersection of every level of government within the bounds of what’s constitutional. One of those levels is the local government consisting of the people that already live in a municipality.
There’s no inherent right, whether constitutionally granted or innately, for you to build whatever you’d like, wherever you’d like. Just like I can’t go build a shack in the middle of NYC’s Central Park.
Framing it as racism or classism is a sign that you don’t have any other valid arguments. It’s literally just an excuse for a land grab!
> The example is meant to be silly to demonstrate that there’s clearly some limit of what is acceptable
But you can use sensible rules for this like "does this impose a significant negative externality" that neatly allow you to exclude a landfill from a residential area but not a new residential building.
> and it’s the stricter intersection of every level of government within the bounds of what’s constitutional.
The entire question is what those laws should be. For example, should states or federal lawmakers prevent towns from imposing restrictive zoning rules, as permitted under their various constitutions?
> There’s no inherent right, whether constitutionally granted or innately, for you to build whatever you’d like, wherever you’d like. Just like I can’t go build a shack in the middle of NYC’s Central Park.
You can't go build a shack in Central Park because you don't own the land in Central Park. The issue here is when you do own the land and all you want to do is build housing during a housing shortage.
> Framing it as racism or classism is a sign that you don’t have any other valid arguments.
Only if you don't present any other valid arguments.
Also, "this is racism or classism" can be a valid argument when it is in fact racism or classism. Just because it's massively overused doesn't mean it's never actually true.
> It’s literally just an excuse for a land grab!
The proposal does not involve the use of eminent domain.
>But you can use sensible rules for this like "does this impose a significant negative externality" that neatly allow you to exclude a landfill from a residential area but not a new residential building.
This is exactly what the planning commissions use. Apparently the separation is not as neat as you believe.
Oh, I see the problem. It's implied that in order to be prohibited, a negative externality should be a net harm. For example, you need to prohibit someone from taking a $1 gain by causing $10 in harm to someone else, causing a net loss of $9 to society.
Compare: You are prohibited from manufacturing electric cars by dumping heavy metals in the river, because that poisons people which causes more harm than disposing of them properly, vs. you are prohibited from manufacturing electric cars because it would reduce the profits of Exxon, ICE automakers and mechanics through increased competition and efficiency, which is not a net harm at all because it creates a countervailing benefit to consumers in a similar amount.
"It makes housing more affordable" is not a net harm.
Many people tried to come up with an ethical calculus through history, and while themselves believed their systems were rational and common sense, other people invariably rejected those.
One is, how do you compare the values of e.g. pollution vs. job creation? What's the monetary value of a human life? You can try to make an estimate but there is no objective answer or unambiguous line.
The other is, there is a cartel charging monopoly rents because there is a law inhibiting anyone new from entering the market. There is a proposal to get rid of the law. By any plausible estimation the net benefits of removing the law are positive, but the cartel claims they'd be harmed because they couldn't charge monopoly rents anymore and then they'd make less money. This is not the same problem; this is the cartel objectively wanting to create a net loss for the general public in exchange for a net gain for themselves only.
>One is, how do you compare the values of e.g. pollution vs. job creation?
My question exactly. Ethical calculus you propose should be able to do that in a manner that won't cause affected people to literally tar and feather you in the best case.
>The other is, there is a cartel charging monopoly rents because there is a law inhibiting anyone new from entering the market.
That's like, your opinion. Fact is that you can build dense housing in any big city in the US. No cartel and no laws forbid it. The argument of "but I want an apartment tower right THERE and it's zoned SFH!!!1!" could as well be applied to SFH and with the same veracity you could repeat that "the law forbids building SFHs" because there are lots zoned AG or industrial where you cannot build a SFH.
That's what the law says. You own a piece of property, you want to get into the market by building more housing on it than currently exists, you can't.
> Fact is that you can build dense housing in any big city in the US. No cartel and no laws forbid it.
Explicitly prohibiting something and purposely using the law to render it uneconomical are de facto equivalent.
> The argument of "but I want an apartment tower right THERE and it's zoned SFH!!!1!" could as well be applied to SFH and with the same veracity you could repeat that "the law forbids building SFHs" because there are lots zoned AG or industrial where you cannot build a SFH.
Okay, so let's do that too. There is no good reason to prohibit single family homes in the most permissively zoned areas -- maybe the agriculture or industrial workers would prefer a shorter commute.
But also, this is often already the case. The farmer is allowed to build a farm house. There is no valid reason to prohibit it. It's just not going to happen very often whether you prohibit it or not because there is no demand for a SFH development in the middle of a large block of farmland or a bunch of warehouses and factories.
Which law says there is a landlord cartel and building apartments is illegal? We both know there is no such law.
>You own a piece of property, you want to get into the market by building more housing on it than currently exists, you can't.
Is this also in some law? Which one, please be specific. How come people get in and out leasing market all the time? An apartment building near where I live changed ownership recently, I would appreciate the exact law you are referring to, this could be a crime in progress.
> Which law says there is a landlord cartel and building apartments is illegal? We both know there is no such law.
We both know that it's zoning laws that prohibit land that currently contains a single family home from containing any structure with a larger number of housing units.
> How come people get in and out leasing market all the time? An apartment building near where I live changed ownership recently, I would appreciate the exact law you are referring to, this could be a crime in progress.
Buying or selling existing units doesn't increase supply.
>We both know that it's zoning laws that prohibit land that currently contains a single family home from containing any structure with a larger number of housing units.
Yes, but what about cartels and other stuff? Zoning does not mean there is a cartel nor does it mean you cannot build apartments.
> Buying or selling existing units doesn't increase supply.
Sure, but you said it's illegal to get into the market so I was curious what law you had in mind, as an upright citizen I wanted to report a crime, as I understand you don't know what law you had been referencing when making the previous statement?
> Yes, but what about cartels and other stuff? Zoning does not mean there is a cartel nor does it mean you cannot build apartments.
Laws can be the mechanism a cartel uses for enforcement. This is called regulatory capture. The incumbents capture the regulators and have them pass laws to restrict supply and create barriers to entry.
The zoning laws restrict supply and create barriers to entry.
> Sure, but you said it's illegal to get into the market so I was curious what law you had in mind, as an upright citizen I wanted to report a crime, as I understand you don't know what law you had been referencing when making the previous statement?
Suppose that Samsung, Micron and SK Hynix have formed a price fixing cartel. If Hynix was bought out by, say, Oracle, who then does nothing to increase production, how would this imply that there isn't a cartel? Buying out an existing member of the cartel doesn't increase supply or lower prices.
You keep repeating "laws do that" but never mentioned any particular law, is not this a time for you to stop and think a little bit, how is this possible that such intrusive laws remain hidden even from you?
increasing housing stock doesn't increase class size. some of the extra people you get are teachers and so the school hires more teachers and runs more classes.
> You’re forgetting that the people living in those towns don’t want you to suddenly increase the housing stock by 5x and with it the class sizes.
It's actually easier to have smaller class sizes with higher density because you spend less on transportation and real estate and can use the money hire more teachers, or lower your taxes, or do whatever you like with it.
> Why should a minority of people, especially those that don’t even live in these towns, dictate how the town will be changing?
Because it's every town operating under the same set of incentives. Existing homeowners don't want more housing because they want the value of their existing home to go up through scarcity. It's the same in every town, so if you want to build "cities" anywhere the decision on whether it can be done in a particular place can't be solely in the hands of the people who have the financial incentive to say no.
> If dense housing is the bees knees, make people want to live in cities.
If people didn't want to live in cities then why does the housing there cost more?
> It's actually easier to have smaller class sizes with higher density because you spend less on transportation and real estate and can use the money hire more teachers, or lower your taxes, or do whatever you like with it.
In practice, new housing increases the denominator (number of students) more the than numerator (tax dollars). This is because the existing tax base includes non-residential land that only provides tax dollars without increase school costs. So any new housing is always a net loss.
> Existing homeowners don't want more housing because they want the value of their existing home to go up through scarcity.
The flip side of that is that people who don’t have those houses want to take that away without paying the market price for that land.
> If people didn't want to live in cities then why does the housing there cost more?
Historicaly, being close to high paying jobs was a major driver. There’s also an annual resupply of starry eyed graduates.
Though I’ll be honest to not understand why anyone would pay a premium to live like a sardine. The air quality alone is enough reason to move out of the city.
> In practice, new housing increases the denominator (number of students) more the than numerator (tax dollars). This is because the existing tax base includes non-residential land that only provides tax dollars without increase school costs. So any new housing is always a net loss.
The assumption here is that you would have only new residential housing. But zoning that allows for higher density construction also allows for new businesses that pay taxes and have no children.
And you would also have to be making assumptions about the ratio of taxes paid to number of kids. But the people who move into small cheap apartments and condos are most often college students and retirees, who don't have kids yet (and wouldn't continue to live there if they did) or their kids are already grown. From which you get new tax dollars but no new students. Whereas the people who can afford a 3- or 4-bedroom unit have money and pay an above-average amount of tax, so they might have kids but they're paying their own way.
This is also not just a fraction with a numerator and a denominator. Many of a government's expenses are fixed costs, e.g. most single-lane suburban roads are nowhere near capacity and would not need to be expanded or even experience congestion if the amount of traffic on them doubled. Each new resident you get paying taxes increases the tax base over which you can amortize those fixed costs.
Moreover, the ratio is irrelevant. If someone is paying $21,000 in taxes and then their presence requires the government to spend $20,000 more in services, you'd have a net gain of $1000 from their presence regardless of what the ratio is for some other people or existing residents.
> The flip side of that is that people who don’t have those houses want to take that away without paying the market price for that land.
They are paying the market price for that land. In order to build a multi-story building, you first have to buy a piece of land to put it on.
What they're doing is making more efficient use of that land, by creating e.g. 10 housing units on a lot currently being used for 1. That reduces the market price of housing units by supply and demand, but the higher price was only ever a result of artificial scarcity.
> Historicaly, being close to high paying jobs was a major driver.
So a shorter commute makes up for a higher price. But if you prohibit housing construction, this trade off only gets worse. The job is in the city, you could have lived in a 6-unit building 20 minutes away, but if those are prohibited then you need 6 times as much land for the same number of residents and now they either have to pay more even for the 20 minute commute or take the far away housing with a 60+ minute commute.
Whereas if you allow the 6-story buildings, anyone who wants the 20-minute commute can live there and anyone who wants to live in a single-family home can live five blocks away with nearly the same commute but for a lower price than they'd have had to pay when those higher density buildings weren't there satisfying housing demand.
> Though I’ll be honest to not understand why anyone would pay a premium to live like a sardine.
Density and small units are not inherently associated. You can put 4000 sq ft units in a multi-story building and still have ten times the density as a single-family home of the same size as one unit.
> The air quality alone is enough reason to move out of the city.
Tell that to the suburban ignoramuses who think it's a good idea to burn wood:
That graphic isn't even to scale. The pellet stove looks like it's only a little over twice as bad as an oil furnace when it's actually more than a hundred times worse, and the wood stoves and fireplaces people have are an order of magnitude worse than that.
> If people didn't want to live in cities then why does the housing there cost more?
Density seems to always make an area more expensive. What are the two densest cities in the US? Which are the two most expensive cities in the US?
Increasing density does not ever seem to make an area cheaper to live. Maybe that is ok, but it does contradict the idea of building more to make it cheaper.
> Density seems to always make an area more expensive. What are the two densest cities in the US? Which are the two most expensive cities in the US?
The causation goes the other way. When an area has a lot of housing demand, that's where they put the tall buildings. Nobody is going to build a skyscraper in the middle of a corn field.
But in order for the density to keep up with demand, you can't suppress new construction. That's what causes prices to be high:
> What are the two densest cities in the US? Which are the two most expensive cities in the US?
Which are the two cities in the US with the most restrictive zoning and building codes? Which are the two most expensive cities in the US?
> The causation goes the other way. When an area has a lot of housing demand, that's where they put the tall buildings. Nobody is going to build a skyscraper in the middle of a corn field.
I believe it's a feedback loop really, not exclusively in one direction or the other.
You're right that nobody wants to build a skyscraper out in the farmlands. They build it in the city, which makes that city a tiny bit more dense, pulls in more people and makes the city a small increment more attractive and pulls in even more people which in turn raises prices even more and the cycle continues. As cities get more dense they always get more expensive.
Look at Manhattan, full of highrises and skyscrapers as far as the eye can see, and is the #1 most expensive area in the US to live.
> Which are the two cities in the US with the most restrictive zoning and building codes?
I have no idea to be honest. Do you have info on that?
> They build it in the city, which makes that city a tiny bit more dense, pulls in more people and makes the city a small increment more attractive and pulls in even more people which in turn raises prices even more and the cycle continues. As cities get more dense they always get more expensive.
This is only a feedback loop if the city becomes more attractive by a larger amount than the increase in housing. For example, if you add new housing for 1000 people and this causes 1200 new people to move to the city. If adding new housing for 1000 people causes 800 new people to move to the city, you've still created more new housing for locals than you had before, and can just keep at it.
We can use basic math to see that even if the former ever happens, it can't sustainably happen. If e.g. the Chicago Metro area had the population density of Manhattan, it would have a larger population than the United States as a whole, 750M vs. 333M. A single metropolitan area could provide more housing than there are people to live in it. That many people would have to exist before they could move there. And obviously the entire US population is not going to move to a single metro area anyway, so you would reach saturation long before that.
Now, one thing that does happen is that tall buildings are more expensive to build, so when you get into the extremely high densities like in Manhattan, part of the high cost is the construction cost for a building that tall. But Manhattan is an outlier. If we're talking about converting single family homes into 12-unit condos, the cost per unit isn't much different and you get a 12X increase in density.
And here's another piece of the puzzle: Where are these people coming from? If you build new housing in New York, that might attract people who used to live in Boston. If you build new housing in Boston, that might attract people who used to live in Seattle. What happens if you build new housing in New York and Boston and Seattle and Los Angels etc.? If people move from everywhere to everywhere, there is no net migration and no increase in local demand. And even if you did only increase the amount of housing in New York, and that caused people to move to New York from Boston and Seattle and Los Angeles, then housing would become more affordable in Boston and Seattle and Los Angeles because the local demand there would go down. So you're talking about a hyper-local effect, whereas on a question of national policy, supply and demand is in full effect and "build more housing" makes the average unit cost less even if the ones that get more affordable aren't in the same place as the ones you build.
> I have no idea to be honest. Do you have info on that?
It's the same two cities. It's New York and San Francisco. They both make it extremely arduous to add new housing. Many of the existing buildings in Manhattan would be illegal to build today. SF is even worse.
The observations are entirely consistent with the theory.
Suppose you have an area with 10,000 acres of land and local demand for 250 housing units, i.e. a rural location. Housing here is going to be inexpensive; land is not scarce so people will build a hundred single family homes on a hundred acres of land, there will still be 9750 acres available and the main cost will be the cost of constructing a house.
Now suppose you have the same 10,000 acres of land but local demand for 25,000 housing units. In the absence of zoning restrictions, this will still result in somewhat higher prices. Many of the lots will need more than one housing unit, these may cost a little more to build, and the cost of the land will be a little higher because there is more demand. In the presence of zoning restrictions requiring only single family homes on an acre of land, you're completely screwed, because the maximum number of units you can build is 10,000 and you have demand for 25,000. We see the latter in practice in many places, e.g. places where any single family home with an acre of land is selling for more than a million dollars.
Now suppose you have the same 10,000 acres of land but local demand for 250,000 housing units. It is not only not possible to satisfy this demand without multi-story buildings, it will take tall ones at that. Without any restrictions that is what would happen, and prices would be a little higher for the same reasons, but still be kept in check by new construction. However, if zoning only allows 125,000 units to be built, you would have a significant amount of density and still fall well short of the 250,000 you need, causing prices to be much higher.
The prices in the area where you need 25 units per acre are always going to be higher, but there is a difference between "higher because it costs somewhat more to construct a 10 story building" and "San Francisco prices".
Moreover, there is another reason why the highest density areas have such high prices. Common zoning practice is to assign some very small area where the tallest buildings can be constructed, e.g. here's the NYC zoning site:
Have a look at what proportion of the land is zoned R8-R10, allowing for the sort of densities seen in Manhattan. It's only allowed where it already is. It's not even allowed in all of Manhattan, which itself is less than 1% of the New York Metro area. So if you want to build a very tall building, it has to be in that tiny sliver in Manhattan, causing the price of land with that zoning to be astronomical because it's so artificially scarce, and adding that cost to the price of any housing there. You keep asking why housing costs so much in Manhattan -- that's why, because you're not allowed to build those buildings somewhere else, and the price of land operates on supply and demand. What's happening is exactly as the theory predicts: Artificial scarcity raises prices.
Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF.
> Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF.
Ultimately, the question I find most interesting is: Which cities have achieved very high density while maintaining a low cost of living (relative to local salaries)?
We can debate "If only they did ..." forever, but if there are no actual cities where this has ever happened, maybe the answer is that it can't happen.
But in practice, we're so far behind on the supply side that we could densify much of our cities and inner suburbs and still see values rise. And I'm not convinced that when done in a playful manner, that densification doesn't add value to existing SFHs, despite now being located in a noisier/denser/whatever area. People largely prefer convenience and not driving all the time. Just walking to school is a huge plus - fewer noisy buses, more healthy kids, etc.
Arlington VA added a ton of mid-rise and high-rise development in the 80s/90s (Clarendon, Courthouse, Ballston) with good results. Reston VA is now doing the same and home that were $400k a decade ago are selling for nearly double. In both cases, the scope of in-fill was tightly controlled - the local governments created dense zones around the Metro stations - which makes sense.
> But in practice, we're so far behind on the supply side that we could densify much of our cities and inner suburbs and still see values rise.
This is a common source of confusion. If you relax zoning, the instantaneous effect is that the value of land is increased in the areas where the zoning is made more permissive (because now you can do more with the land) and reduced where zoning was already permissive (because now land zoned for those uses is less scarce).
So the immediate effect is that the value of the land where single-family homes are will go up, and that effect is permanent. Then the value of indoor space goes down as people are allowed to and do build more of it. Which is what we're after, because the important thing is that people can get a couple thousand sq ft of living space for an affordable price, regardless of the number of floors the building they're in has. If the value of the land doubles but the amount of housing per acre quintuples, you've still made the land cost per housing unit decline by 250%.
What that does to the long-term value of existing single-family homes depends on how much demand there is. In areas where the zoning had been oppressively restrictive, the gain in land value from relaxing the zoning could exceed the amount that it's even possible to lose from the value of indoor space.
For example, you have a $400,000 house and the new zoning makes the land itself worth $500,000, but housing still becomes more affordable because someone can buy that $500,000 piece of land, build a dozen housing units there and sell the property for $2.4M, pricing each of the units at $200,000. The existing single family home still sells for $500,000+ though, not because it's a housing unit but because it's an acre of land where someone could build a dozen.
> In both cases, the scope of in-fill was tightly controlled - the local governments created dense zones around the Metro stations - which makes sense.
It doesn't. It makes a significant amount of sense to put a 3-5 story building in an area with mostly single-family homes, because that can often be supported with no additional infrastructure. If you want to put them all in the same place then you have to upgrade the utilities and transportation infrastructure there. Which is fine if that's what happens naturally because people choose to develop a particular area, but there is no reason to force it.
And trying to concentrate them all in one area also slows down the construction and makes it cost more, because then the land cost there remains high for lack of alternatives, forcing developers to buy out those particular people (and giving them undue gains that should have been evenly distributed to the community at large) instead of buying whatever properties were already on the market.
> build a dozen housing units there and sell the property for $2.4M, pricing each of the units at $200,000
If builders were selling units at their cost plus a fixed profit margin, you're right.
But builders are in the business of maximizing profit. If in this area there was a backlog of people willing to pay 400K for a housing unit, the builder will sell each of these dozen units for 400K.
If you feel I'm wrong, please point me at a few cities in the US where housing became cheaper as density increased.
Well you have to pick one. Either people will pay ~$400K for the units and then the builder's incentive to build there is obvious -- because there is enough demand to sell them for $400K, which is profitable.
Or people wouldn't pay quite as much as the existing single-family homes, but they'd still pay more than the builder's costs to construct the building, so it's still profitable. It only becomes not profitable when the price of a housing unit drops below the builder's costs. Which is why they'd want to keep building until that happens.
> If you feel I'm wrong, please point me at a few cities in the US where housing became cheaper as density increased.
I keep saying this. The causation goes the other way. Density increases where demand is higher. Higher demand increases prices, then density blunts the increase so that it's smaller than it would be if no additional construction occurred. That doesn't mean it would become cheaper in the higher demand area than the lower demand area -- particularly if the area is still growing, in which case construction lags the increase in demand and has to catch up. And if construction is inhibited, it can't, so you get as much density as the zoning allows and then prices skyrocket because supply can no longer respond to increases in demand. Which can happen even if the area already has above-average density.
What you'd need to see a price decrease is an area where zoning was relaxed after being strict, allowing density to increase after it had previously been suppressed, so that density increases because of the legal change rather than a new increase in demand. But the lack of this happening in areas of high demand is exactly the problem. Maybe we should try it and see what happens?
This is an oversimplification that gets repeated too often. It is not illegal to build dense housing.
There are suburban areas where zoning doesn't allow you to build a high-rise apartment building. That is true. But why would you build a high-rise apartment building out in the suburbs anyway?
Here (in the outskirts of silicon valley) high-rise apartment buildings near downtown are popping up like mushrooms, there are perpetually at least a couple in construction as soon as others are completed. Lots of dense housing being built, nothing illegal about it.
> This is an oversimplification that gets repeated too often. It is not illegal to build dense housing.
It is illegal to build dense housing in most of the land area where it would be useful. Naturally the few exceptions will cause it to be built there, but that doesn't make for a solution. Since there are so few such areas, the price of land zoned for density skyrockets and that gets added to the cost of the new units, making construction uneconomical well before the units become affordable to ordinary people.
An a plot of land where it's legal to build a 10-story building doesn't really allow you to increase the housing supply when it has had a 10-story building already on it since 1965.
> But why would you build a high-rise apartment building out in the suburbs anyway?
Because that's where the land that doesn't already have a high-rise on it is.
Suppose the price of a house in the suburbs is $400,000. Developer buys one, pays $5M more to build a building with 20 condos in it, sells them each for $350,000 and nets $1.6M. Why would somebody buy one of those instead of a house? Because they're $350,000 instead of $400,000.
> Why would somebody buy one of those instead of a house? Because they're $350,000 instead of $400,000.
That's one reason, but another common reason is that they just want to live there and there isn't a house available on the market so they take what they can get even if that is the apartment for 400K.
How about legalize the high-rises - and especially things like 3 and 4 story buildings with commercial underneath - and see what shakes out?
It's difficult to say how much demand there is for that kind of thing if we've made it illegal in so many places.
I don't doubt that many people have a preference for more suburban type places, but even those could be a lot more flexible and adaptable. A 4-plex here, a corner store there... that's not big city stuff. The city I live in is about 100K, and we have corner stores from back when they were legal when it was more like 10K.
The suburbs are fiscally unsustainable in that many suburban areas bring in less tax revenue than the cost of maintaining them.
Inner cities and commercial areas tend to support suburban neighborhoods.
The cost per resident is much higher in low density areas like suburbs.
Rural areas get around this by not providing services. Most rural districts don’t provide garbage, water, sewer, recreation, fire, transit or any of a bunch of other services that people expect in suburbs.
Are you talking suburban areas that are part of the city “proper” or are you meaning suburbs that are their own city with their own taxes and services?
The infrastructure necessary to build suburbs is expensive: roads, water, sewer, electric, etc. It takes a very long time to pay off in taxes.
Denser areas bring in more tax revenue with fewer miles of infrastructure. There are good Strong Towns articles about this.
Rural areas have the same problem, but often the houses are on wells and septic tanks. The roads are simpler and cheaper and can get by with less maintenance.
> The infrastructure necessary to build suburbs is expensive
I'm not sure it's so simple. Yes, a mile of underground services (water, sewer, etc) in NYC serves orders of magnitude more people than a mile of underground services in some suburb.
But, digging up a mile of underground services in NYC also costs billions of dollars, whereas a similar dig out in the suburbs can be done by a few people and a small digger in far less time and doesn't cost much because there's nothing near or above it.
When far suburbs and exurbs have to pay their own way they often wind up not being able to. Those that don’t have an equivalent to California’s Prop 13 cap on property tax increases will have to raise property taxes substantially to continue maintaining roads, sewers, providing fire and police services, public schools, and so on. Places that do have an equivalent to California’s Prop 13 cap on property tax increases will have to find some other way to fund these services (local income and sales taxes, transfer taxes, toll roads, collection and insurance fees, etc.). Either way, a lot of the people who live in far suburbs and exurbs—which are extremely energy-hungry compared to cities, which is what many costs ultimately reduce to—will wind up pricing out not just future but current residents.
So yes, in fact, the “plan” is to pack people into high-rises—because that’s all they’ll be able to afford due to their relative energy efficiency.
It's fiscally unsustainable if more people want to live there than there are housing units, and prices climb forever.
Having denser housing in some places does not mean replacing all housing with high density.
There are a lot of density options between single-family home suburbs and high-rise towers. Look up "missing middle" housing.
The biggest offenders are actual urban areas that should be cities but try to act like suburbs. Let cities be dense, and it will actually take some pressure off of the suburbs. People who work in cities end up living in suburbs even if they don't want to, and then commute in every day and clog up the roads. Most US major cities are still well below major European cities on residential density.
If you want rural to remain rural and suburbs to remain suburbs, then let town centers and metro cities fill in density for those who want to live there.
Really any city that you can think of that's surrounded by a spaghetti tangle of highways full of commuters every morning and evening, which is most of them in the US.
US cities are generally fairly low density. That pushes more people to the suburbs, or low density suburb-like development at the edge of the city, driving up prices there and adding commuter traffic that the city pays to handle.
If people want to live in the suburbs that's fine, but given housing prices in most cities I think there is greater demand than supply for residential there.
The claim that suburbs are fiscally unsustainable is dubious. When asked for evidence it appears a video seems to be the source for the claim.
With appropriate land taxes suburbs can be happily fiscally sustainable.
Oddly, the claim is usually made by people who say that public transport is necessary and rarely comment on the fiscal sustainability of public transport.
Other than Amtrak, which counts subsidies as revenue, not transit system in the US has a farebox recovery ratio of above 55% and most are around 20-30% .
This was also before Covid and the dramatic rise of WFH.
In the US and much of the developed world transit use is down by at least a quarter due to increased WFH. This is making US transit systems even more fiscally unsustainable.
I think the biggest issue is suburbs within commuter range of urban centers. The residents of the suburbs pay local taxes to the suburb for their local infrastructure.
In the morning, a decent chunk of them get in their cars and drive into the city. The roads that need constant expansion, upgrades, and repair are the ones in the city or between the city and the suburb.
The suburb residents vote against things that might cost them money but reduce the burden on roads not paid for by the suburbs.
Yes, commuting has dropped, but it’s not gone. The major highways between my suburb and the nearby city are still constantly clogged and forever under construction.
Blame the companies, government agencies, and anyone else mandating RTO and other outmoded forms of work. Plenty of companies are fleeing downtown for office parks in the suburbs as their lease expires. We will see how sustainable some of these downtown businesses (restaurants, coffee shops, bars, stores) are once the money from suburban commuters dries up.
In my experience "suburb" towns that have variety of density, including a dense town core, have more variety of healthy local stores and restaurants as well.
It's hard to run a local restaurant when the houses are all evenly spread out and going out to dinner means a 30 minute car drive. Thus the proliferation of chain franchises in these areas.
> ...[no] transit system in the US has a farebox recovery ratio of above 55% and most are around 20-30% .
There are a tiny handful of roads in the country that bother to even attempt to recover their operating costs. Overall, I'd bet that the road system in the US has a "farebox recovery rate" of low single-digits at absolute best.
That doesn't mean we should shut it down.
Publicly-accessible transit systems are a public good... one that delivers far more value than can be easily accounted for.
That report says that that tax is to be spent on roads, transport, biking infrastructure & etc.
I also expect that you don't have any idea how much of the total road-maintenance funding comes from that tax, and how much of it comes from other sources.
(It's also... odd... to start off talking about tax and revenue policies in the US, and then suddenly switch to an entirely separate country (given that the US is uniquely car-centric and politically fucked-up) but whatever.)
You are going to have to cite "Many people love the suburbs" part. Most people live in the suburbs because that is the only cheap option available and that's because of zoning doesn't allow any other form of living.
And when cities do decide to upzone, they tend to centralize high density towers in one part of the city.
There are countless studies on why suburbs are just one big ponzi scheme. Strongtowns is an advocacy group that is trying to show more light into this issue.
Most of the tax revenue comes from downtowns where there are more density and more economic activity. Meanwhile a lot of the infrastructure cost are sunked into the suburbs that contribute little to the total tax revenue. The situation is even worst in California due to prop 13.
> A city with a park nearby where your kids will actually meet other kids to play with?
Have you been to San Francisco? Addicts and homeless take over all parks. While I emphatize with their difficult situation, I don't want my child exposed to that.
> "Kids don't need a big yard to play, they need other kids" - and living in a denser area provides more kids.
Out here in suburbs,lots of kids (since most families with kids move to the suburbs) and many parks and none of the problems of a dense city.
As a 20-something I want(ed) to live in a dense city for the parties & people & bars. As a parent of a child, I want to be as far as possible from a dense city.
At a density that can support public transit, cars are optional (not a necessity), you still have a (back)yard, and can have a garage (attached to a laneway). The above was how things were often built pre-WW2:
These places now cost quite a lot now because urban living is cool, but in roughly 1960-90s they were relatively cheap because all the WASPs moved to the suburbs because 'downtown was for immigrants'; one particular neighbourhood linked to above was >90% Polish during the time period:
Just to the east of this neighbourhood is Little Portugal (and then further east China Town, and a little north Little Italy), and to the west a large Ukraine community used to be concentrated (with a smattering of Lithuanians).
Nobody is saying people who want their own yard shouldn't be able to have that.
But those that don't have that as a priority, or can't afford it, should also have options.
Nobody is suggesting turning all suburbs into high-rises. But we need variety and supply in the market, so that people have choices that suit their lifestyle and income. Including the option to live closer to where they work to reduce the traffic on your roads.
There is plenty of choices. Don’t blame us suburb lovers with families and safety concerns if the yuppies, DINKs, and well to do retirees priced you out of the urbanity you desire.
This post is about rent prices continuing to increase across the country. If there were plenty of choices relative to demand, I would expect supply and demand to not continue driving prices up.
Probably not a big downside, although it might make fewer single family units available to rent. But it really is a supply issue. Those bills, like the one from my Senator here in Oregon, Merkley, tend to be about singling out single family units as worthy of protection as "nice" housing for "families", which in its own small way contributes to the notion of denser, multifamily housing as being... not quite up to the same standard, if that makes sense.
More than anything, we need more housing supply in more places, and high insurance rates make that tricky because they're actually hurting multifamily construction quite a bit. It's sort of a vicious circle.
In lieu of that kind of housing, some reforms that would help are things like eliminating burdensome parking regulations and reducing minimum lot sizes, like Houston did to spur a lot of "gentle density" infill housing. Those sorts of incremental changes might help out some smaller developers who don't need huge loans.
The ban on renting single family housing is just pure classism used as a way to ban people who can't afford a downpayment on a SFH to live in the same neighborhood.
This is a supply issue and thus why people should be considering joining YIMBY Action.
People generally vote for things that benefit them.
People who have a large portion of their wealth in housing, and even more so those who have used debt to take an extremely leveraged position on housing, benefit from increases in housing prices and lose out on decreases.
Having a significant amount of voters be in the above position is to make effective government action to reduce housing prices impossible.
So with that in mind, if institutional investors are disincentivised from investing in housing, which group is supposed to take their place?
In the same way telecoms and other incumbent data-services providers can lobby local and state governments to create regulation that ensures that newcomers are prevented from entering the data-services market in the area, folks who are currently making big money from renting housing can lobby their local and state government to do the same.
(One obvious way for the folks making big money from renting housing to do this is to ensure the obstruction of new construction.)
And (of course) both sets of politically-savvy entities can encourage others to agitate on their behalf for the entity's preferred political outcome.
You're partly correct. Our economy runs on consumption. Housing is a consumable, of sorts. Then you consume home appliances, furniture, textiles, etc. People consume more when they own, and less when they rent.
There are really three things going on: secular inflation causing overall upward price trends, industry-specific restrictions on building housing in many places, and an increasing population.
Each of these things should be discussed separately in order to have a productive conversation about the overall results of rents still going up quickly.
Really? The reasons you gave are perpetual. Don't you think that the real reason, in this moment in history, is that landlords are colluding on rents? If we enforced anti-competitive laws, and raised property taxes in the suburbs to a level commensurate with the maintenance costs of those areas' infrastructure, it would solve a lot of these problems.
Not generally, no. Certainly some areas are experiencing landlord collusion, but in general colluding is extremely difficult as a landlord because rental properties are so decentralized. Nowhere in the US do we have anything like berlin where 3 companies own the majority of units. The sheer amount of collaboration required to collude when there are thousands of suppliers makes it very unlikely in most cases.
I agree with you - though one mechanism for implied and unintended collusion would be rental pricing services that are widely used by landlords and might cause prices to converge or be self-reinforcing. I don't believe this argument, but I do think it merits consideration and counterargument.
That is, it needn't be explicit collusion where thousands of landlords get together - it might just be because they're all using the same price forecasting service.
My rent goes up CPI+5% or 10% wtv is smaller and those guidelines are considered “price controlled”. Most recently my rent went up 8.3% cuz CPI was 3.3% +5. Rent is a portion of CPI calculation though, so it is almost a catch 22, if rents rise, the next years CPI then displays this rise, and then that new CPI is used to justify a raise in rent prices once again. And it’s a loop that continues, it’s an equation for guaranteed inflation.
That's because rent is a reflection of the reality of the cost of living that the BLS can't fudge the numbers on monthly by not counting certain expenses.
The answer is less but at the local level in the form of loosening zoning and other regulations in order to allow for the building of more and denser housing.
We have a housing shortage[0] plain and simple and NIMBY is holding back progress on the issue.
Most housing market intervention is at the local level (where there needs to be much less). Federal government has several levers through which they can subsidize supply creation which they should use. At the local level people wll have to fight one by one to get things built
The answer is the former[1], but the policy will tend toward the latter.
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Thomas Sowell[2]
It’s possible for governments to lower housing costs in many ways. They just don’t want to.
If SF prevented any new office building from being constructed 20 years ago there would be less demand for housing locally. But the incentives didn’t line up that way. Cities need to provide schools when they build housing but office space is free of that obligation.
Similarly transport infrastructure is expensive and reduces the property taxes you collect locally.
To the extent the cart can spoof the horse, look for a downhill slope. Which will not go on forever. Once the potential energy is spent, the friction kicks in. QED all about you.
Fees discourage use when the costs are almost independent of use. E-ZPass also requires you to build and maintain infrastructure, do customer service, and enforce people who skip it etc.
A bridge without that overheard is unquestionably more efficient.
We've collectively failed at this problem as a society.
We've
1. made it extremely difficult, even illegal, to build more denser housing.
2. devalued the status of electricians, plumbers, and carpenters leading to a shortage of people we need to build more homes.
3. made it much too easy to get very large mortgage loans, incentivizing people to leverage themselves much more than they should to purchase homes. Thus bidding up the price of homes as otherwise financially smart people are forced to play the game as well.
4. built software to collectively price fix rents, favoring higher rents over maximum occupancy.
All of this has turned housing into an asset class, in which a significant fraction of the average American's net worth is invested, and has led to huge inflows of investor money. The incentives to not fix any of this are very strong.
How is this any fault of “society’s” beyond the requirement that you must live in or close to certain cities/areas to make “good money” in any non-law/non-medical profession? I’m going to lookout for my family without any malicious intent towards others. Other people might have different values and they are free to live, vote, etc where and how they want. As a resident of the Phoenix metro area I wouldn’t expect to be able to have any impact on how Santa Monica is building.
The current state of affairs are the direct result of government policy and investment, starting with mid-century "urban renewal" (which demolished existing dense and close-in housing and infrastructure), continuing with government bias towards suburbanization through municipal bonds and auto infrastructure spending, and most recently with the high tax and subsidy benefits that go to homeowners, and particularly first-time purchasers. Zoning and "character" codes factor in as well. Private interests were certainly involved (particularly with the realty industry's contribution to white flight and the banking industry's mortgage financing schemes), but much of this very much "society's" fault. I go to the "The Devil Wear's Prada" theory of decision-making: if you picked it off the rack or see a lot of other people doing the same thing, question who made the decision for you.
Well in Phoenix's case the big failure is continuing to subsidize water for agricultural usage. That is a choice society has made and it is causing housing in the valley to get more expensive as new builds are starting to be banned over water rights.
Canada only did 1, but not really 2 or 3 as much as the states, and the mess is even worse.
What it always comes down to is a pretty basic supply and demand problem in my head. Build a surplus of housing, and even the (4) algorithms will push rent and prices lower.
No, the biggest stumbling block is that the US government spends far, far beyond its means. This can't go on forever. We are handing out money to everyone - the military, renewable energy, semi conductors, car makers, municipalities, the list goes on and on and on. It has to stop, eventually. We are expanding the money supply and the interest on debt is ballooning.
As Jerome Powell, Chairman of the Federal Reserve said back in February:
> PELLEY: But is the national debt a danger to the economy in your review? You are this country's central banker.
> POWELL: So, it, I would say this. In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government's on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don't think that's at all controversial. And I think we know that we have to get back on a sustainable fiscal path. And I think you're starting to hear now from people in the elected branches who can make that happen. It's time that we got back to that focus.
> I think the pandemic was a very special event, and it caused the government to really spend to ward off what looked like very severe downside risks. It's probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path.
> PELLEY: I have the sense this worries you very much.
> POWELL: Over the long run, of course it does. You know, we're effectively — we're borrowing from future generations. And every generation really should pay for the things that it, that it needs. It can cause the federal government to buy the things that it needs for it, but it really should pay for those things and not hand the bills to our children and grandchildren.
> I think this is, again, not controversial. But it's difficult from a political standpoint. It's not our business, really. But I do think it's pretty widely understood that it's time for us to get back to putting a priority on fiscal sustainability. And sooner's better than later.
I think this is an important point since the cost of money is a big part of building and buying housing. There are other nuances contained in this exchange too.
But beyond cost of money what, if any, specific argument are you making regarding housing? Lower subsidies in hopes the market follows? Further restrict the money supply to try and contain inflation? There are lots of second order effects that are too broad here, like high interest rates acting as a de facto subsidy to the wealthy (who then, maybe, buy more real estate, etc...
The problem is not that housing or rent is causing inflation. That is a second order effect of what really causes inflation - handing out money, especially to unproductive sectors. Because we cannot build housing quickly, it inflates. Other sectors of the economy hide inflation better via shrinkflation, cheapening and degrading the product (i.e. poor quality inputs), among other solutions. But you can't create new housing fast enough to hide the fundamental monetary inflation - the same issue applies somewhat to education, medicine, and other areas with supply that can't expand quickly (for their own varied reasons).
> ... And that just means that the debt is growing faster than the economy.
Just like in the EU: they've been hiding "growth" behind public debt. But that's fake growth, where nothing of value is created.
And there's a limit and that limit is now being reached. They'll kick the can down the road a bit more but... Out of the 150 cases or so throughout history where public debt reached crazy level, there's one case where it didn't go to complete shit: Japan.
And somehow all these geniuses at the bar are certain they'll manage to pull a Japan and not fail miserably like in the 149 cases where the state did default.
We have monkeys at the helm and it's going to end up ugly.
The Fed cannot fix this.
It is illegal to build dense housing. Car-centric suburbia is fiscally unsustainable and people are feeling the effects via rent. See San Fran and Miami for ground zero.
"The housing theory of everything" is relevant here: https://worksinprogress.co/issue/the-housing-theory-of-every...
Discussion: https://news.ycombinator.com/item?id=28531025
Agree about dense housing, but a lot of that means more expensive builds: if you want to build a 5-over-1 with commercial on the ground floor, that's great, but the construction loan you need to do that is going to be $$$$ right now.
We don’t (only) need 5:1 builds. You can fit smaller 2-6 unit builds on many SFH plots. Either via small apartments or small THs/triplexes.
I agree completely. Legalize it all and see what works out. Still though, the loans are more expensive right now, and that is a Fed thing. Perhaps they affect that kind of housing you're describing a bit less in some cases, but it's still a problem there for some developers.
It's partially a Fed thing. Higher interest rates in general lead to higher interest rates for construction loans. But if you're trying to spur housing construction without causing general inflation, maybe offer lower interest loans only for housing construction?
I'm not sure how you get that without getting the government involved in providing those lower rates. I'm not opposed to that, but it makes everything a bit trickier...
Offer a tax credit for a percentage of interest paid on construction loans. Then you still get them from a bank but pay less interest.
You’re forgetting that the people living in those towns don’t want you to suddenly increase the housing stock by 5x and with it the class sizes.
Why should a minority of people, especially those that don’t even live in these towns, dictate how the town will be changing?
If dense housing is the bees knees, make people want to live in cities.
This attitude is why we have a housing crisis. Not banks or Blackstone, not RealPage, not foreign buyers, not short term rentals. Those things may not help, but the lid on the housing supply are people in your city who, ironically, generally are a small but involved minority who show up to say NO to housing and NO to a diversity of housing types.
It is a reasonable concern. So reasonable in fact that everyone has it and thus the natural state of things is American cities all try to ban dense housing. Hence the housing crisis.
This is the logic behind some states like California trying to reduce the amount of local control over how dense housing can be. It is a state-wide problem that every city is disincentivized to solve.
While you were probably using hyperbole, I don’t think it’s easy to 5x the population of a city with infill housing. Just financing, land acquisition, demolition, construction, and sales takes a while. Government redtape only adds more time.
Do we really need to 5x the population? Or would adding a studio apt to the basement of every SFH solve it (not saying this should be the solution, just thinking scope of problem)?
FWIW, I spent a few weeks working remote/vacationing in Cape Canaveral, FL two years ago (the town, not the military base). It has mixed housing - SFHs, duplex, and two-story (~8 unit) apartment blocks - it seemed to work well. It felt like a place I could happily live (other than the heat).
If you’re trying to 5x the population of any city with a housing cost issue then I suppose you are going to have a lot more problems than housing.
Conversely: why should my neighbor get to dictate if I get to build a duplex on my property.
Same reason you have a say in whether there’s a strip mine or a landfill across the street from your property. The residents come together and decide on the rules by which they will be governed.
Just because they don’t jive with exactly how you’d want things doesn’t mean the system is not working as it’s intended.
But that's a silly example, because proving net-harm from industrial uses across from residential is easy. Proving net-harm from denser residential is generally an exercise in NIMBY-ism that slides very smoothly into classism and racism about who would live in those denser units.
Residents coming together to decide on rules by which they are governed can get us public lynching too. It doesn't mean it's good governance.
The example is meant to be silly to demonstrate that there’s clearly some limit of what is acceptable and it’s the stricter intersection of every level of government within the bounds of what’s constitutional. One of those levels is the local government consisting of the people that already live in a municipality.
There’s no inherent right, whether constitutionally granted or innately, for you to build whatever you’d like, wherever you’d like. Just like I can’t go build a shack in the middle of NYC’s Central Park.
Framing it as racism or classism is a sign that you don’t have any other valid arguments. It’s literally just an excuse for a land grab!
> The example is meant to be silly to demonstrate that there’s clearly some limit of what is acceptable
But you can use sensible rules for this like "does this impose a significant negative externality" that neatly allow you to exclude a landfill from a residential area but not a new residential building.
> and it’s the stricter intersection of every level of government within the bounds of what’s constitutional.
The entire question is what those laws should be. For example, should states or federal lawmakers prevent towns from imposing restrictive zoning rules, as permitted under their various constitutions?
> There’s no inherent right, whether constitutionally granted or innately, for you to build whatever you’d like, wherever you’d like. Just like I can’t go build a shack in the middle of NYC’s Central Park.
You can't go build a shack in Central Park because you don't own the land in Central Park. The issue here is when you do own the land and all you want to do is build housing during a housing shortage.
> Framing it as racism or classism is a sign that you don’t have any other valid arguments.
Only if you don't present any other valid arguments.
Also, "this is racism or classism" can be a valid argument when it is in fact racism or classism. Just because it's massively overused doesn't mean it's never actually true.
> It’s literally just an excuse for a land grab!
The proposal does not involve the use of eminent domain.
>But you can use sensible rules for this like "does this impose a significant negative externality" that neatly allow you to exclude a landfill from a residential area but not a new residential building.
This is exactly what the planning commissions use. Apparently the separation is not as neat as you believe.
Oh, I see the problem. It's implied that in order to be prohibited, a negative externality should be a net harm. For example, you need to prohibit someone from taking a $1 gain by causing $10 in harm to someone else, causing a net loss of $9 to society.
Compare: You are prohibited from manufacturing electric cars by dumping heavy metals in the river, because that poisons people which causes more harm than disposing of them properly, vs. you are prohibited from manufacturing electric cars because it would reduce the profits of Exxon, ICE automakers and mechanics through increased competition and efficiency, which is not a net harm at all because it creates a countervailing benefit to consumers in a similar amount.
"It makes housing more affordable" is not a net harm.
Many people tried to come up with an ethical calculus through history, and while themselves believed their systems were rational and common sense, other people invariably rejected those.
You're talking about something else entirely.
One is, how do you compare the values of e.g. pollution vs. job creation? What's the monetary value of a human life? You can try to make an estimate but there is no objective answer or unambiguous line.
The other is, there is a cartel charging monopoly rents because there is a law inhibiting anyone new from entering the market. There is a proposal to get rid of the law. By any plausible estimation the net benefits of removing the law are positive, but the cartel claims they'd be harmed because they couldn't charge monopoly rents anymore and then they'd make less money. This is not the same problem; this is the cartel objectively wanting to create a net loss for the general public in exchange for a net gain for themselves only.
>One is, how do you compare the values of e.g. pollution vs. job creation?
My question exactly. Ethical calculus you propose should be able to do that in a manner that won't cause affected people to literally tar and feather you in the best case.
>The other is, there is a cartel charging monopoly rents because there is a law inhibiting anyone new from entering the market.
That's like, your opinion. Fact is that you can build dense housing in any big city in the US. No cartel and no laws forbid it. The argument of "but I want an apartment tower right THERE and it's zoned SFH!!!1!" could as well be applied to SFH and with the same veracity you could repeat that "the law forbids building SFHs" because there are lots zoned AG or industrial where you cannot build a SFH.
> That's like, your opinion.
That's what the law says. You own a piece of property, you want to get into the market by building more housing on it than currently exists, you can't.
> Fact is that you can build dense housing in any big city in the US. No cartel and no laws forbid it.
Explicitly prohibiting something and purposely using the law to render it uneconomical are de facto equivalent.
> The argument of "but I want an apartment tower right THERE and it's zoned SFH!!!1!" could as well be applied to SFH and with the same veracity you could repeat that "the law forbids building SFHs" because there are lots zoned AG or industrial where you cannot build a SFH.
Okay, so let's do that too. There is no good reason to prohibit single family homes in the most permissively zoned areas -- maybe the agriculture or industrial workers would prefer a shorter commute.
But also, this is often already the case. The farmer is allowed to build a farm house. There is no valid reason to prohibit it. It's just not going to happen very often whether you prohibit it or not because there is no demand for a SFH development in the middle of a large block of farmland or a bunch of warehouses and factories.
>That's what the law says.
Which law says there is a landlord cartel and building apartments is illegal? We both know there is no such law.
>You own a piece of property, you want to get into the market by building more housing on it than currently exists, you can't.
Is this also in some law? Which one, please be specific. How come people get in and out leasing market all the time? An apartment building near where I live changed ownership recently, I would appreciate the exact law you are referring to, this could be a crime in progress.
> Which law says there is a landlord cartel and building apartments is illegal? We both know there is no such law.
We both know that it's zoning laws that prohibit land that currently contains a single family home from containing any structure with a larger number of housing units.
> How come people get in and out leasing market all the time? An apartment building near where I live changed ownership recently, I would appreciate the exact law you are referring to, this could be a crime in progress.
Buying or selling existing units doesn't increase supply.
>We both know that it's zoning laws that prohibit land that currently contains a single family home from containing any structure with a larger number of housing units.
Yes, but what about cartels and other stuff? Zoning does not mean there is a cartel nor does it mean you cannot build apartments.
> Buying or selling existing units doesn't increase supply.
Sure, but you said it's illegal to get into the market so I was curious what law you had in mind, as an upright citizen I wanted to report a crime, as I understand you don't know what law you had been referencing when making the previous statement?
> Yes, but what about cartels and other stuff? Zoning does not mean there is a cartel nor does it mean you cannot build apartments.
Laws can be the mechanism a cartel uses for enforcement. This is called regulatory capture. The incumbents capture the regulators and have them pass laws to restrict supply and create barriers to entry.
The zoning laws restrict supply and create barriers to entry.
> Sure, but you said it's illegal to get into the market so I was curious what law you had in mind, as an upright citizen I wanted to report a crime, as I understand you don't know what law you had been referencing when making the previous statement?
Suppose that Samsung, Micron and SK Hynix have formed a price fixing cartel. If Hynix was bought out by, say, Oracle, who then does nothing to increase production, how would this imply that there isn't a cartel? Buying out an existing member of the cartel doesn't increase supply or lower prices.
You keep repeating "laws do that" but never mentioned any particular law, is not this a time for you to stop and think a little bit, how is this possible that such intrusive laws remain hidden even from you?
It's these laws right here:
https://zola.planning.nyc.gov
The ones that say only a tiny sliver of the city is zoned R8 through R10 (allowing for the tallest buildings), and those places already have them.
Everyone was new to their town at some point.
increasing housing stock doesn't increase class size. some of the extra people you get are teachers and so the school hires more teachers and runs more classes.
> You’re forgetting that the people living in those towns don’t want you to suddenly increase the housing stock by 5x and with it the class sizes.
It's actually easier to have smaller class sizes with higher density because you spend less on transportation and real estate and can use the money hire more teachers, or lower your taxes, or do whatever you like with it.
> Why should a minority of people, especially those that don’t even live in these towns, dictate how the town will be changing?
Because it's every town operating under the same set of incentives. Existing homeowners don't want more housing because they want the value of their existing home to go up through scarcity. It's the same in every town, so if you want to build "cities" anywhere the decision on whether it can be done in a particular place can't be solely in the hands of the people who have the financial incentive to say no.
> If dense housing is the bees knees, make people want to live in cities.
If people didn't want to live in cities then why does the housing there cost more?
> It's actually easier to have smaller class sizes with higher density because you spend less on transportation and real estate and can use the money hire more teachers, or lower your taxes, or do whatever you like with it.
In practice, new housing increases the denominator (number of students) more the than numerator (tax dollars). This is because the existing tax base includes non-residential land that only provides tax dollars without increase school costs. So any new housing is always a net loss.
> Existing homeowners don't want more housing because they want the value of their existing home to go up through scarcity.
The flip side of that is that people who don’t have those houses want to take that away without paying the market price for that land.
> If people didn't want to live in cities then why does the housing there cost more?
Historicaly, being close to high paying jobs was a major driver. There’s also an annual resupply of starry eyed graduates.
Though I’ll be honest to not understand why anyone would pay a premium to live like a sardine. The air quality alone is enough reason to move out of the city.
> In practice, new housing increases the denominator (number of students) more the than numerator (tax dollars). This is because the existing tax base includes non-residential land that only provides tax dollars without increase school costs. So any new housing is always a net loss.
The assumption here is that you would have only new residential housing. But zoning that allows for higher density construction also allows for new businesses that pay taxes and have no children.
And you would also have to be making assumptions about the ratio of taxes paid to number of kids. But the people who move into small cheap apartments and condos are most often college students and retirees, who don't have kids yet (and wouldn't continue to live there if they did) or their kids are already grown. From which you get new tax dollars but no new students. Whereas the people who can afford a 3- or 4-bedroom unit have money and pay an above-average amount of tax, so they might have kids but they're paying their own way.
This is also not just a fraction with a numerator and a denominator. Many of a government's expenses are fixed costs, e.g. most single-lane suburban roads are nowhere near capacity and would not need to be expanded or even experience congestion if the amount of traffic on them doubled. Each new resident you get paying taxes increases the tax base over which you can amortize those fixed costs.
Moreover, the ratio is irrelevant. If someone is paying $21,000 in taxes and then their presence requires the government to spend $20,000 more in services, you'd have a net gain of $1000 from their presence regardless of what the ratio is for some other people or existing residents.
> The flip side of that is that people who don’t have those houses want to take that away without paying the market price for that land.
They are paying the market price for that land. In order to build a multi-story building, you first have to buy a piece of land to put it on.
What they're doing is making more efficient use of that land, by creating e.g. 10 housing units on a lot currently being used for 1. That reduces the market price of housing units by supply and demand, but the higher price was only ever a result of artificial scarcity.
> Historicaly, being close to high paying jobs was a major driver.
So a shorter commute makes up for a higher price. But if you prohibit housing construction, this trade off only gets worse. The job is in the city, you could have lived in a 6-unit building 20 minutes away, but if those are prohibited then you need 6 times as much land for the same number of residents and now they either have to pay more even for the 20 minute commute or take the far away housing with a 60+ minute commute.
Whereas if you allow the 6-story buildings, anyone who wants the 20-minute commute can live there and anyone who wants to live in a single-family home can live five blocks away with nearly the same commute but for a lower price than they'd have had to pay when those higher density buildings weren't there satisfying housing demand.
> Though I’ll be honest to not understand why anyone would pay a premium to live like a sardine.
Density and small units are not inherently associated. You can put 4000 sq ft units in a multi-story building and still have ten times the density as a single-family home of the same size as one unit.
> The air quality alone is enough reason to move out of the city.
Tell that to the suburban ignoramuses who think it's a good idea to burn wood:
https://www.familiesforcleanair.org/wp-content/uploads/2013/...
That graphic isn't even to scale. The pellet stove looks like it's only a little over twice as bad as an oil furnace when it's actually more than a hundred times worse, and the wood stoves and fireplaces people have are an order of magnitude worse than that.
> If people didn't want to live in cities then why does the housing there cost more?
Density seems to always make an area more expensive. What are the two densest cities in the US? Which are the two most expensive cities in the US?
Increasing density does not ever seem to make an area cheaper to live. Maybe that is ok, but it does contradict the idea of building more to make it cheaper.
> Density seems to always make an area more expensive. What are the two densest cities in the US? Which are the two most expensive cities in the US?
The causation goes the other way. When an area has a lot of housing demand, that's where they put the tall buildings. Nobody is going to build a skyscraper in the middle of a corn field.
But in order for the density to keep up with demand, you can't suppress new construction. That's what causes prices to be high:
> What are the two densest cities in the US? Which are the two most expensive cities in the US?
Which are the two cities in the US with the most restrictive zoning and building codes? Which are the two most expensive cities in the US?
> The causation goes the other way. When an area has a lot of housing demand, that's where they put the tall buildings. Nobody is going to build a skyscraper in the middle of a corn field.
I believe it's a feedback loop really, not exclusively in one direction or the other.
You're right that nobody wants to build a skyscraper out in the farmlands. They build it in the city, which makes that city a tiny bit more dense, pulls in more people and makes the city a small increment more attractive and pulls in even more people which in turn raises prices even more and the cycle continues. As cities get more dense they always get more expensive.
Look at Manhattan, full of highrises and skyscrapers as far as the eye can see, and is the #1 most expensive area in the US to live.
> Which are the two cities in the US with the most restrictive zoning and building codes?
I have no idea to be honest. Do you have info on that?
> They build it in the city, which makes that city a tiny bit more dense, pulls in more people and makes the city a small increment more attractive and pulls in even more people which in turn raises prices even more and the cycle continues. As cities get more dense they always get more expensive.
This is only a feedback loop if the city becomes more attractive by a larger amount than the increase in housing. For example, if you add new housing for 1000 people and this causes 1200 new people to move to the city. If adding new housing for 1000 people causes 800 new people to move to the city, you've still created more new housing for locals than you had before, and can just keep at it.
We can use basic math to see that even if the former ever happens, it can't sustainably happen. If e.g. the Chicago Metro area had the population density of Manhattan, it would have a larger population than the United States as a whole, 750M vs. 333M. A single metropolitan area could provide more housing than there are people to live in it. That many people would have to exist before they could move there. And obviously the entire US population is not going to move to a single metro area anyway, so you would reach saturation long before that.
Now, one thing that does happen is that tall buildings are more expensive to build, so when you get into the extremely high densities like in Manhattan, part of the high cost is the construction cost for a building that tall. But Manhattan is an outlier. If we're talking about converting single family homes into 12-unit condos, the cost per unit isn't much different and you get a 12X increase in density.
And here's another piece of the puzzle: Where are these people coming from? If you build new housing in New York, that might attract people who used to live in Boston. If you build new housing in Boston, that might attract people who used to live in Seattle. What happens if you build new housing in New York and Boston and Seattle and Los Angels etc.? If people move from everywhere to everywhere, there is no net migration and no increase in local demand. And even if you did only increase the amount of housing in New York, and that caused people to move to New York from Boston and Seattle and Los Angeles, then housing would become more affordable in Boston and Seattle and Los Angeles because the local demand there would go down. So you're talking about a hyper-local effect, whereas on a question of national policy, supply and demand is in full effect and "build more housing" makes the average unit cost less even if the ones that get more affordable aren't in the same place as the ones you build.
> I have no idea to be honest. Do you have info on that?
It's the same two cities. It's New York and San Francisco. They both make it extremely arduous to add new housing. Many of the existing buildings in Manhattan would be illegal to build today. SF is even worse.
> We can use basic math
The math checks out on paper, the arguments make sense.
And yet, whenever I see a very dense city, I also see an extremely expensive place to live.
When observations contradict theory, I have to think there's some flaw in the theory.
The observations are entirely consistent with the theory.
Suppose you have an area with 10,000 acres of land and local demand for 250 housing units, i.e. a rural location. Housing here is going to be inexpensive; land is not scarce so people will build a hundred single family homes on a hundred acres of land, there will still be 9750 acres available and the main cost will be the cost of constructing a house.
Now suppose you have the same 10,000 acres of land but local demand for 25,000 housing units. In the absence of zoning restrictions, this will still result in somewhat higher prices. Many of the lots will need more than one housing unit, these may cost a little more to build, and the cost of the land will be a little higher because there is more demand. In the presence of zoning restrictions requiring only single family homes on an acre of land, you're completely screwed, because the maximum number of units you can build is 10,000 and you have demand for 25,000. We see the latter in practice in many places, e.g. places where any single family home with an acre of land is selling for more than a million dollars.
Now suppose you have the same 10,000 acres of land but local demand for 250,000 housing units. It is not only not possible to satisfy this demand without multi-story buildings, it will take tall ones at that. Without any restrictions that is what would happen, and prices would be a little higher for the same reasons, but still be kept in check by new construction. However, if zoning only allows 125,000 units to be built, you would have a significant amount of density and still fall well short of the 250,000 you need, causing prices to be much higher.
The prices in the area where you need 25 units per acre are always going to be higher, but there is a difference between "higher because it costs somewhat more to construct a 10 story building" and "San Francisco prices".
Moreover, there is another reason why the highest density areas have such high prices. Common zoning practice is to assign some very small area where the tallest buildings can be constructed, e.g. here's the NYC zoning site:
https://zola.planning.nyc.gov
Have a look at what proportion of the land is zoned R8-R10, allowing for the sort of densities seen in Manhattan. It's only allowed where it already is. It's not even allowed in all of Manhattan, which itself is less than 1% of the New York Metro area. So if you want to build a very tall building, it has to be in that tiny sliver in Manhattan, causing the price of land with that zoning to be astronomical because it's so artificially scarce, and adding that cost to the price of any housing there. You keep asking why housing costs so much in Manhattan -- that's why, because you're not allowed to build those buildings somewhere else, and the price of land operates on supply and demand. What's happening is exactly as the theory predicts: Artificial scarcity raises prices.
Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF.
> Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF.
Ultimately, the question I find most interesting is: Which cities have achieved very high density while maintaining a low cost of living (relative to local salaries)?
We can debate "If only they did ..." forever, but if there are no actual cities where this has ever happened, maybe the answer is that it can't happen.
But in practice, we're so far behind on the supply side that we could densify much of our cities and inner suburbs and still see values rise. And I'm not convinced that when done in a playful manner, that densification doesn't add value to existing SFHs, despite now being located in a noisier/denser/whatever area. People largely prefer convenience and not driving all the time. Just walking to school is a huge plus - fewer noisy buses, more healthy kids, etc.
Arlington VA added a ton of mid-rise and high-rise development in the 80s/90s (Clarendon, Courthouse, Ballston) with good results. Reston VA is now doing the same and home that were $400k a decade ago are selling for nearly double. In both cases, the scope of in-fill was tightly controlled - the local governments created dense zones around the Metro stations - which makes sense.
> But in practice, we're so far behind on the supply side that we could densify much of our cities and inner suburbs and still see values rise.
This is a common source of confusion. If you relax zoning, the instantaneous effect is that the value of land is increased in the areas where the zoning is made more permissive (because now you can do more with the land) and reduced where zoning was already permissive (because now land zoned for those uses is less scarce).
So the immediate effect is that the value of the land where single-family homes are will go up, and that effect is permanent. Then the value of indoor space goes down as people are allowed to and do build more of it. Which is what we're after, because the important thing is that people can get a couple thousand sq ft of living space for an affordable price, regardless of the number of floors the building they're in has. If the value of the land doubles but the amount of housing per acre quintuples, you've still made the land cost per housing unit decline by 250%.
What that does to the long-term value of existing single-family homes depends on how much demand there is. In areas where the zoning had been oppressively restrictive, the gain in land value from relaxing the zoning could exceed the amount that it's even possible to lose from the value of indoor space.
For example, you have a $400,000 house and the new zoning makes the land itself worth $500,000, but housing still becomes more affordable because someone can buy that $500,000 piece of land, build a dozen housing units there and sell the property for $2.4M, pricing each of the units at $200,000. The existing single family home still sells for $500,000+ though, not because it's a housing unit but because it's an acre of land where someone could build a dozen.
> In both cases, the scope of in-fill was tightly controlled - the local governments created dense zones around the Metro stations - which makes sense.
It doesn't. It makes a significant amount of sense to put a 3-5 story building in an area with mostly single-family homes, because that can often be supported with no additional infrastructure. If you want to put them all in the same place then you have to upgrade the utilities and transportation infrastructure there. Which is fine if that's what happens naturally because people choose to develop a particular area, but there is no reason to force it.
And trying to concentrate them all in one area also slows down the construction and makes it cost more, because then the land cost there remains high for lack of alternatives, forcing developers to buy out those particular people (and giving them undue gains that should have been evenly distributed to the community at large) instead of buying whatever properties were already on the market.
> build a dozen housing units there and sell the property for $2.4M, pricing each of the units at $200,000
If builders were selling units at their cost plus a fixed profit margin, you're right.
But builders are in the business of maximizing profit. If in this area there was a backlog of people willing to pay 400K for a housing unit, the builder will sell each of these dozen units for 400K.
If you feel I'm wrong, please point me at a few cities in the US where housing became cheaper as density increased.
Well you have to pick one. Either people will pay ~$400K for the units and then the builder's incentive to build there is obvious -- because there is enough demand to sell them for $400K, which is profitable.
Or people wouldn't pay quite as much as the existing single-family homes, but they'd still pay more than the builder's costs to construct the building, so it's still profitable. It only becomes not profitable when the price of a housing unit drops below the builder's costs. Which is why they'd want to keep building until that happens.
> If you feel I'm wrong, please point me at a few cities in the US where housing became cheaper as density increased.
I keep saying this. The causation goes the other way. Density increases where demand is higher. Higher demand increases prices, then density blunts the increase so that it's smaller than it would be if no additional construction occurred. That doesn't mean it would become cheaper in the higher demand area than the lower demand area -- particularly if the area is still growing, in which case construction lags the increase in demand and has to catch up. And if construction is inhibited, it can't, so you get as much density as the zoning allows and then prices skyrocket because supply can no longer respond to increases in demand. Which can happen even if the area already has above-average density.
What you'd need to see a price decrease is an area where zoning was relaxed after being strict, allowing density to increase after it had previously been suppressed, so that density increases because of the legal change rather than a new increase in demand. But the lack of this happening in areas of high demand is exactly the problem. Maybe we should try it and see what happens?
This is why it's a bit late to start building. A decade of ZIRP was the perfect time to build housing but we squandered it.
> This is why it's a bit late to start building.
The best time to plant a tree (or build a house) was yesterday. Second best is today.
Yep, monetary policy can not fix supply problems. Housing prices will go down when supply expands meaningfully, end of story.
> It is illegal to build dense housing.
This is an oversimplification that gets repeated too often. It is not illegal to build dense housing.
There are suburban areas where zoning doesn't allow you to build a high-rise apartment building. That is true. But why would you build a high-rise apartment building out in the suburbs anyway?
Here (in the outskirts of silicon valley) high-rise apartment buildings near downtown are popping up like mushrooms, there are perpetually at least a couple in construction as soon as others are completed. Lots of dense housing being built, nothing illegal about it.
> This is an oversimplification that gets repeated too often. It is not illegal to build dense housing.
It is illegal to build dense housing in most of the land area where it would be useful. Naturally the few exceptions will cause it to be built there, but that doesn't make for a solution. Since there are so few such areas, the price of land zoned for density skyrockets and that gets added to the cost of the new units, making construction uneconomical well before the units become affordable to ordinary people.
An a plot of land where it's legal to build a 10-story building doesn't really allow you to increase the housing supply when it has had a 10-story building already on it since 1965.
> But why would you build a high-rise apartment building out in the suburbs anyway?
Because that's where the land that doesn't already have a high-rise on it is.
> Because that's where the land that doesn't already have a high-rise on it is.
True, but the people who want to live in a highrise also want to live in a city, not out in the suburbs.
Who are you (as the builder) selling these units to? Can you do so profitably if there's not that much demand for highrise living in the suburbs?
Suppose the price of a house in the suburbs is $400,000. Developer buys one, pays $5M more to build a building with 20 condos in it, sells them each for $350,000 and nets $1.6M. Why would somebody buy one of those instead of a house? Because they're $350,000 instead of $400,000.
> Why would somebody buy one of those instead of a house? Because they're $350,000 instead of $400,000.
That's one reason, but another common reason is that they just want to live there and there isn't a house available on the market so they take what they can get even if that is the apartment for 400K.
This was your question:
> Who are you (as the builder) selling these units to? Can you do so profitably if there's not that much demand for highrise living in the suburbs?
It seems like you've answered it yourself?
You're essentially asking who you're going to sell new housing to in a housing shortage.
> Car-centric suburbia is fiscally unsustainable ...
For whom? Many people love the suburbs and hate cities. I know many people who know work 3 days from home and only commute to work 2 days per week.
If the suburbs are fiscally unsustainable, what about rural?
What's your plan? Pack people in high-rises? Even if they don't want that?
How about legalize the high-rises - and especially things like 3 and 4 story buildings with commercial underneath - and see what shakes out?
It's difficult to say how much demand there is for that kind of thing if we've made it illegal in so many places.
I don't doubt that many people have a preference for more suburban type places, but even those could be a lot more flexible and adaptable. A 4-plex here, a corner store there... that's not big city stuff. The city I live in is about 100K, and we have corner stores from back when they were legal when it was more like 10K.
The suburbs are fiscally unsustainable in that many suburban areas bring in less tax revenue than the cost of maintaining them.
Inner cities and commercial areas tend to support suburban neighborhoods.
The cost per resident is much higher in low density areas like suburbs.
Rural areas get around this by not providing services. Most rural districts don’t provide garbage, water, sewer, recreation, fire, transit or any of a bunch of other services that people expect in suburbs.
Are you talking suburban areas that are part of the city “proper” or are you meaning suburbs that are their own city with their own taxes and services?
The infrastructure necessary to build suburbs is expensive: roads, water, sewer, electric, etc. It takes a very long time to pay off in taxes.
Denser areas bring in more tax revenue with fewer miles of infrastructure. There are good Strong Towns articles about this.
Rural areas have the same problem, but often the houses are on wells and septic tanks. The roads are simpler and cheaper and can get by with less maintenance.
> The infrastructure necessary to build suburbs is expensive
I'm not sure it's so simple. Yes, a mile of underground services (water, sewer, etc) in NYC serves orders of magnitude more people than a mile of underground services in some suburb.
But, digging up a mile of underground services in NYC also costs billions of dollars, whereas a similar dig out in the suburbs can be done by a few people and a small digger in far less time and doesn't cost much because there's nothing near or above it.
When far suburbs and exurbs have to pay their own way they often wind up not being able to. Those that don’t have an equivalent to California’s Prop 13 cap on property tax increases will have to raise property taxes substantially to continue maintaining roads, sewers, providing fire and police services, public schools, and so on. Places that do have an equivalent to California’s Prop 13 cap on property tax increases will have to find some other way to fund these services (local income and sales taxes, transfer taxes, toll roads, collection and insurance fees, etc.). Either way, a lot of the people who live in far suburbs and exurbs—which are extremely energy-hungry compared to cities, which is what many costs ultimately reduce to—will wind up pricing out not just future but current residents.
So yes, in fact, the “plan” is to pack people into high-rises—because that’s all they’ll be able to afford due to their relative energy efficiency.
It's fiscally unsustainable if more people want to live there than there are housing units, and prices climb forever.
Having denser housing in some places does not mean replacing all housing with high density.
There are a lot of density options between single-family home suburbs and high-rise towers. Look up "missing middle" housing.
The biggest offenders are actual urban areas that should be cities but try to act like suburbs. Let cities be dense, and it will actually take some pressure off of the suburbs. People who work in cities end up living in suburbs even if they don't want to, and then commute in every day and clog up the roads. Most US major cities are still well below major European cities on residential density.
If you want rural to remain rural and suburbs to remain suburbs, then let town centers and metro cities fill in density for those who want to live there.
> The biggest offenders are actual urban areas that should be cities but try to act like suburbs.
Got an example?
If you'd like a specific example:
https://www.sparefoot.com/moving/city-guides/4385319-visuali...
Really any city that you can think of that's surrounded by a spaghetti tangle of highways full of commuters every morning and evening, which is most of them in the US.
https://www.stockingblue.com/article/1008/eu-and-us-cities-b...
US cities are generally fairly low density. That pushes more people to the suburbs, or low density suburb-like development at the edge of the city, driving up prices there and adding commuter traffic that the city pays to handle.
If people want to live in the suburbs that's fine, but given housing prices in most cities I think there is greater demand than supply for residential there.
The claim that suburbs are fiscally unsustainable is dubious. When asked for evidence it appears a video seems to be the source for the claim.
With appropriate land taxes suburbs can be happily fiscally sustainable.
Oddly, the claim is usually made by people who say that public transport is necessary and rarely comment on the fiscal sustainability of public transport.
Other than Amtrak, which counts subsidies as revenue, not transit system in the US has a farebox recovery ratio of above 55% and most are around 20-30% .
https://en.wikipedia.org/wiki/Farebox_recovery_ratio
This was also before Covid and the dramatic rise of WFH.
In the US and much of the developed world transit use is down by at least a quarter due to increased WFH. This is making US transit systems even more fiscally unsustainable.
I think the biggest issue is suburbs within commuter range of urban centers. The residents of the suburbs pay local taxes to the suburb for their local infrastructure.
In the morning, a decent chunk of them get in their cars and drive into the city. The roads that need constant expansion, upgrades, and repair are the ones in the city or between the city and the suburb.
The suburb residents vote against things that might cost them money but reduce the burden on roads not paid for by the suburbs.
Yes, commuting has dropped, but it’s not gone. The major highways between my suburb and the nearby city are still constantly clogged and forever under construction.
Blame the companies, government agencies, and anyone else mandating RTO and other outmoded forms of work. Plenty of companies are fleeing downtown for office parks in the suburbs as their lease expires. We will see how sustainable some of these downtown businesses (restaurants, coffee shops, bars, stores) are once the money from suburban commuters dries up.
In my experience "suburb" towns that have variety of density, including a dense town core, have more variety of healthy local stores and restaurants as well.
It's hard to run a local restaurant when the houses are all evenly spread out and going out to dinner means a 30 minute car drive. Thus the proliferation of chain franchises in these areas.
> It's hard to run a local restaurant when the houses are all evenly spread out and going out to dinner means a 30 minute car drive.
Can you point me at a few suburbs (not out in the wilderness) where it actually takes a 30 minute car drive to get to a restaurant?
I have difficulty picturing that such a place exists, but maybe I'm wrong.
How much do the road systems recover from driver usage fees?
Yup.
> ...[no] transit system in the US has a farebox recovery ratio of above 55% and most are around 20-30% .
There are a tiny handful of roads in the country that bother to even attempt to recover their operating costs. Overall, I'd bet that the road system in the US has a "farebox recovery rate" of low single-digits at absolute best.
That doesn't mean we should shut it down.
Publicly-accessible transit systems are a public good... one that delivers far more value than can be easily accounted for.
I would be shocked if toll fees covered 1% of road costs in the US.
I can’t even remember the last time I paid a toll.
To be fair, you are paying the "toll" each time you fill up (in the form of gas taxes).
In the US, those taxes don't come anywhere near even artillery range of paying for road maintenance, construction, and various road-support services.
And as a bus rider I pay the fare every time I pay taxes by that logic.
As a side question: when I buy gasoline for my backup generator am I paying the 'toll' for that generator to drive on the road?
In Australia road users pay more than twice as much in petrol tax as is spent on roads.
https://www.abc.net.au/news/2022-03-21/fuel-excise-not-being...
So the recovery ratio is more than 200%.
That report says that that tax is to be spent on roads, transport, biking infrastructure & etc.
I also expect that you don't have any idea how much of the total road-maintenance funding comes from that tax, and how much of it comes from other sources.
(It's also... odd... to start off talking about tax and revenue policies in the US, and then suddenly switch to an entirely separate country (given that the US is uniquely car-centric and politically fucked-up) but whatever.)
The other way to look at subsidies for transport is per passenger mile :
This has data for the US.
https://www.newgeography.com/content/006415-transport-costs-...
You are going to have to cite "Many people love the suburbs" part. Most people live in the suburbs because that is the only cheap option available and that's because of zoning doesn't allow any other form of living.
And when cities do decide to upzone, they tend to centralize high density towers in one part of the city.
There are countless studies on why suburbs are just one big ponzi scheme. Strongtowns is an advocacy group that is trying to show more light into this issue.
Most of the tax revenue comes from downtowns where there are more density and more economic activity. Meanwhile a lot of the infrastructure cost are sunked into the suburbs that contribute little to the total tax revenue. The situation is even worst in California due to prop 13.
https://www.pewresearch.org/social-trends/2021/12/16/america...
The numbers in 2021 of preference :
19% Urban, 46% Suburban, 35% rural.
Where else are you going to live where you can have a decent sized lot with space?
A city with a park nearby where your kids will actually meet other kids to play with?
That's what life was like back when we lived in Italy a few years ago. It was pretty good in a lot of ways!
When we moved here to Oregon, we landed in a rental with a big, beautiful back yard that didn't see much use.
"Kids don't need a big yard to play, they need other kids" - and living in a denser area provides more kids.
That's not to say no one should have a yard or anything, just that it's really not all that it's cracked up to be.
> A city with a park nearby where your kids will actually meet other kids to play with?
Have you been to San Francisco? Addicts and homeless take over all parks. While I emphatize with their difficult situation, I don't want my child exposed to that.
> "Kids don't need a big yard to play, they need other kids" - and living in a denser area provides more kids.
Out here in suburbs,lots of kids (since most families with kids move to the suburbs) and many parks and none of the problems of a dense city.
As a 20-something I want(ed) to live in a dense city for the parties & people & bars. As a parent of a child, I want to be as far as possible from a dense city.
> Have you been to San Francisco? Addicts and homeless take over all parks.
The high amount of homelessness may have something to do with the housing shortage.
> Where else are you going to live where you can have a decent sized lot with space?
Define "decent sized":
* https://www.google.com/maps/place/150+Geoffrey+St,+Toronto,+...
* https://www.google.com/maps/place/70+Jackman+Ave+Toronto,+ON
* https://www.google.com/maps/place/150+Westminster+Ave,+Toron...
Or perhaps something with less square footage:
* https://www.google.com/maps/place/50+Geoffrey+St,+Toronto,+O...
* https://www.google.com/maps/place/125+Hampton+Ave,+Toronto,+...
At a density that can support public transit, cars are optional (not a necessity), you still have a (back)yard, and can have a garage (attached to a laneway). The above was how things were often built pre-WW2:
* https://en.wikipedia.org/wiki/Streetcar_suburb
* https://www.youtube.com/watch?v=MWsGBRdK2N0
These places now cost quite a lot now because urban living is cool, but in roughly 1960-90s they were relatively cheap because all the WASPs moved to the suburbs because 'downtown was for immigrants'; one particular neighbourhood linked to above was >90% Polish during the time period:
* https://en.wikipedia.org/wiki/Roncesvalles,_Toronto
Just to the east of this neighbourhood is Little Portugal (and then further east China Town, and a little north Little Italy), and to the west a large Ukraine community used to be concentrated (with a smattering of Lithuanians).
Nobody is saying people who want their own yard shouldn't be able to have that.
But those that don't have that as a priority, or can't afford it, should also have options.
Nobody is suggesting turning all suburbs into high-rises. But we need variety and supply in the market, so that people have choices that suit their lifestyle and income. Including the option to live closer to where they work to reduce the traffic on your roads.
There is plenty of choices. Don’t blame us suburb lovers with families and safety concerns if the yuppies, DINKs, and well to do retirees priced you out of the urbanity you desire.
This post is about rent prices continuing to increase across the country. If there were plenty of choices relative to demand, I would expect supply and demand to not continue driving prices up.
Sure seems like the solution is to get bank money out of housing. I say this as someone who’s usually on the free-market side of debates.
Is there a true downside to the plans occasionally thrown around in Congress to limit/disincent institutional investors housing holdings?
Probably not a big downside, although it might make fewer single family units available to rent. But it really is a supply issue. Those bills, like the one from my Senator here in Oregon, Merkley, tend to be about singling out single family units as worthy of protection as "nice" housing for "families", which in its own small way contributes to the notion of denser, multifamily housing as being... not quite up to the same standard, if that makes sense.
More than anything, we need more housing supply in more places, and high insurance rates make that tricky because they're actually hurting multifamily construction quite a bit. It's sort of a vicious circle.
In lieu of that kind of housing, some reforms that would help are things like eliminating burdensome parking regulations and reducing minimum lot sizes, like Houston did to spur a lot of "gentle density" infill housing. Those sorts of incremental changes might help out some smaller developers who don't need huge loans.
The ban on renting single family housing is just pure classism used as a way to ban people who can't afford a downpayment on a SFH to live in the same neighborhood.
This is a supply issue and thus why people should be considering joining YIMBY Action.
> This is a supply issue and thus why people should be considering joining YIMBY Action.
Yup. I'm an introverted software guy. I am not 'a natural' at political stuff, but that group has given me so much help; it's great.
People generally vote for things that benefit them.
People who have a large portion of their wealth in housing, and even more so those who have used debt to take an extremely leveraged position on housing, benefit from increases in housing prices and lose out on decreases.
Having a significant amount of voters be in the above position is to make effective government action to reduce housing prices impossible.
So with that in mind, if institutional investors are disincentivised from investing in housing, which group is supposed to take their place?
You think it's rent seeking as a block, and not a supply problem?
In the same way telecoms and other incumbent data-services providers can lobby local and state governments to create regulation that ensures that newcomers are prevented from entering the data-services market in the area, folks who are currently making big money from renting housing can lobby their local and state government to do the same.
(One obvious way for the folks making big money from renting housing to do this is to ensure the obstruction of new construction.)
And (of course) both sets of politically-savvy entities can encourage others to agitate on their behalf for the entity's preferred political outcome.
We learned during the Great Recession that our whole economy is built on housing.
Headline is more accurate than homeowners (now corporations speculating by buying houses as investments, see Zillow) care to admit.
You're partly correct. Our economy runs on consumption. Housing is a consumable, of sorts. Then you consume home appliances, furniture, textiles, etc. People consume more when they own, and less when they rent.
yes, exactly. The solution is pretty clear.
End the fed.
"Pretty clear"? I don't think it's clear at all that that's what follows from dirtyhippyfree's point.
https://archive.is/ZA31F
There are really three things going on: secular inflation causing overall upward price trends, industry-specific restrictions on building housing in many places, and an increasing population.
Each of these things should be discussed separately in order to have a productive conversation about the overall results of rents still going up quickly.
Really? The reasons you gave are perpetual. Don't you think that the real reason, in this moment in history, is that landlords are colluding on rents? If we enforced anti-competitive laws, and raised property taxes in the suburbs to a level commensurate with the maintenance costs of those areas' infrastructure, it would solve a lot of these problems.
> “Don't you think that the real reason, in this moment in history, is that landlords are colluding on rents?”
The lawsuit that could shake up the rental market [1]
AirBandB
Hedge fund investing in real estate
To name a few
https://www.npr.org/2024/01/11/1197961038/the-indicator-from...
Not generally, no. Certainly some areas are experiencing landlord collusion, but in general colluding is extremely difficult as a landlord because rental properties are so decentralized. Nowhere in the US do we have anything like berlin where 3 companies own the majority of units. The sheer amount of collaboration required to collude when there are thousands of suppliers makes it very unlikely in most cases.
I agree with you - though one mechanism for implied and unintended collusion would be rental pricing services that are widely used by landlords and might cause prices to converge or be self-reinforcing. I don't believe this argument, but I do think it merits consideration and counterargument.
That is, it needn't be explicit collusion where thousands of landlords get together - it might just be because they're all using the same price forecasting service.
My rent goes up CPI+5% or 10% wtv is smaller and those guidelines are considered “price controlled”. Most recently my rent went up 8.3% cuz CPI was 3.3% +5. Rent is a portion of CPI calculation though, so it is almost a catch 22, if rents rise, the next years CPI then displays this rise, and then that new CPI is used to justify a raise in rent prices once again. And it’s a loop that continues, it’s an equation for guaranteed inflation.
That's because rent is a reflection of the reality of the cost of living that the BLS can't fudge the numbers on monthly by not counting certain expenses.
So what's the answer, less federal intervention in the housing market, or more?
The answer is less but at the local level in the form of loosening zoning and other regulations in order to allow for the building of more and denser housing.
We have a housing shortage[0] plain and simple and NIMBY is holding back progress on the issue.
[0] https://econofact.org/the-housing-shortage-and-the-policies-...
Most housing market intervention is at the local level (where there needs to be much less). Federal government has several levers through which they can subsidize supply creation which they should use. At the local level people wll have to fight one by one to get things built
The answer is the former[1], but the policy will tend toward the latter.
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Thomas Sowell[2]
[1] https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...
[2] https://www.amazon.com/Reality-Optional-Essays-Institution-P...
It’s possible for governments to lower housing costs in many ways. They just don’t want to.
If SF prevented any new office building from being constructed 20 years ago there would be less demand for housing locally. But the incentives didn’t line up that way. Cities need to provide schools when they build housing but office space is free of that obligation.
Similarly transport infrastructure is expensive and reduces the property taxes you collect locally.
Government is a load, never a driver.
To the extent the cart can spoof the horse, look for a downhill slope. Which will not go on forever. Once the potential energy is spent, the friction kicks in. QED all about you.
Building a bridge without tolls is more efficient than one with tolls. That’s one case where governments beat private enterprises.
https://en.wikipedia.org/wiki/E-ZPass
By which I mean: confuse not implementation with principle.
Fees discourage use when the costs are almost independent of use. E-ZPass also requires you to build and maintain infrastructure, do customer service, and enforce people who skip it etc.
A bridge without that overheard is unquestionably more efficient.
Governance is always a brake pedal, not an accelerator.
Friction stabilizes a system--at no point am I advocating anarchy--at the cost of gain.
When engineering, never lose sight of the trade-offs.
We've collectively failed at this problem as a society.
We've 1. made it extremely difficult, even illegal, to build more denser housing. 2. devalued the status of electricians, plumbers, and carpenters leading to a shortage of people we need to build more homes. 3. made it much too easy to get very large mortgage loans, incentivizing people to leverage themselves much more than they should to purchase homes. Thus bidding up the price of homes as otherwise financially smart people are forced to play the game as well. 4. built software to collectively price fix rents, favoring higher rents over maximum occupancy.
All of this has turned housing into an asset class, in which a significant fraction of the average American's net worth is invested, and has led to huge inflows of investor money. The incentives to not fix any of this are very strong.
How is this any fault of “society’s” beyond the requirement that you must live in or close to certain cities/areas to make “good money” in any non-law/non-medical profession? I’m going to lookout for my family without any malicious intent towards others. Other people might have different values and they are free to live, vote, etc where and how they want. As a resident of the Phoenix metro area I wouldn’t expect to be able to have any impact on how Santa Monica is building.
The current state of affairs are the direct result of government policy and investment, starting with mid-century "urban renewal" (which demolished existing dense and close-in housing and infrastructure), continuing with government bias towards suburbanization through municipal bonds and auto infrastructure spending, and most recently with the high tax and subsidy benefits that go to homeowners, and particularly first-time purchasers. Zoning and "character" codes factor in as well. Private interests were certainly involved (particularly with the realty industry's contribution to white flight and the banking industry's mortgage financing schemes), but much of this very much "society's" fault. I go to the "The Devil Wear's Prada" theory of decision-making: if you picked it off the rack or see a lot of other people doing the same thing, question who made the decision for you.
Well in Phoenix's case the big failure is continuing to subsidize water for agricultural usage. That is a choice society has made and it is causing housing in the valley to get more expensive as new builds are starting to be banned over water rights.
Canada only did 1, but not really 2 or 3 as much as the states, and the mess is even worse.
What it always comes down to is a pretty basic supply and demand problem in my head. Build a surplus of housing, and even the (4) algorithms will push rent and prices lower.
No, the biggest stumbling block is that the US government spends far, far beyond its means. This can't go on forever. We are handing out money to everyone - the military, renewable energy, semi conductors, car makers, municipalities, the list goes on and on and on. It has to stop, eventually. We are expanding the money supply and the interest on debt is ballooning.
As Jerome Powell, Chairman of the Federal Reserve said back in February:
> PELLEY: But is the national debt a danger to the economy in your review? You are this country's central banker.
> POWELL: So, it, I would say this. In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government's on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don't think that's at all controversial. And I think we know that we have to get back on a sustainable fiscal path. And I think you're starting to hear now from people in the elected branches who can make that happen. It's time that we got back to that focus.
> I think the pandemic was a very special event, and it caused the government to really spend to ward off what looked like very severe downside risks. It's probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path.
> PELLEY: I have the sense this worries you very much.
> POWELL: Over the long run, of course it does. You know, we're effectively — we're borrowing from future generations. And every generation really should pay for the things that it, that it needs. It can cause the federal government to buy the things that it needs for it, but it really should pay for those things and not hand the bills to our children and grandchildren.
> I think this is, again, not controversial. But it's difficult from a political standpoint. It's not our business, really. But I do think it's pretty widely understood that it's time for us to get back to putting a priority on fiscal sustainability. And sooner's better than later.
> PELLEY: Urgent?
> POWELL: You could say that it was urgent, yes.
https://www.pgpf.org/blog/2024/02/fed-chair-powell-its-past-....
> We are expanding the money supply
Money supply has actually been shrinking over the past 2 years https://fred.stlouisfed.org/series/WM2NS
I think this is an important point since the cost of money is a big part of building and buying housing. There are other nuances contained in this exchange too.
But beyond cost of money what, if any, specific argument are you making regarding housing? Lower subsidies in hopes the market follows? Further restrict the money supply to try and contain inflation? There are lots of second order effects that are too broad here, like high interest rates acting as a de facto subsidy to the wealthy (who then, maybe, buy more real estate, etc...
The problem is not that housing or rent is causing inflation. That is a second order effect of what really causes inflation - handing out money, especially to unproductive sectors. Because we cannot build housing quickly, it inflates. Other sectors of the economy hide inflation better via shrinkflation, cheapening and degrading the product (i.e. poor quality inputs), among other solutions. But you can't create new housing fast enough to hide the fundamental monetary inflation - the same issue applies somewhat to education, medicine, and other areas with supply that can't expand quickly (for their own varied reasons).
^this
But not just the US.
The US, The UK, My own Australia and more than anything CHINA.
They're all printing money. Stealing from the future.
This may sound obvious given my username: buy bitcoin!
> ... And that just means that the debt is growing faster than the economy.
Just like in the EU: they've been hiding "growth" behind public debt. But that's fake growth, where nothing of value is created.
And there's a limit and that limit is now being reached. They'll kick the can down the road a bit more but... Out of the 150 cases or so throughout history where public debt reached crazy level, there's one case where it didn't go to complete shit: Japan.
And somehow all these geniuses at the bar are certain they'll manage to pull a Japan and not fail miserably like in the 149 cases where the state did default.
We have monkeys at the helm and it's going to end up ugly.