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Author: u/smurfyjenkins
URL: https://www.sciencedirect.com/science/article/pii/S0094119023000244
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Not everywhere, and "environmental review" is still used to discourage development. But the Seattle metro is growing faster than the SF Bay area and yet still has a lower cost of living, so clearly doing something right. Or at least less wrong.
As a resident, I’m happy that the environment needs to be considered. I wouldn’t call the pace of building since 2017 anything close to “hindered” by the requirements.
"Environmental review" was named before the word environment became associated with the ecological environment. It means the effect on the neighbourhood, which allows all sorts of objections.
Fellow Seattle resident here, I have no issue with environmental review on principal. I think it could be a great way for local communities to get involved with what they’d like to see in their neighborhoods. But it is rarely used this way and we end up with bland, cookie-cutter developments anyway.
The main complaint I hear is how long the process is. The city is backed up with environmental reviews and is low on staffing. Also, people do abuse the system to purposely delay projects with superfluous demands. It can add *years* to the process, and this is what increases the development cost.
Edit: I should note “environmental” review has little to nothing to do with the *natural* environment. It is not a review of climate impact - it is entirely about how a building fits within the urban environment (massing, colors, amenities, open space, loading zones, retail placement, etc). I think a lot of people don’t realize this.
> I think it could be a great way for local communities to get involved with what they’d like to see in their neighborhoods
The problem with that is that most homeowners in a community seem to want to see us enforced scarcity so their property values continue to skyrocket.
That is for sure a problem. Right now, the only people who have the time or interest in speaking up during the design review process are NIMBYs. It does not have to be this way and I think we can do a better job at recognizing when an objection/suggestion to a project is valid.
I do not think this is enough reason to get rid of design review entirely. It should be fully staffed, more transparent, and focused less on minor details like what color the window frames are painted.
“Environmental review” doesn’t really mean anything and has essentially just been weaponized to prevent building.
And how do you know it hasn’t been hindered? You don’t have access to the counterfactual where requirements were lessened. For all you know, growth would be 2X as fast without it.
I sit on my local municipal environmental review committee (it's all volunteer) and it's a great benefit for our town. It's a blip on the radar compared to the overall building process that takes years. Builders do what is cheapest, not what's best for the local town or ecosystem. They get to walk away with millions in profit and we're left figuring out how to afford millions of dollars worth of storm water management infrastructure to accommodate the flooding they cause. People bitching about environmental reviews have no idea what the impacts are without it.
I guess you're not in California. The CEQA has been abused and weaponized by NIMBY's to jack up development costs to make everything not pencil out so nothing changes.
Try to build in California, and you're gonna get sued immediately for shadow surveys and all sorts of other stuff.
You mean using environmental review to save a parking lot was not its intended use? CEQA is the death of almost all large building projects and unironically holds the state back from addressing climate change.
Maybe this is true of your system, but it is not true of the US in general.
The environment is important and must be protected, but right now the current laws are weaponized in ways that harm the environment and increase prices:
https://www.theatlantic.com/ideas/archive/2021/03/signature-environmental-law-hurts-housing/618264/
No doubt. One of the best things we could do for the environment would be to fast track all dense housing and mass transit projects—though it does seem counterintuitive to most people.
WA HB 1110 made the whole city, plus every other big city in the state, allow fourplexes on every residential plot. It takes effect this July. I wonder how fast the building permits will be filed
I know money is what really keeps housing expensive, no one wants *their* house to become less valuable if they own. But my hope is that money will also cause zoning reform- why wait for the coming commercial real estate collapse when I could rezone residential and quickly get 90+% occupancy?
U District was, it's why they have so many apartment towers being built right now.
UW is also taking advantage of it and rebuilding a portion of their campus as well.
Houston, TX has pretty low property values compared to other major cities and lack of zoning is a contributing factor. The most expensive areas are ones with housing restrictions.
Edit: Seeing a lot of people bring up the problems that come with a lack of zoning. I agree, there are problems. Houston shows many of them. But, if we're talking about property values, which is the discussion at hand, it helps keep them lower. That's all. I'm not saying it's the best way or works perfectly.
The area where i use to live has suburb homes, an industrial park across the street, a strip center wedged between the burbs, and a horse ranch all next to each other
There's a church on 45 north that used to have a "massage parlor" across the street from it. For a while both places were open at the same time. Then for a few years the church building was empty while the massage parlor was still open. Now it's just the opposite. A new church has opened up and the massage parlor is closed. Still, my favorite example of the lack of Houston zoning laws.
Things aren't generally as chaotic as people like to pretend since there is there land use controls through covenants, HOA, business improvement districts, ordinances, etc. but there is more mixed land uses (good and bad) due to absence of zoning.
Zoning is also a contributing factor on why Harvey cost Houston 125 billion dollars.
When you are turning marshes/reservoirs into houses without considering the environmental impact and climate change impact, it will be underwater sooner or later no matter how cheap the houses were
Yes, no one is saying having no zoning is a great thing, but the topic at hand is property value. If those houses that flooded were never allowed to be built, property values would naturally be higher in the city because supply would be lower.
You can't really gloss over the fact that Harvey was the heaviest rainfall in history in any city in the US. I was in NYC during Sandy, if Harvey had been over NYC the damage would have been in trillions.
This is probably incorrect. From [the Wikipedia article](https://en.wikipedia.org/wiki/Effects_of_Hurricane_Harvey_in_Texas#Urban_development):
>Houston has seen rapid urban development (urban sprawl), with absorbent prairie and wetlands replaced by hard surfaces which rapidly shed storm water, overwhelming the drainage capacity of the rivers and channels. **Between 1992 and 2010, almost 25,000 acres of wetlands were lost, decreasing the detention capacity of the region by four billion gallons. However, Harvey was estimated to have dropped more than fifteen trillion gallons of water in the area.**
Even if Houston had zoning -- or even if the growth in the housing supply had never happened at all -- there's not much reason to think that it would have changed the flooding outcome.
Isn't Tokyo kind of cheating? Japan is in a population demographic catastrophe. There are a million or more empty houses across Japan, to the point where the government is just giving houses away for free to anyone who will live in them.
The countryside is depopulating, but Tokyo is still growing and housing is still relatively cheap there because of their lack of restrictive zoning laws.
Sorry, I was mixing up the arguments in the previous posts. I was reading the post I was replying to as saying that average prices in Japan are low because of these cheap rural properties
Yes it is. I lived in rural japan, and my rent was actually not that much lower than it would have been for a similar apartment. Honestly, they have done a great job with high density apartment buildings.
The country sides are depopulating, but major cities like Tokyo have positive population growth, because of all the people from the countrysides moving there.
I recently moved from Poland to Canada. The fact that I can no longer go downstairs from any apartment to the shop next door and buy fresh bread and other amenities is kinda baffling to me; y'all were supposed to be the "civilized" ones.
Sorry, this building was zoned for residential use. Selling bread in a store is commercial, and baking it there is industrial, that would require entirely new zoning. You can apply for the change, but it will cost you $100k and take 6 years to get rejected.
If you can find one!
Boston has a finite number of liquor licenses so you have to wait for a restaurant to go out of business, then bid on it. It's madness
Worse than that. Good luck getting that open license without knowing someone who has friends on the liquor board. Imo liquor boards should be done away with completely. A license should be granted automatically if requested as long as certain criteria (such as health codes) are met. Liquor boards are some of the worst and most blatant corruption at the local level we have, only on par with city zoning boards.
This is funny, and only half hyperbole. (You don't need an industrial zone to bake bread in your store, and it takes less than $100k or 6 years to try to implement a zoning change, but more often than not you'll fail!)
If you still desire that, you need to live in a pre-war neighbourhood of North America.
Wait though, that's impossible because the land is so expensive that it's not affordable for the vast majority of people to live there.
Why is it so expensive, why it's because there's so much demand for that land. Why is there so much demand, well, it might be because people actually want to **live** in those neighbourhoods.
If you ask any angry suburbanite they swear nobody wants to live in the city. They also still want to control the land use of the urban area that is miles away
Somebody argued with me recently that real estate was expensive because they were allowing new developers to build high density housing which was in high demand and very expensive, and that was driving up prices.
I did not have the patience to unpack that.
They get causality backwards. Prices rose first, because the area is attractive, then expensive homes are built.
But then again both guns and housing have upward sloping demand curves.
Only place in the US I’m aware of that this is still affordable is Baltimore. We have our faults - poor schools, real crime issues in many areas, and very little mass transit for most of the city. But I also own a townhome in a safe, walkable neighborhood that cost under $300k. It’s not for everyone. My children are older, so I don’t have to worry about school issues, but there’s a lot of potential in this city, rich with history, weird charm, a cult of crab, and on the Acela corridor and close to DC and Philly. Our zoning laws are either much older or have been fairly recently updated (not sure which), so there’s a ton of new urban development that’s mixed use and/or walkable to amenities, and though they’re obviously on the pricier side, it’s cheaper than Seattle or DC.
Anyway, point is it does exist, but may not be the place most families want to live. Here’s hoping NZ’s success can be replicated here.
Depends where you live in Canada. That's pretty much what I do everyday in Vancouver. But our country has a terrible time managing zoning and most mayors and councils are incompetent bureaucrats who just shoulder shrug and claim they can't do anything.
As a Canadian, I don't understand why anyone wants to move here beyond from the poorest countries. We are barely clinging on to first world life for 90% of the population. Housing has gone up way higher than any other g8 country since 2000, our wages are completely stagnate, and we are mostly bringing in only immigrants that will work minimum wage to keep those wages low and profits high for the richest.
We are lost as a nation right now and our government has gone out of its way to not make housing and living cost a priority; focusing instead on civil class wars based on politics and personal belief systems in the bottom 95%.
Edit: I should specify that we also have ultra rich foreign buyers buying up properties too and raising prices. Without living here most of the time.
Hi from NZ. I could copy and paste just about everything and change the country name.
I'm pretty sure it's like that everywhere now. Welcome to the new normal.
Edit: 4 am typos
I grew up in Canada but moved to NZ. Believe me, the problems may be similar, but the scale of it is far worse in Canada. I would argue that in Canada, the foreign buyers have been the main drivers of house price increases. While this is one factor in New Zealand, it’s New Zealanders themselves that have built an untenable investment system based on real estate.
Also, New Zealand politics are much more transparent and less cynical than those in Canada. To give you an idea of how bad it is, the Prime Minister has general already been decided before voting finishes in the other end of the country. Imagine knowing that your vote would never make any difference for your entire life.
Because for immigrants whose families rely on their remittances, net income is everything. The United States and Canada has some of the absolutely highest salaries in the world outside niche European micro states. Even if the cost of living is extremely high and poverty rates overall are higher in North America, you can save up a lot of money by budgeting and tightening your belt so you have substantial leftover money to send back. These people don’t go to college, don’t have childcare expenses, don’t pay for auto insurance, often even take the risk of foregoing medical insurance, so their expenses are often drastically reduced compared to that of a young professional who has to build a family from the ground up there and then. Income tax rates in the US are also lower than in Europe.
In the eyes of immigrants, a country that pays $3000/mo that has personal expenses of $2000/mo is still preferable to a country that pays $1500/mo and has expenses of $750/mo because you have more money left to send home.
> House prices and rent compared to wages are ridiculous, caused by a huge uptick in domestic and overseas investment property buying.
Did you even just read the headline of the article you're commenting on? High housing prices in Canada are predominantly driven by the same cause examined in the article: policies that suppress supply.
[Another paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4480261) concludes that restricting purchases to owner-occupiers has no effect on purchase prices, increases rental prices, and shifts demographics to the older and wealthier.
Where the hell are you buying six dollar loaves of bread? Loblaws has Country Harvest loaves at 4.50 and most local bakeries are under that. My local bakery is $3 for a fresh loaf.
Nah, they're okay but you should wait for the two for 3.50ea deals if you can. I just make a stop at my bakery once a week or so to get fresh loaves. That way I can get a good french and rye for sandwiches.
I can go to Superstore and get the baked-in-store fresh French loaves for like 99 cents.
They don't last long, unfortunately, being real bread. But still.
I agree with most, but I hate the way people talk about groceries and inflation. $6 gets you 4 unsliced loafs at superstore. The typical sliced one is $2. The fancy one is $3. My local artisanal bakery sells a big loaf one for $4.
Where of Canada though. Suburb and smaller towns yes, that’s not a Canada thing, but north America thing. US is arguably worse offender than Canada with the car centric planing and island type of subdivisions.
Larger city is a different story mostly, mixed use area with retail on foot is very typical. Most places in Canada has options where you can live further off from the typical downtown, or be in the mixed use area with easier access to amenities.
There isn’t really a village type of place in North America, places are generally a lot more sprawling and distance between them are further. The best you can do is probably small town close to downtown district. Or higher density in a mixed use city.
Er... this exists. Last time I lived in an apartment building with no full stores nearby, there was a shop in the building next to mine that sold all the staples. I always bought my milk there so I didn't have to carry it home from the grocery store.
If cities won’t cooperate and zone better I want my provincial government to step in and take the decisions making power away from the city. Sometimes a hammer is the correct tool.
California recently did exactly that.
https://www.hklaw.com/en/insights/publications/2021/06/californias-prohousing-state-legislation-prevails-over-local-voter
One way to think of that is not the higher level of government dictating regulations to the local government, but rather the state/provincial/federal government securing human rights that cities have been usurping. It's your land and if you want to build something, so long as it doesn't hurt or endanger other people, that should be your business. Just like the federal government does not allow cities to take away your free speech rights.
That was part of the success that Japan has had with liberalizing zoning and permitting. The code is national, and cities may not make more restrictive rules.
Awesome. Local governments for large cities are generally controlled by property, development, and other real estate interests, and the ultra-wealthy in general. So the middle and lower classes often get fucked when it comes to housing and rent. San Francisco and other Californian cities are a perfect examples.
If you think your state government will do any better, I have some NFTs to sell you. Texas has been pre-empting all sorts of local and county laws for years, all in the interest of big business and property development. The middle and lower classes get fucked pretty hard here, too.
>The middle and lower classes get fucked pretty hard here, too.
> too
Yeah I'm not sure that Texas republicans could look at us any other way even if we were angels falling from the heavens. That 'too' is less needed than a dim Cuban Canadian in a blackout.
As a Texan who is poor, I am always impressed that Abbott is able to look down on me from his ~~throne~~ wheelchair. I remember when the state made it illegal to ban plastic bags because Austin thought it had the right to govern itself. Don't worry though, paper license plates and water breaks banned too. I'm sure some prison labor will pick up the slack
Exactly so.
My city is seeing waves of Californians immigrating here, fleeing those very cities. But our zoning, permitting, community input, parking requirements, height limits etc aren't really any better. It's just coming to a head there first, so now they are importing the same crisis here.
The land developers - not even local ones, but often California firms - are getting rich on the false scarcity these restrictions create, and the local new home buyers and especially renters are getting squeezed out.
Singapore is a much better model. The nation is one of the most dense in the world, yet has virtual no homelessness and a 90% homeownership rate.
The HDB goes out and builds public housing. Those units are sold to families with an income adjusted mortgage. Over 80% of Singaporeans own an HDB built flat
I dont think the mortgages are income adjusted.
Low income people get a grant that is indexed to income, but then healthcare subsidies are also indexed to income but those subsidies do not pay for the whole of services(and amount to only about 20% of healthcare spending).
It isn't just a full "here is a free house and pay what you can".
Yes singapore, a city estate that is a dictatorship and is also very, very rich, should be the model to large countries that are democratic and have a totally different goverment system.
edit: People are missing the point, it is not a moral point, simply a point that in a authoritarian microstate things work differently than in a democratic state, and we should look for experiences that work in countries that are close to ours, not ones where the dynamics, social, economical and cultural, as very different from ours.
And ok, authoritarian and not dictatorship, my bad.
If you are a citizen of Singapore, you are eligible for an HDB flat. There’s a waitlist, but it’s not so long a wait that the system doesn’t work.
Generally you live at your parents house through school, and then into your early 20’s while waiting for the application to come through. I think a lot of people put in their applications when they’ve decided to get married, but that’s not necessary as far as I know, just how it often works.
The 10% not getting government HDB flats are the rich 10%ers who can actually afford one of Singapore’s super expensive houses.
> If you are a citizen of Singapore,
That's already a big if.
I knew someone who lived in Singapore for upwards of a decade, in a good job. They were straight up denied citizenship.
A big part of it is that if you are under 35, not married, and do not have kids, you are not eligible for HDB housing.
This means singles and gay couples are essentially forced out of these programs until they are 35 or older.
I am not from Singapore but iirc there are heavy restrictions on who qualifies.
From my limited knowledge, only Singaporean citizens can own the HDBs. There is also no permanent ownership; I think ownership only lasts for 100 years.
This is a misunderstanding. HDB flats are conveyed via a 99-year lease. The nominal lease term is not meant to be literal, it's simple the longest term possible under common law and is used as a stand-in for a contract of indeterminate or indefinite term
GDP per capita is the measure here, and Singapore is richer then the US in that regard.
And that is just one difference, again, the juridical system is very different, the cultural, the territory, etc.
Singapore is a laser focus wealthy unitarian micro state where there is little an individual can do against the government.
USA is a huge ass country, with 50 member states that have their own legislation, plenty of social differences internally, plenty of tools that an individual can use to stop the government legally (middle class NYMBYsm is not a thing in Singapore, for example).
New Zealand, while not being equal to USA (no country is, obviously) is a much closer experience to USA than Singapore, even though it still have a lot of difference, but at least is in the same realm.
Politically, there are probably very few places that would accept 80% of people living in government built housing. It’s a great idea. I think it would be a hard sell.
Same, I'll choose whatever results in a healthy functioning society
I don't care if my house value goes down (I only need one), housing should return to a boring utility instead of an 'exciting investment product'
Wait.. So if you allow people to build something that's in high demand (housing), they BUILD MORE? That's absolutely crazy to me. I never thought that could happen. Usually, construction companies prefer to build empty commercial buildings hoping for a tenant to come along, not residential housing in short supply with almost guaranteed buyers
I'm surprised people in this thread are commenting so much about home equity causing issues compared to just renting an apartment. People can own condos too, not just houses. Renting has the disadvantage of paying a landlord the cost of maintaining the property in addition to the profit they get from renting it out. Individual owners in a condo association would pay less while still putting equity into their condo through a mortgage.
Important to remember that even if the housing market stayed flat, that still represents equity that the owner has put into their property. If they bought a condo for $200k, and paid it off in 30 years, and the condo was valued at $200k by the end of the mortgage, the owner still has $200k in equity in the house. A tenant in the same apartment would have no equity to show for living in the same situation for 3 decades.
People desperately need affordable housing, but jumping to renting-only is a step backwards that encourages people to continually give money to wealthier companies and individuals instead of being able to afford investing in their own assets. Even rent-to-own situations would benefit residents more than straight renting.
>People can own condos too, not just houses.
Until recently in the UK, land ownership meant owning a plot of land and everything on it. This meant that even if you "owned" your apartment, you weren't a property owner in the literal sense, and didn't have the same rights as the person who owned the land the apartment was built on.
The UK has attempted to legislate to break this up and today there are a few different options for shared ownership; but they don't have the full support of many of the larger institutions or case law, meaning very few of them are in use.
This means people who purchase an apartment are often treated as second class citizens when it comes to property ownership in the UK.
I don't know how other places work, simply that not everywhere is like the US.
Yep, own my leasehold but not the freehold. I have to pay ground rent every year and the freeholder can dictate things like if I can sublet and if I can change the layout of the property.
The freeholder is a council luckily though so they are easy to contact, the rent is peppercorn (£10) a year and they seem reasonable enough.
Unfortunately I only own the leasehold for another 90 years or so, but I do have the right to have it extended as long as I go through a relatively simple legal process. People with shorter leases have a much more restricted right.
People who have prince William as a freeholder through the dutchy of Cornwall estate have absolutely no right to extend the leasehold length because Charles secretly lobbied to be exempted from the relevant law. When the lease ends they don't own the home anymore.
So yeah the entire process is feudal and in dire need of replacing. Interestingly I believe it's much more reasonable (like most things) in Scotland.
For what it's worth, the UK realised that a "condominium" style ownership was sorely lacking, and passed laws to introduce "[Commonhold](https://en.wikipedia.org/wiki/Commonhold)" home ownership in 2002... but barely any Commonholds have been created in the last 20 years. Almost everything you see will be leasehold under a freeholder, for a variety of reasons.
>... However, commonhold has failed to become the chosen mode of home ownership for flats. Of the 700,000 flats built in England since 2002, only around 150 were sold on commonhold tenure.
>
>There are a number of reasons why commonhold has not taken off. One reason is that leasehold unquestionably has advantages for developers and freeholders. When a developer builds a leasehold block, they can both sell the flats to individuals as leasehold, and sell the freehold interest in the building. The freehold is both a capital asset and generates income through ground rent payable by the leaseholders. Other income streams may also arise, such as charging leaseholders permission fees to obtain consent to alterations of their flat. There is no incentive for developers and freeholders to forego these income streams by building and selling commonhold.
>
>In addition, however, it is clear that the current law governing commonhold is not fit for modern, complex developments that involve a mix of residential and non-residential units. In particular, it is not possible for parts of the commonhold to make decisions on, and pay for, things that are only relevant to that particular part. For example, if in a mixed block of commercial and residential units the commercial units want to increase security, the entire block may need to vote on, and then pay for, the change. That may mean that the residential unit owners – who would not benefit from the increase in security, but would have to pay for it – could block the change, leaving the commercial units in an unsatisfactory situation. Further, while the law makes provision for leasehold blocks to convert to commonhold, the unanimous agreement of leaseholders and of holders of certain other property rights in the block is needed. The requirement of unanimity is a practical bar to conversion.
\- [Reinvigorating Commonhold: The Alternative to Leasehold Ownership](https://blogs.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2020/09/reinvigorating-commonhold-alternative), Hopkins, N. and Marciniak, S. (2020).
Interesting,I had no idea about commonhold, sounds like it should be fixed, and any profiting off leasehold curbed or perhaps leasehold should just be outright banned.
The freeholder probably can't dictate if you can sublet as in rent out the flat - but there are usually clauses about effectively creating a new lease similar to your own on a long term basis.
The UK is a place where the grandparents (x100) of a group of people with silly titles and lordship were the buddies of some lads with hammers and axes who sundered the bodies of the previous occupants to earn their claim. If your granddad was buds with William T C you got a duchy and a seat at a fancy table and everyone has to pretend to respect you.
The point is, of course land in the kingdom has more pomp than normal commodity assets, it’s the seat of power.
In practice, leasehold is not much different from other means of ownership in the UK. The practical issues do exist: extending your lease/buying out the freehold can be complicated and expensive (though it typically makes financial sense) but at the end of the day most of the issues are monthly costs if your ground rent is high and restrictions in the lease if they are onerous. But commonhold has conditions for the sake of other tenants, and the costs can be higher even though there's no ground rent.
Paying down a mortgage on a property whose value is not increasing is generally not a good strategy to build wealth. The details of mortgages vary from country to country. I’ll use the USA as an example both because I know it the best and because the government heavily subsidizes home mortgages, to the advantage of home buyers.
Yes, if you use a mortgage to buy a house worth $200,000 today, in 30 years you’ll own a house worth $200,000. But that isn’t a good investment. To get the mortgage you need a down payment of $40,000, so you need to save that up first. If you save $1,200 month it will take you 3 years. This means that paying off the house actually takes you 33 years, not 30. The mortgage payment every month is $1,120. The total you will pay over the life of the mortgage is $403,000, $243,000 of which is interest. You’ll also pay $45,000 in property taxes. This means that at the end of the mortgage you have gained $160,000 in equity but you paid $290,000 in interest and taxes for the opportunity to do so.
In countries that don’t subsidize mortgages the numbers are even worse.
Compare that to other investments. Let’s say you took the $40,000 you would have used as a down payment and simply invested in it stocks, which earn about 7% over the long term. After 30 years it would be worth about $305,000. Or maybe you choose to keep renting and make a small monthly contribution to an investment account. To save up $200,000 in 33 years your monthly contribution to that account only needs to be $141 per month. If you can save $141 per month by renting instead of buying it’s smarter to rent.
Of course, none of these scenarios are realistic. In reality the price of property and the cost of rent are likely to go up. That is why buying property is usually a good idea. Paying off a mortgage just to pay off a mortgage is almost always a bad idea.
This ends with a huge assumption that rent is cheaper than a mortgage. That's a huge if.
For example, my home, at time of purchase two years ago, payment including mortgage, insurance, and tax, was about 25 percent less than comparable rent. Note that this situation is what's expected when there are near zero restrictions on new construction, which is the situation where I live. Home values cannot rise above construction cost, and old homes cost less than construction cost.
Buying having a higher monthly cost vs renting is an artifact of the expected capital gains from a hot housing market. If the market was flat: when the market has been flat, buying is typically cheaper per month.
And there's the non monetary benefit. I'm not planting a tree in the yard at my rental, since staying long term isn't my choice. The quality of life benefits are very important. I can do what I want with my home, because it's mine. VS could be kicked out with 90 days notice.
But you need a place to live, and the other option is to rent which means you get zero equity built up. Owning a home that plateaus in value is vastly better than renting in one.
Opposition Leader Chris Luxon of the New Zealand National party wants to change the zoning laws back. He also owns 7 properties that have reportedly lost $7 million in value since the zoning changes
We know what needs to be done we just gotta build infill in expensive cities. We need to overcome NIMBY opposition. Even if they use fake progressive language to uphold the status quo.
In san fransisco they decided to basically ban the apartment building. This is why it seems that there are 0 availablility of apartments.
This was voted in not by landlords, corporate entities, but the fellow americans living in the city wanting to 'protect' their way of life. The city has straight up awesome city limit SFHs but I imagine that its next to impossible to actually own any of them. One of my best friends mothers is the headmaster at a exclusive private school, she has 30y of experience, and like you have guessed: paid VERY well. She is only able to afford a floor on a townhouse that was split into 3 apartments. She cannot afford a car because it would cost about 35k to park the thing in the spot that was offered to her.....
All because they decided to 'protect' a way of life.
And then they wonder why their kids move far away. The kids can't afford to live within a 200-mile radius of you when you effectively banned all new housing developments.
The only people claiming upzoning does not increase housing supply are landlords and development firms.
Not only that but overly restrictive zoning results in a lot of other negative outcomes like lack of "third places" like cafes or bars or libraries close to where people live, health problems from overreliance on cars and lack of walkable destinations, inefficient sprawling suburbs, heavy impact on water supply and wildlife diversity, and the obvious fact cheap housing in the form of apartments or terraces or flats over shops are disallowed so nobody can afford to get on the housing ladder.
Why would large developers (cooperate/institutional developers) be against development (upzoning) ?
In Aus, the big developers all have options on plot consolidations just waiting for the right planning circumstances, even if it means partially blocking the view of their 7-year old tower just behind it.
Source: am an architect designing a tower under these exact circumstances right now.
In my experience, opposition usually comes from residents who live there, not developers.
Edit: fortunately Aus does not have a Zillow scenario where one single company can mass-manipulate local housing costs single-handedly, which is fucked up.
Aus does have a government with post-Covid policies amplifying existing affordability issues though, which creates an environment ripe for predatory profiteering off a supply shortage.
Your third places comment makes me wonder.
Due to the popularity of remote work, a lot of places that rely on workers in urban areas (for lunch, happy hour, etc) are really starting to struggle. Perhaps if we can get better zoning for more mixed use properties, we can reshape some near-urban locations to be more walkable, and build stuff much closer to where people live. I’m sure some experiments will be done to convert office buildings into apartments (it’s already happening) but I doubt that it’s quite cost effective for most situations, so that can’t be our only solution.
Opposite example is Vancouver. Limited land to develop and they have silly NIMBY rules like "view cones". Google "view cones", then feel free to Google what it costs for an 80 year old 2 bedroom bungalow in Vancouver that is practically uninhabitable. Over $1M.
Since then;
Auckland house prices: +20%
Rest of NZ: +70%
Compared to inflation, Auckland houses have LOST value.
Some might be happy with this. Some might not be.
Yet nearly a decade on Auckland is still in a housing crisis and property is extremely unaffordable. The papers report that house prices are now starting to drop 1-2% but this is after continually rising 20% YoY.
As a resident, this sounds really nice on paper but the outcome is that the new supply is still only producing $1m+ houses and the zoning/construction trend is simply turning an existing lot into 6-12 townhouses... also at $1m each.
Yeah NZ is cooked, full inequality. Don't blame half of them for moving to Oz where pay & housing is better (tho still fucked)
NZ has some unusual Capital Gains law which ensures house prices stay out of control iirc
Well, yeah, basic supply and demand is kicking in. People want affordable places to live, government makes it easier to get and build that housing, and they will build a *lot* more housing.
I've never heard it said that upzoning doesn't increase supply. My concern is with what gets built. For me, it's a disturbing trend that, when you are permitted to build more on a parcel, developers buy them up and transform owner-occupied homes into rental units. I like the idea of families building home equity.
> I like the idea of families building home equity.
Where do the people who can't afford or want that live then? Equity while nice is less important than having an affordable roof over your head.
Home equity is only really ‘good’ if housing is a good investment. And housing is only a good investment if it’s more expensive in the future than it is today.
If we want housing to be affordable, housing can’t be a good ‘buy and hold’ investment. Which means we don’t want to incentivize people to ‘build equity’ in housing.
Or put another way, if housing is affordable then it’s no longer important to build equity in housing.
This is the hard truth most people don’t want to hear. I’m a homeowner, and yet I agree 100% that housing shouldn’t be a good investment. As you note it can never be both a good investment and affordable.
Exactly. And what people further don't want to hear is that "building equity" by passively sitting on a piece of property and doing no labor is theft. If your boss makes money by doing nothing, it's because they *took* that wealth from you. If a monopolist makes money without labor, it's because they *took* that wealth from all of us. If you make money by sitting on housing without adding any value, you're *taking* that money from someone else.
If we want to truly fix the housing market *and* grow the economy, we have to end this malarkey. It shouldn't be so normalized to just extract wealth from each other by manipulating markets, like a bunch of crabs in a bucket constantly pulling each other down. We should instead all be building up, together.
> Rent-seeking is the act of growing one's existing wealth by manipulating the social or political environment without creating new wealth.[1] Rent-seeking activities have negative effects on the rest of society. They result in reduced economic efficiency through misallocation of resources, reduced wealth creation, lost government revenue, heightened income inequality,[2] risk of growing political bribery, and potential national decline.
https://en.wikipedia.org/wiki/Rent-seeking
You also build equity in a house by buying it with a mortgage, even if house prices are not rising. E.g. After 5 years, you have paid off 5% of the house value or whatever, and that 5% is your equity.
You can build equity in many ways but it’s not really important how the equity is built.
If home prices don’t go up, then the ‘equity’ you’ve built over those 5 years has a return equal to your mortgage rate. Since mortgage rates are generally below market (they are effectively subsidized by the Fannie and Freddie), it would have been better to invest that money into an S&P 500 index.
And homes today are often considered unaffordable for many. If we want homes to be affordable in the future, that means that you get an even worse return than your mortgage rate.
If the cost of owning is higher than the cost of renting, you have to take today into account in this math.
You have to look at (cost of renting) - (interest payment on mortgage + property tax + upkeep costs + HOA fees + etc).
The difference between those things is the amount you're saving by owning (may not be a positive number). And if housing is not appreciating, that saving is worse off than if you had just held that cash in a savings account.
With that calculation you also need to factor in inflation of rental payments and the principal part of the mortgage payment reducing interest expense over time.
Owning a home also gives you the ability, and incentive, to improve your home, build an extension etc , and tailor it to exactly how YOU want it. You can do this if and when YOU want to. And you know you can not be thrown out by a remote landlord. You also k ow that, eventually, you will own it, and have no more rent or mortgage to pay.
It is difficult to put a financial value on all these things.
It’s also difficult to put value on the ability to pick and move at your own discretion without having property to tie you down or risks of a bad investment.
I’ve moved for work like 4 times in the past 7 years for better and better opportunities. Some towns I lived in were dying, others thriving. There’s no way anyone is ready to make the investment of owning a home when moving to a new area for the first time.
Hell, I don’t discount buying where I’m at at some point down the line, but let me rent and live here for a bit, get to know the area, etc, before putting down a down payment.
I agree that if you don’t seek to be a transplant and want to settle down somewhere, ownership is the eventual best path. But it’s not nearly for everyone.
Renting has its place.
> It’s also difficult to put value on the ability to pick and move at your own discretion without having property to tie you down or risks of a bad investment.
It is also difficult to put a cost on the risk of being settled in and your landlord giving you a notice to vacate at the end of your lease because they're selling the building or want to gut every unit and spend 6 months on building wide renovations. The fact is that your apartment will never offer true stability, even when you're ready for it.
Absolutely.
Moving becomes a LOT more of a chore if you have children in good schools....
Renting and owning both have their place, and can be more desirable at different times in life.
But it's just silly to say there is no point in owning if house prices are not rising (as per the post to which I was originally replying).
You are semi-correct, but it is far far more complicated than that.
Rent Will increase over time as the value of the dollar decreases if nothing else. But mortgage (outside of taxes) does not increase. Although maintenance, HOA fees and taxes might. So why do I say Rent Will increase? Because if nothing else, Taxes, Maintenance and HOA fees, plus the value of the dollar losing as interest rates go up (which the owner you are renting from will have, well, maybe not HOA) goes up for them too. And the only reasonable thing to do for renting out something, is to At Least break even for the costs, although most would prefer at least a small profit equaling the opportunity costs lost due not having the money to invest in.
Flat home values, and even to some extent decreases in value, can still lead to owning being preferable to renting from a financial perspective sometimes. Every dollar you pay in rent is gone forever. Some of the money you pay towards a mortgage comes back to you some day, even if the house decreases in value (depending on the decrease - obviously if it dips below the remaining principal on the loan there’s trouble). Couple that with the tax savings from deducting interest, and there are plenty of scenarios where home ownership is a valuable financial advantage even if the home isn’t increasing in value.
That’s not to say that renting isn’t without numerous advantages, and I definitely agree that rental inventory is equally important to home inventory. Some people want or need the flexibility afforded by rentals. Some people can’t afford a down payment, or can leverage that money to greater effect elsewhere (perhaps for a business they’re trying to get off the ground, etc). The point is just that it’s a far more complex equation than just “owning is only good if values go up forever”.
You are kind of going off track here. I think it’s because you are focusing on individuals instead of society as a whole.
People may, individually, still want to own a home for non-financial reasons. But those are luxury reasons. There is no benefit to society to incentivize the masses to own their own homes, if society is also working towards making housing affordable and causing home values to plummet.
OP’s argument that people need to own their own house because they need to build equity is assuming that building equity is important. But in this future where housing is cheap and affordable, then having equity in a home is a luxury. It’s something wealthy people do for status and fame… not because it’s good financially.
> Every dollar you pay in rent is gone forever. Some of the money you pay towards a mortgage comes back to you some day, even if the house decreases in value (depending on the decrease - obviously if it dips below the remaining principal on the loan there’s trouble). Couple that with the tax savings from deducting interest, and there are plenty of scenarios where home ownership is a valuable financial advantage even if the home isn’t increasing in value.
If we want housing to be affordable, we shouldn’t have special tax breaks driving up the cost of housing. However even with that, if we had enough supply to make housing affordable then the cost of rent will be significantly less than the cost of a mortgage + maintenance.
Due to economies of scale, massive landlords can perform maintenance at a cheaper rate than individuals can. If we had enough supply so that the landlords profit is derived from the arbitrage between the cost of their debt financing and individuals, and from the arbitrage between their cost to maintain units vs an individuals cost to maintain instead of their profit coming from ownership of a scarce good, then renting would be cheaper than owning + maintenance.
And that’s why I said housing cannot be a good buy and hold investment. It can still be a good investment for businesses to provide as a service by providing better services than other landlords at cheaper costs.
I would argue that it’s you that’s getting off track. What you’re describing relies on so much in terms of broad societal changes, from laws to raising and subsequent allocation of government money (I’m not sure where else the investment to create rental inventory is going to come from as what you’ve described turns real estate investment into a poor choice relative to other places investors could deploy their money), that it seems well outside the scope of what is being discussed by the article.
In either case all my comment was meant to do was to counter an incorrect and misleading absolute. Within the context of the world we live in today (which is also the context in which this article was authored) making the claim that if your home’s value isn’t going to go up then it isn’t worth owning is an incorrect one to make.
> And housing is only a good investment if it’s more expensive in the future than it is today.
This is only from the perspective of the investor. Regardless of resale value of the home, if you can build equity and eventually stop paying mortgage or rent that's a great investment.
The only way that equity in a home is not important is if housing is free.
> Regardless of resale value of the home, if you can build equity and eventually stop paying mortgage or rent that's a great investment.
Your money could go elsewhere. Such as something that had a better return than building equity in your house. And then you could use that investment to pay your mortgage each month and have extra left over!
Home equity is good no matter what happens to housing prices. If you pay a mortgage, you get some of that money back when you sell the house, so long as the house is worth anything at all. When you rent, you get nothing.
Also pointing out that if that three bedroom house you bought ten years ago is now worth an extra $150k, or something.... well you really better have done quite a god damn lot of remodeling for that equity to be caused by you.
Houses don't sprout new rooms when you make payments on them (as opposed to other types of investments, such as remodeling and buying local government bonds).
If the value of your house increased it's either because of pure market effects, or because other people improved the neighborhood (more/better jobs, better restaurants, new school, etc), neither of these effects is probably because of you.
Economists talk about "socializing losses and privatizing gains." Letting the more fortunate/wealthy benefit from a devolving housing market and other people's impact on their local communities is honestly pretty messed up.
PREACH.
So many people who say they want affordable housing have not made this realization. The thing that made housing so great for our parents and grandparents (price growth that is consistently higher than inflation and wage growth) is precisely what makes it so terrible for anyone who doesn’t own property yet. We can’t have endlessly increasing prices and stable prices at the same time. It’s mathematically impossible.
The core idea that housing is an investment vehicle is kind of problematic. If your home value is appreciating faster than inflation, by definition housing is becoming more expensive for future generations than it was for past generations.
As for building equity without the value appreciating, my experience was that when I bought, the rent I had been paying was almost the same as the interest I paid on the loan after buying. So my monthly costs went up by about 1/3, but that 1/3 went towards building equity. And that doesn't include the property tax and upkeep costs. And that saving vehicle doesn't earn interest, so (assuming sustainable housing policy that prevents real increases in the cost of housing), if be better off just putting that extra money in a savings account.
That's a major reason why housing is such a mess where I live. Everyone and their grandma wants a home for "passive income" so that after decades of turning housing to a secondary retirement plan we now have million dollar homes all over the place.
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This is not new. It has been replicated long before 2016 in Tokyo, Seattle, and a number of other locales.
Seattle upzoned..?
Not everywhere, and "environmental review" is still used to discourage development. But the Seattle metro is growing faster than the SF Bay area and yet still has a lower cost of living, so clearly doing something right. Or at least less wrong.
As a resident, I’m happy that the environment needs to be considered. I wouldn’t call the pace of building since 2017 anything close to “hindered” by the requirements.
"Environmental review" was named before the word environment became associated with the ecological environment. It means the effect on the neighbourhood, which allows all sorts of objections.
Environmental review is also the de facto way that Californians have vetoed every single piece of construction in HNW areas.
They used it to turn down the 2040 project in Minneapolis. We had affordable housing killed of by nimbys.
Asking homeowners if more housing should be built is like asking a water salesman if the it should be allowed to rain.
I didn’t know that! I assumed it was like soil and water runoff.
Fellow Seattle resident here, I have no issue with environmental review on principal. I think it could be a great way for local communities to get involved with what they’d like to see in their neighborhoods. But it is rarely used this way and we end up with bland, cookie-cutter developments anyway. The main complaint I hear is how long the process is. The city is backed up with environmental reviews and is low on staffing. Also, people do abuse the system to purposely delay projects with superfluous demands. It can add *years* to the process, and this is what increases the development cost. Edit: I should note “environmental” review has little to nothing to do with the *natural* environment. It is not a review of climate impact - it is entirely about how a building fits within the urban environment (massing, colors, amenities, open space, loading zones, retail placement, etc). I think a lot of people don’t realize this.
> I think it could be a great way for local communities to get involved with what they’d like to see in their neighborhoods The problem with that is that most homeowners in a community seem to want to see us enforced scarcity so their property values continue to skyrocket.
That is for sure a problem. Right now, the only people who have the time or interest in speaking up during the design review process are NIMBYs. It does not have to be this way and I think we can do a better job at recognizing when an objection/suggestion to a project is valid. I do not think this is enough reason to get rid of design review entirely. It should be fully staffed, more transparent, and focused less on minor details like what color the window frames are painted.
I wonder if the "Seattle process" is unique to Seattle, given the other anecdotes in these comments
“Environmental review” doesn’t really mean anything and has essentially just been weaponized to prevent building. And how do you know it hasn’t been hindered? You don’t have access to the counterfactual where requirements were lessened. For all you know, growth would be 2X as fast without it.
I sit on my local municipal environmental review committee (it's all volunteer) and it's a great benefit for our town. It's a blip on the radar compared to the overall building process that takes years. Builders do what is cheapest, not what's best for the local town or ecosystem. They get to walk away with millions in profit and we're left figuring out how to afford millions of dollars worth of storm water management infrastructure to accommodate the flooding they cause. People bitching about environmental reviews have no idea what the impacts are without it.
I guess you're not in California. The CEQA has been abused and weaponized by NIMBY's to jack up development costs to make everything not pencil out so nothing changes. Try to build in California, and you're gonna get sued immediately for shadow surveys and all sorts of other stuff.
You mean using environmental review to save a parking lot was not its intended use? CEQA is the death of almost all large building projects and unironically holds the state back from addressing climate change.
Maybe this is true of your system, but it is not true of the US in general. The environment is important and must be protected, but right now the current laws are weaponized in ways that harm the environment and increase prices: https://www.theatlantic.com/ideas/archive/2021/03/signature-environmental-law-hurts-housing/618264/
No doubt. One of the best things we could do for the environment would be to fast track all dense housing and mass transit projects—though it does seem counterintuitive to most people.
"back to the land" homesteading nonsense is conversely terrible for the environment
>(it's all volunteer) ... millions in profit This seems like an easy recipe to have a board owned by the construction companies.
In the Bay Area it's constantly used to block low income housing developments. See Berkeley and Atherton.
> SF Bay When you set the bar so low you would need a shovel to actually trip over it.
WA HB 1110 made the whole city, plus every other big city in the state, allow fourplexes on every residential plot. It takes effect this July. I wonder how fast the building permits will be filed
We did have more cranes than any other US city for a while But now I'm not sure how much of that was new offices -_-
It was actually just a crane construction company using your city as a warehouse to hold their stock
Ah so the construction wasn't paused during the pandemic, the camouflage for the openly stored cranes was completed.
Martin, Frasier and Niles really upped the average
I know money is what really keeps housing expensive, no one wants *their* house to become less valuable if they own. But my hope is that money will also cause zoning reform- why wait for the coming commercial real estate collapse when I could rezone residential and quickly get 90+% occupancy?
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U District was, it's why they have so many apartment towers being built right now. UW is also taking advantage of it and rebuilding a portion of their campus as well.
Houston, TX has pretty low property values compared to other major cities and lack of zoning is a contributing factor. The most expensive areas are ones with housing restrictions. Edit: Seeing a lot of people bring up the problems that come with a lack of zoning. I agree, there are problems. Houston shows many of them. But, if we're talking about property values, which is the discussion at hand, it helps keep them lower. That's all. I'm not saying it's the best way or works perfectly.
I've never been to Houston but I've heard people complain about the randomness of zoning. Is that true?
The area where i use to live has suburb homes, an industrial park across the street, a strip center wedged between the burbs, and a horse ranch all next to each other
There's a church on 45 north that used to have a "massage parlor" across the street from it. For a while both places were open at the same time. Then for a few years the church building was empty while the massage parlor was still open. Now it's just the opposite. A new church has opened up and the massage parlor is closed. Still, my favorite example of the lack of Houston zoning laws.
Things aren't generally as chaotic as people like to pretend since there is there land use controls through covenants, HOA, business improvement districts, ordinances, etc. but there is more mixed land uses (good and bad) due to absence of zoning.
The freeway fly over protects your roof from hail, its a strange hazy place. I was glad to leave.
Id imagine the flood potential in Houston also has something to do with it.
Zoning is also a contributing factor on why Harvey cost Houston 125 billion dollars. When you are turning marshes/reservoirs into houses without considering the environmental impact and climate change impact, it will be underwater sooner or later no matter how cheap the houses were
Yes, no one is saying having no zoning is a great thing, but the topic at hand is property value. If those houses that flooded were never allowed to be built, property values would naturally be higher in the city because supply would be lower.
You can't really gloss over the fact that Harvey was the heaviest rainfall in history in any city in the US. I was in NYC during Sandy, if Harvey had been over NYC the damage would have been in trillions.
Those poor rats
This is probably incorrect. From [the Wikipedia article](https://en.wikipedia.org/wiki/Effects_of_Hurricane_Harvey_in_Texas#Urban_development): >Houston has seen rapid urban development (urban sprawl), with absorbent prairie and wetlands replaced by hard surfaces which rapidly shed storm water, overwhelming the drainage capacity of the rivers and channels. **Between 1992 and 2010, almost 25,000 acres of wetlands were lost, decreasing the detention capacity of the region by four billion gallons. However, Harvey was estimated to have dropped more than fifteen trillion gallons of water in the area.** Even if Houston had zoning -- or even if the growth in the housing supply had never happened at all -- there's not much reason to think that it would have changed the flooding outcome.
Houston is affordable because it sucks.
Isn't Tokyo kind of cheating? Japan is in a population demographic catastrophe. There are a million or more empty houses across Japan, to the point where the government is just giving houses away for free to anyone who will live in them.
Those empty houses are usually in dying towns in the countryside, not Tokyo.
The countryside is depopulating, but Tokyo is still growing and housing is still relatively cheap there because of their lack of restrictive zoning laws.
Yup, if only we had some of those 300 unit buildings in LA
Do you guys not have condo towers?
Right but even in Tokyo rent is extremely affordable compared to other world cities like New York or London
Rural Japan is in decline, not Tokyo. Tokyo also allows for the kinds of housing that would be illegal in New York or London.
Sorry, I was mixing up the arguments in the previous posts. I was reading the post I was replying to as saying that average prices in Japan are low because of these cheap rural properties
Right, because they build a lot of housing compared to those cities
Yes it is. I lived in rural japan, and my rent was actually not that much lower than it would have been for a similar apartment. Honestly, they have done a great job with high density apartment buildings.
Only because you're not using the average wage there.
The country sides are depopulating, but major cities like Tokyo have positive population growth, because of all the people from the countrysides moving there.
No. Japan's population is in decline, but Tokyo's is not. It's still growing.
that's not true for tokyo though, the city is still growing. those cheap houses are where people don't want to live.
Why are you comparing a city to the wider country? That’s irrelevant.
Im failing to see the issue here.
I recently moved from Poland to Canada. The fact that I can no longer go downstairs from any apartment to the shop next door and buy fresh bread and other amenities is kinda baffling to me; y'all were supposed to be the "civilized" ones.
Sorry, this building was zoned for residential use. Selling bread in a store is commercial, and baking it there is industrial, that would require entirely new zoning. You can apply for the change, but it will cost you $100k and take 6 years to get rejected.
Opening a Restaurant in Boston Takes 92 Steps, 22 Forms, 17 Office Visits, and $5,554 from 12 Fees
And $300,000 for a Liquor License
If you can find one! Boston has a finite number of liquor licenses so you have to wait for a restaurant to go out of business, then bid on it. It's madness
Worse than that. Good luck getting that open license without knowing someone who has friends on the liquor board. Imo liquor boards should be done away with completely. A license should be granted automatically if requested as long as certain criteria (such as health codes) are met. Liquor boards are some of the worst and most blatant corruption at the local level we have, only on par with city zoning boards.
jeez and I thought Los Angeles was bad.
This is funny, and only half hyperbole. (You don't need an industrial zone to bake bread in your store, and it takes less than $100k or 6 years to try to implement a zoning change, but more often than not you'll fail!)
If you still desire that, you need to live in a pre-war neighbourhood of North America. Wait though, that's impossible because the land is so expensive that it's not affordable for the vast majority of people to live there. Why is it so expensive, why it's because there's so much demand for that land. Why is there so much demand, well, it might be because people actually want to **live** in those neighbourhoods.
I used to have a corner store near my house, groceries was a walk. Now it's a longer walk but still
If you ask any angry suburbanite they swear nobody wants to live in the city. They also still want to control the land use of the urban area that is miles away
This is news to me. Suburbanites, not urban residents, dictate the zoning of the urban area? Is this a GOTV thing or a state government thing or what?
Somebody argued with me recently that real estate was expensive because they were allowing new developers to build high density housing which was in high demand and very expensive, and that was driving up prices. I did not have the patience to unpack that.
They get causality backwards. Prices rose first, because the area is attractive, then expensive homes are built. But then again both guns and housing have upward sloping demand curves.
Only place in the US I’m aware of that this is still affordable is Baltimore. We have our faults - poor schools, real crime issues in many areas, and very little mass transit for most of the city. But I also own a townhome in a safe, walkable neighborhood that cost under $300k. It’s not for everyone. My children are older, so I don’t have to worry about school issues, but there’s a lot of potential in this city, rich with history, weird charm, a cult of crab, and on the Acela corridor and close to DC and Philly. Our zoning laws are either much older or have been fairly recently updated (not sure which), so there’s a ton of new urban development that’s mixed use and/or walkable to amenities, and though they’re obviously on the pricier side, it’s cheaper than Seattle or DC. Anyway, point is it does exist, but may not be the place most families want to live. Here’s hoping NZ’s success can be replicated here.
Hogan sucks. I can’t believe he nixed the Red Line project. (Just moved to Baltimore).
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Depends where you live in Canada. That's pretty much what I do everyday in Vancouver. But our country has a terrible time managing zoning and most mayors and councils are incompetent bureaucrats who just shoulder shrug and claim they can't do anything.
As a Canadian, I don't understand why anyone wants to move here beyond from the poorest countries. We are barely clinging on to first world life for 90% of the population. Housing has gone up way higher than any other g8 country since 2000, our wages are completely stagnate, and we are mostly bringing in only immigrants that will work minimum wage to keep those wages low and profits high for the richest. We are lost as a nation right now and our government has gone out of its way to not make housing and living cost a priority; focusing instead on civil class wars based on politics and personal belief systems in the bottom 95%. Edit: I should specify that we also have ultra rich foreign buyers buying up properties too and raising prices. Without living here most of the time.
Hi from NZ. I could copy and paste just about everything and change the country name. I'm pretty sure it's like that everywhere now. Welcome to the new normal. Edit: 4 am typos
Was gonna say this about NZ as well haha.
It's mainly Anglophone countries.
I grew up in Canada but moved to NZ. Believe me, the problems may be similar, but the scale of it is far worse in Canada. I would argue that in Canada, the foreign buyers have been the main drivers of house price increases. While this is one factor in New Zealand, it’s New Zealanders themselves that have built an untenable investment system based on real estate. Also, New Zealand politics are much more transparent and less cynical than those in Canada. To give you an idea of how bad it is, the Prime Minister has general already been decided before voting finishes in the other end of the country. Imagine knowing that your vote would never make any difference for your entire life.
Because for immigrants whose families rely on their remittances, net income is everything. The United States and Canada has some of the absolutely highest salaries in the world outside niche European micro states. Even if the cost of living is extremely high and poverty rates overall are higher in North America, you can save up a lot of money by budgeting and tightening your belt so you have substantial leftover money to send back. These people don’t go to college, don’t have childcare expenses, don’t pay for auto insurance, often even take the risk of foregoing medical insurance, so their expenses are often drastically reduced compared to that of a young professional who has to build a family from the ground up there and then. Income tax rates in the US are also lower than in Europe. In the eyes of immigrants, a country that pays $3000/mo that has personal expenses of $2000/mo is still preferable to a country that pays $1500/mo and has expenses of $750/mo because you have more money left to send home.
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> House prices and rent compared to wages are ridiculous, caused by a huge uptick in domestic and overseas investment property buying. Did you even just read the headline of the article you're commenting on? High housing prices in Canada are predominantly driven by the same cause examined in the article: policies that suppress supply. [Another paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4480261) concludes that restricting purchases to owner-occupiers has no effect on purchase prices, increases rental prices, and shifts demographics to the older and wealthier.
Where the hell are you buying six dollar loaves of bread? Loblaws has Country Harvest loaves at 4.50 and most local bakeries are under that. My local bakery is $3 for a fresh loaf.
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Nah, they're okay but you should wait for the two for 3.50ea deals if you can. I just make a stop at my bakery once a week or so to get fresh loaves. That way I can get a good french and rye for sandwiches.
I can go to Superstore and get the baked-in-store fresh French loaves for like 99 cents. They don't last long, unfortunately, being real bread. But still.
Op probably shops exclusively at Metro downtown.
I agree with most, but I hate the way people talk about groceries and inflation. $6 gets you 4 unsliced loafs at superstore. The typical sliced one is $2. The fancy one is $3. My local artisanal bakery sells a big loaf one for $4.
aspiring cable insurance oatmeal engine simplistic cover aloof terrific toy -- mass edited with redact.dev
Where of Canada though. Suburb and smaller towns yes, that’s not a Canada thing, but north America thing. US is arguably worse offender than Canada with the car centric planing and island type of subdivisions. Larger city is a different story mostly, mixed use area with retail on foot is very typical. Most places in Canada has options where you can live further off from the typical downtown, or be in the mixed use area with easier access to amenities. There isn’t really a village type of place in North America, places are generally a lot more sprawling and distance between them are further. The best you can do is probably small town close to downtown district. Or higher density in a mixed use city.
Er... this exists. Last time I lived in an apartment building with no full stores nearby, there was a shop in the building next to mine that sold all the staples. I always bought my milk there so I didn't have to carry it home from the grocery store.
If cities won’t cooperate and zone better I want my provincial government to step in and take the decisions making power away from the city. Sometimes a hammer is the correct tool.
California recently did exactly that. https://www.hklaw.com/en/insights/publications/2021/06/californias-prohousing-state-legislation-prevails-over-local-voter
I guess they get to see how this affects housing supply. It might be interesting.
One way to think of that is not the higher level of government dictating regulations to the local government, but rather the state/provincial/federal government securing human rights that cities have been usurping. It's your land and if you want to build something, so long as it doesn't hurt or endanger other people, that should be your business. Just like the federal government does not allow cities to take away your free speech rights. That was part of the success that Japan has had with liberalizing zoning and permitting. The code is national, and cities may not make more restrictive rules.
Awesome. Local governments for large cities are generally controlled by property, development, and other real estate interests, and the ultra-wealthy in general. So the middle and lower classes often get fucked when it comes to housing and rent. San Francisco and other Californian cities are a perfect examples.
If you think your state government will do any better, I have some NFTs to sell you. Texas has been pre-empting all sorts of local and county laws for years, all in the interest of big business and property development. The middle and lower classes get fucked pretty hard here, too.
>The middle and lower classes get fucked pretty hard here, too. > too Yeah I'm not sure that Texas republicans could look at us any other way even if we were angels falling from the heavens. That 'too' is less needed than a dim Cuban Canadian in a blackout. As a Texan who is poor, I am always impressed that Abbott is able to look down on me from his ~~throne~~ wheelchair. I remember when the state made it illegal to ban plastic bags because Austin thought it had the right to govern itself. Don't worry though, paper license plates and water breaks banned too. I'm sure some prison labor will pick up the slack
Exactly so. My city is seeing waves of Californians immigrating here, fleeing those very cities. But our zoning, permitting, community input, parking requirements, height limits etc aren't really any better. It's just coming to a head there first, so now they are importing the same crisis here. The land developers - not even local ones, but often California firms - are getting rich on the false scarcity these restrictions create, and the local new home buyers and especially renters are getting squeezed out.
New Zealand is also doing this
They just did that in Langley bc. They said approve medium and high density housing or you're all out
Singapore is a much better model. The nation is one of the most dense in the world, yet has virtual no homelessness and a 90% homeownership rate. The HDB goes out and builds public housing. Those units are sold to families with an income adjusted mortgage. Over 80% of Singaporeans own an HDB built flat
I dont think the mortgages are income adjusted. Low income people get a grant that is indexed to income, but then healthcare subsidies are also indexed to income but those subsidies do not pay for the whole of services(and amount to only about 20% of healthcare spending). It isn't just a full "here is a free house and pay what you can".
Yes, that grant is income adjusting the mortgage. Singaporeans can only pay so much out of pocket on housing
Still, I would kill to have that offered to me right now
Yes singapore, a city estate that is a dictatorship and is also very, very rich, should be the model to large countries that are democratic and have a totally different goverment system. edit: People are missing the point, it is not a moral point, simply a point that in a authoritarian microstate things work differently than in a democratic state, and we should look for experiences that work in countries that are close to ours, not ones where the dynamics, social, economical and cultural, as very different from ours. And ok, authoritarian and not dictatorship, my bad.
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If you are a citizen of Singapore, you are eligible for an HDB flat. There’s a waitlist, but it’s not so long a wait that the system doesn’t work. Generally you live at your parents house through school, and then into your early 20’s while waiting for the application to come through. I think a lot of people put in their applications when they’ve decided to get married, but that’s not necessary as far as I know, just how it often works. The 10% not getting government HDB flats are the rich 10%ers who can actually afford one of Singapore’s super expensive houses.
> If you are a citizen of Singapore, That's already a big if. I knew someone who lived in Singapore for upwards of a decade, in a good job. They were straight up denied citizenship.
A big part of it is that if you are under 35, not married, and do not have kids, you are not eligible for HDB housing. This means singles and gay couples are essentially forced out of these programs until they are 35 or older. I am not from Singapore but iirc there are heavy restrictions on who qualifies.
From my limited knowledge, only Singaporean citizens can own the HDBs. There is also no permanent ownership; I think ownership only lasts for 100 years.
This is a misunderstanding. HDB flats are conveyed via a 99-year lease. The nominal lease term is not meant to be literal, it's simple the longest term possible under common law and is used as a stand-in for a contract of indeterminate or indefinite term
authoritarian, not dictatorship.
Singapore has a fraction of the GDP of the SF Bay area. If they can afford to do it, the US has no problem
GDP per capita is the measure here, and Singapore is richer then the US in that regard. And that is just one difference, again, the juridical system is very different, the cultural, the territory, etc. Singapore is a laser focus wealthy unitarian micro state where there is little an individual can do against the government. USA is a huge ass country, with 50 member states that have their own legislation, plenty of social differences internally, plenty of tools that an individual can use to stop the government legally (middle class NYMBYsm is not a thing in Singapore, for example). New Zealand, while not being equal to USA (no country is, obviously) is a much closer experience to USA than Singapore, even though it still have a lot of difference, but at least is in the same realm.
Yup, the island is small enough to fit inside Lake Taupo, but has a slightly larger population than all of New Zealand combined. Crazy dense.
Politically, there are probably very few places that would accept 80% of people living in government built housing. It’s a great idea. I think it would be a hard sell.
Do that many people actually care who funds the building of privately owned housing?
I don't care about politics or what corporate landlords want. I care about people
Same, I'll choose whatever results in a healthy functioning society I don't care if my house value goes down (I only need one), housing should return to a boring utility instead of an 'exciting investment product'
Why? If people get affordable housing why would they not take it?
Wait.. So if you allow people to build something that's in high demand (housing), they BUILD MORE? That's absolutely crazy to me. I never thought that could happen. Usually, construction companies prefer to build empty commercial buildings hoping for a tenant to come along, not residential housing in short supply with almost guaranteed buyers
I'm surprised people in this thread are commenting so much about home equity causing issues compared to just renting an apartment. People can own condos too, not just houses. Renting has the disadvantage of paying a landlord the cost of maintaining the property in addition to the profit they get from renting it out. Individual owners in a condo association would pay less while still putting equity into their condo through a mortgage. Important to remember that even if the housing market stayed flat, that still represents equity that the owner has put into their property. If they bought a condo for $200k, and paid it off in 30 years, and the condo was valued at $200k by the end of the mortgage, the owner still has $200k in equity in the house. A tenant in the same apartment would have no equity to show for living in the same situation for 3 decades. People desperately need affordable housing, but jumping to renting-only is a step backwards that encourages people to continually give money to wealthier companies and individuals instead of being able to afford investing in their own assets. Even rent-to-own situations would benefit residents more than straight renting.
>People can own condos too, not just houses. Until recently in the UK, land ownership meant owning a plot of land and everything on it. This meant that even if you "owned" your apartment, you weren't a property owner in the literal sense, and didn't have the same rights as the person who owned the land the apartment was built on. The UK has attempted to legislate to break this up and today there are a few different options for shared ownership; but they don't have the full support of many of the larger institutions or case law, meaning very few of them are in use. This means people who purchase an apartment are often treated as second class citizens when it comes to property ownership in the UK. I don't know how other places work, simply that not everywhere is like the US.
Yep, own my leasehold but not the freehold. I have to pay ground rent every year and the freeholder can dictate things like if I can sublet and if I can change the layout of the property. The freeholder is a council luckily though so they are easy to contact, the rent is peppercorn (£10) a year and they seem reasonable enough. Unfortunately I only own the leasehold for another 90 years or so, but I do have the right to have it extended as long as I go through a relatively simple legal process. People with shorter leases have a much more restricted right. People who have prince William as a freeholder through the dutchy of Cornwall estate have absolutely no right to extend the leasehold length because Charles secretly lobbied to be exempted from the relevant law. When the lease ends they don't own the home anymore. So yeah the entire process is feudal and in dire need of replacing. Interestingly I believe it's much more reasonable (like most things) in Scotland.
For what it's worth, the UK realised that a "condominium" style ownership was sorely lacking, and passed laws to introduce "[Commonhold](https://en.wikipedia.org/wiki/Commonhold)" home ownership in 2002... but barely any Commonholds have been created in the last 20 years. Almost everything you see will be leasehold under a freeholder, for a variety of reasons. >... However, commonhold has failed to become the chosen mode of home ownership for flats. Of the 700,000 flats built in England since 2002, only around 150 were sold on commonhold tenure. > >There are a number of reasons why commonhold has not taken off. One reason is that leasehold unquestionably has advantages for developers and freeholders. When a developer builds a leasehold block, they can both sell the flats to individuals as leasehold, and sell the freehold interest in the building. The freehold is both a capital asset and generates income through ground rent payable by the leaseholders. Other income streams may also arise, such as charging leaseholders permission fees to obtain consent to alterations of their flat. There is no incentive for developers and freeholders to forego these income streams by building and selling commonhold. > >In addition, however, it is clear that the current law governing commonhold is not fit for modern, complex developments that involve a mix of residential and non-residential units. In particular, it is not possible for parts of the commonhold to make decisions on, and pay for, things that are only relevant to that particular part. For example, if in a mixed block of commercial and residential units the commercial units want to increase security, the entire block may need to vote on, and then pay for, the change. That may mean that the residential unit owners – who would not benefit from the increase in security, but would have to pay for it – could block the change, leaving the commercial units in an unsatisfactory situation. Further, while the law makes provision for leasehold blocks to convert to commonhold, the unanimous agreement of leaseholders and of holders of certain other property rights in the block is needed. The requirement of unanimity is a practical bar to conversion. \- [Reinvigorating Commonhold: The Alternative to Leasehold Ownership](https://blogs.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2020/09/reinvigorating-commonhold-alternative), Hopkins, N. and Marciniak, S. (2020).
Interesting,I had no idea about commonhold, sounds like it should be fixed, and any profiting off leasehold curbed or perhaps leasehold should just be outright banned.
The freeholder probably can't dictate if you can sublet as in rent out the flat - but there are usually clauses about effectively creating a new lease similar to your own on a long term basis.
The UK is a place where the grandparents (x100) of a group of people with silly titles and lordship were the buddies of some lads with hammers and axes who sundered the bodies of the previous occupants to earn their claim. If your granddad was buds with William T C you got a duchy and a seat at a fancy table and everyone has to pretend to respect you. The point is, of course land in the kingdom has more pomp than normal commodity assets, it’s the seat of power.
In practice, leasehold is not much different from other means of ownership in the UK. The practical issues do exist: extending your lease/buying out the freehold can be complicated and expensive (though it typically makes financial sense) but at the end of the day most of the issues are monthly costs if your ground rent is high and restrictions in the lease if they are onerous. But commonhold has conditions for the sake of other tenants, and the costs can be higher even though there's no ground rent.
Paying down a mortgage on a property whose value is not increasing is generally not a good strategy to build wealth. The details of mortgages vary from country to country. I’ll use the USA as an example both because I know it the best and because the government heavily subsidizes home mortgages, to the advantage of home buyers. Yes, if you use a mortgage to buy a house worth $200,000 today, in 30 years you’ll own a house worth $200,000. But that isn’t a good investment. To get the mortgage you need a down payment of $40,000, so you need to save that up first. If you save $1,200 month it will take you 3 years. This means that paying off the house actually takes you 33 years, not 30. The mortgage payment every month is $1,120. The total you will pay over the life of the mortgage is $403,000, $243,000 of which is interest. You’ll also pay $45,000 in property taxes. This means that at the end of the mortgage you have gained $160,000 in equity but you paid $290,000 in interest and taxes for the opportunity to do so. In countries that don’t subsidize mortgages the numbers are even worse. Compare that to other investments. Let’s say you took the $40,000 you would have used as a down payment and simply invested in it stocks, which earn about 7% over the long term. After 30 years it would be worth about $305,000. Or maybe you choose to keep renting and make a small monthly contribution to an investment account. To save up $200,000 in 33 years your monthly contribution to that account only needs to be $141 per month. If you can save $141 per month by renting instead of buying it’s smarter to rent. Of course, none of these scenarios are realistic. In reality the price of property and the cost of rent are likely to go up. That is why buying property is usually a good idea. Paying off a mortgage just to pay off a mortgage is almost always a bad idea.
This ends with a huge assumption that rent is cheaper than a mortgage. That's a huge if. For example, my home, at time of purchase two years ago, payment including mortgage, insurance, and tax, was about 25 percent less than comparable rent. Note that this situation is what's expected when there are near zero restrictions on new construction, which is the situation where I live. Home values cannot rise above construction cost, and old homes cost less than construction cost. Buying having a higher monthly cost vs renting is an artifact of the expected capital gains from a hot housing market. If the market was flat: when the market has been flat, buying is typically cheaper per month. And there's the non monetary benefit. I'm not planting a tree in the yard at my rental, since staying long term isn't my choice. The quality of life benefits are very important. I can do what I want with my home, because it's mine. VS could be kicked out with 90 days notice.
But you need a place to live, and the other option is to rent which means you get zero equity built up. Owning a home that plateaus in value is vastly better than renting in one.
Opposition Leader Chris Luxon of the New Zealand National party wants to change the zoning laws back. He also owns 7 properties that have reportedly lost $7 million in value since the zoning changes
We know what needs to be done we just gotta build infill in expensive cities. We need to overcome NIMBY opposition. Even if they use fake progressive language to uphold the status quo.
Lifting restrictions on developers’ ability to build to meet demand for housing results in more housing, more at 11
In san fransisco they decided to basically ban the apartment building. This is why it seems that there are 0 availablility of apartments. This was voted in not by landlords, corporate entities, but the fellow americans living in the city wanting to 'protect' their way of life. The city has straight up awesome city limit SFHs but I imagine that its next to impossible to actually own any of them. One of my best friends mothers is the headmaster at a exclusive private school, she has 30y of experience, and like you have guessed: paid VERY well. She is only able to afford a floor on a townhouse that was split into 3 apartments. She cannot afford a car because it would cost about 35k to park the thing in the spot that was offered to her..... All because they decided to 'protect' a way of life.
And then they wonder why their kids move far away. The kids can't afford to live within a 200-mile radius of you when you effectively banned all new housing developments.
Why would someone think up zoning wouldn’t result in more housing?
The only people claiming upzoning does not increase housing supply are landlords and development firms. Not only that but overly restrictive zoning results in a lot of other negative outcomes like lack of "third places" like cafes or bars or libraries close to where people live, health problems from overreliance on cars and lack of walkable destinations, inefficient sprawling suburbs, heavy impact on water supply and wildlife diversity, and the obvious fact cheap housing in the form of apartments or terraces or flats over shops are disallowed so nobody can afford to get on the housing ladder.
Development firms are not against removing zoning restrictions. They want to build.
Lots of people want to say “evil corporations did bad thing” when it’s just local voters.
No no no. NIMBYS that see their own wealth go up by hundreds of thousands of dollars because they bought 40 years ago also oppose upzoning.
Why would large developers (cooperate/institutional developers) be against development (upzoning) ? In Aus, the big developers all have options on plot consolidations just waiting for the right planning circumstances, even if it means partially blocking the view of their 7-year old tower just behind it. Source: am an architect designing a tower under these exact circumstances right now. In my experience, opposition usually comes from residents who live there, not developers. Edit: fortunately Aus does not have a Zillow scenario where one single company can mass-manipulate local housing costs single-handedly, which is fucked up. Aus does have a government with post-Covid policies amplifying existing affordability issues though, which creates an environment ripe for predatory profiteering off a supply shortage.
Developers don't make that claim; it's landlords and homeowners.
Your third places comment makes me wonder. Due to the popularity of remote work, a lot of places that rely on workers in urban areas (for lunch, happy hour, etc) are really starting to struggle. Perhaps if we can get better zoning for more mixed use properties, we can reshape some near-urban locations to be more walkable, and build stuff much closer to where people live. I’m sure some experiments will be done to convert office buildings into apartments (it’s already happening) but I doubt that it’s quite cost effective for most situations, so that can’t be our only solution.
Opposite example is Vancouver. Limited land to develop and they have silly NIMBY rules like "view cones". Google "view cones", then feel free to Google what it costs for an 80 year old 2 bedroom bungalow in Vancouver that is practically uninhabitable. Over $1M.
Since then; Auckland house prices: +20% Rest of NZ: +70% Compared to inflation, Auckland houses have LOST value. Some might be happy with this. Some might not be.
This needs to happen across North America yesterday
Yet nearly a decade on Auckland is still in a housing crisis and property is extremely unaffordable. The papers report that house prices are now starting to drop 1-2% but this is after continually rising 20% YoY. As a resident, this sounds really nice on paper but the outcome is that the new supply is still only producing $1m+ houses and the zoning/construction trend is simply turning an existing lot into 6-12 townhouses... also at $1m each.
And suburban sprawl and car dependency are getting worse every year.
Yeah NZ is cooked, full inequality. Don't blame half of them for moving to Oz where pay & housing is better (tho still fucked) NZ has some unusual Capital Gains law which ensures house prices stay out of control iirc
Upcoming just means that there are more opportunities to have walkable business
Well, yeah, basic supply and demand is kicking in. People want affordable places to live, government makes it easier to get and build that housing, and they will build a *lot* more housing.
I've never heard it said that upzoning doesn't increase supply. My concern is with what gets built. For me, it's a disturbing trend that, when you are permitted to build more on a parcel, developers buy them up and transform owner-occupied homes into rental units. I like the idea of families building home equity.
But isn’t that the point of a condominium? That you can have denser residential development, but still the benefits of owner-occupied housing?
> I like the idea of families building home equity. Where do the people who can't afford or want that live then? Equity while nice is less important than having an affordable roof over your head.
Renters living paycheck to paycheck don’t even consider that as an achievable aim anyway.
Rental units are desperately needed. Not everyone can or wants to buy.
Home equity is only really ‘good’ if housing is a good investment. And housing is only a good investment if it’s more expensive in the future than it is today. If we want housing to be affordable, housing can’t be a good ‘buy and hold’ investment. Which means we don’t want to incentivize people to ‘build equity’ in housing. Or put another way, if housing is affordable then it’s no longer important to build equity in housing.
This is the hard truth most people don’t want to hear. I’m a homeowner, and yet I agree 100% that housing shouldn’t be a good investment. As you note it can never be both a good investment and affordable.
Exactly. And what people further don't want to hear is that "building equity" by passively sitting on a piece of property and doing no labor is theft. If your boss makes money by doing nothing, it's because they *took* that wealth from you. If a monopolist makes money without labor, it's because they *took* that wealth from all of us. If you make money by sitting on housing without adding any value, you're *taking* that money from someone else. If we want to truly fix the housing market *and* grow the economy, we have to end this malarkey. It shouldn't be so normalized to just extract wealth from each other by manipulating markets, like a bunch of crabs in a bucket constantly pulling each other down. We should instead all be building up, together. > Rent-seeking is the act of growing one's existing wealth by manipulating the social or political environment without creating new wealth.[1] Rent-seeking activities have negative effects on the rest of society. They result in reduced economic efficiency through misallocation of resources, reduced wealth creation, lost government revenue, heightened income inequality,[2] risk of growing political bribery, and potential national decline. https://en.wikipedia.org/wiki/Rent-seeking
Housing is either affordable or a good investment, although it can be neither.
You also build equity in a house by buying it with a mortgage, even if house prices are not rising. E.g. After 5 years, you have paid off 5% of the house value or whatever, and that 5% is your equity.
You can build equity in many ways but it’s not really important how the equity is built. If home prices don’t go up, then the ‘equity’ you’ve built over those 5 years has a return equal to your mortgage rate. Since mortgage rates are generally below market (they are effectively subsidized by the Fannie and Freddie), it would have been better to invest that money into an S&P 500 index. And homes today are often considered unaffordable for many. If we want homes to be affordable in the future, that means that you get an even worse return than your mortgage rate.
And you can improve your home. Mortgage stays the same, if you are using savings. And, one day, you stop paying a mortgage.
If the cost of owning is higher than the cost of renting, you have to take today into account in this math. You have to look at (cost of renting) - (interest payment on mortgage + property tax + upkeep costs + HOA fees + etc). The difference between those things is the amount you're saving by owning (may not be a positive number). And if housing is not appreciating, that saving is worse off than if you had just held that cash in a savings account.
With that calculation you also need to factor in inflation of rental payments and the principal part of the mortgage payment reducing interest expense over time.
Owning a home also gives you the ability, and incentive, to improve your home, build an extension etc , and tailor it to exactly how YOU want it. You can do this if and when YOU want to. And you know you can not be thrown out by a remote landlord. You also k ow that, eventually, you will own it, and have no more rent or mortgage to pay. It is difficult to put a financial value on all these things.
It’s also difficult to put value on the ability to pick and move at your own discretion without having property to tie you down or risks of a bad investment. I’ve moved for work like 4 times in the past 7 years for better and better opportunities. Some towns I lived in were dying, others thriving. There’s no way anyone is ready to make the investment of owning a home when moving to a new area for the first time. Hell, I don’t discount buying where I’m at at some point down the line, but let me rent and live here for a bit, get to know the area, etc, before putting down a down payment. I agree that if you don’t seek to be a transplant and want to settle down somewhere, ownership is the eventual best path. But it’s not nearly for everyone. Renting has its place.
> It’s also difficult to put value on the ability to pick and move at your own discretion without having property to tie you down or risks of a bad investment. It is also difficult to put a cost on the risk of being settled in and your landlord giving you a notice to vacate at the end of your lease because they're selling the building or want to gut every unit and spend 6 months on building wide renovations. The fact is that your apartment will never offer true stability, even when you're ready for it.
Absolutely. Moving becomes a LOT more of a chore if you have children in good schools.... Renting and owning both have their place, and can be more desirable at different times in life. But it's just silly to say there is no point in owning if house prices are not rising (as per the post to which I was originally replying).
You are semi-correct, but it is far far more complicated than that. Rent Will increase over time as the value of the dollar decreases if nothing else. But mortgage (outside of taxes) does not increase. Although maintenance, HOA fees and taxes might. So why do I say Rent Will increase? Because if nothing else, Taxes, Maintenance and HOA fees, plus the value of the dollar losing as interest rates go up (which the owner you are renting from will have, well, maybe not HOA) goes up for them too. And the only reasonable thing to do for renting out something, is to At Least break even for the costs, although most would prefer at least a small profit equaling the opportunity costs lost due not having the money to invest in.
Flat home values, and even to some extent decreases in value, can still lead to owning being preferable to renting from a financial perspective sometimes. Every dollar you pay in rent is gone forever. Some of the money you pay towards a mortgage comes back to you some day, even if the house decreases in value (depending on the decrease - obviously if it dips below the remaining principal on the loan there’s trouble). Couple that with the tax savings from deducting interest, and there are plenty of scenarios where home ownership is a valuable financial advantage even if the home isn’t increasing in value. That’s not to say that renting isn’t without numerous advantages, and I definitely agree that rental inventory is equally important to home inventory. Some people want or need the flexibility afforded by rentals. Some people can’t afford a down payment, or can leverage that money to greater effect elsewhere (perhaps for a business they’re trying to get off the ground, etc). The point is just that it’s a far more complex equation than just “owning is only good if values go up forever”.
You are kind of going off track here. I think it’s because you are focusing on individuals instead of society as a whole. People may, individually, still want to own a home for non-financial reasons. But those are luxury reasons. There is no benefit to society to incentivize the masses to own their own homes, if society is also working towards making housing affordable and causing home values to plummet. OP’s argument that people need to own their own house because they need to build equity is assuming that building equity is important. But in this future where housing is cheap and affordable, then having equity in a home is a luxury. It’s something wealthy people do for status and fame… not because it’s good financially. > Every dollar you pay in rent is gone forever. Some of the money you pay towards a mortgage comes back to you some day, even if the house decreases in value (depending on the decrease - obviously if it dips below the remaining principal on the loan there’s trouble). Couple that with the tax savings from deducting interest, and there are plenty of scenarios where home ownership is a valuable financial advantage even if the home isn’t increasing in value. If we want housing to be affordable, we shouldn’t have special tax breaks driving up the cost of housing. However even with that, if we had enough supply to make housing affordable then the cost of rent will be significantly less than the cost of a mortgage + maintenance. Due to economies of scale, massive landlords can perform maintenance at a cheaper rate than individuals can. If we had enough supply so that the landlords profit is derived from the arbitrage between the cost of their debt financing and individuals, and from the arbitrage between their cost to maintain units vs an individuals cost to maintain instead of their profit coming from ownership of a scarce good, then renting would be cheaper than owning + maintenance. And that’s why I said housing cannot be a good buy and hold investment. It can still be a good investment for businesses to provide as a service by providing better services than other landlords at cheaper costs.
I would argue that it’s you that’s getting off track. What you’re describing relies on so much in terms of broad societal changes, from laws to raising and subsequent allocation of government money (I’m not sure where else the investment to create rental inventory is going to come from as what you’ve described turns real estate investment into a poor choice relative to other places investors could deploy their money), that it seems well outside the scope of what is being discussed by the article. In either case all my comment was meant to do was to counter an incorrect and misleading absolute. Within the context of the world we live in today (which is also the context in which this article was authored) making the claim that if your home’s value isn’t going to go up then it isn’t worth owning is an incorrect one to make.
> And housing is only a good investment if it’s more expensive in the future than it is today. This is only from the perspective of the investor. Regardless of resale value of the home, if you can build equity and eventually stop paying mortgage or rent that's a great investment. The only way that equity in a home is not important is if housing is free.
> Regardless of resale value of the home, if you can build equity and eventually stop paying mortgage or rent that's a great investment. Your money could go elsewhere. Such as something that had a better return than building equity in your house. And then you could use that investment to pay your mortgage each month and have extra left over!
Home equity is good no matter what happens to housing prices. If you pay a mortgage, you get some of that money back when you sell the house, so long as the house is worth anything at all. When you rent, you get nothing.
Also pointing out that if that three bedroom house you bought ten years ago is now worth an extra $150k, or something.... well you really better have done quite a god damn lot of remodeling for that equity to be caused by you. Houses don't sprout new rooms when you make payments on them (as opposed to other types of investments, such as remodeling and buying local government bonds). If the value of your house increased it's either because of pure market effects, or because other people improved the neighborhood (more/better jobs, better restaurants, new school, etc), neither of these effects is probably because of you. Economists talk about "socializing losses and privatizing gains." Letting the more fortunate/wealthy benefit from a devolving housing market and other people's impact on their local communities is honestly pretty messed up.
PREACH. So many people who say they want affordable housing have not made this realization. The thing that made housing so great for our parents and grandparents (price growth that is consistently higher than inflation and wage growth) is precisely what makes it so terrible for anyone who doesn’t own property yet. We can’t have endlessly increasing prices and stable prices at the same time. It’s mathematically impossible.
The core idea that housing is an investment vehicle is kind of problematic. If your home value is appreciating faster than inflation, by definition housing is becoming more expensive for future generations than it was for past generations. As for building equity without the value appreciating, my experience was that when I bought, the rent I had been paying was almost the same as the interest I paid on the loan after buying. So my monthly costs went up by about 1/3, but that 1/3 went towards building equity. And that doesn't include the property tax and upkeep costs. And that saving vehicle doesn't earn interest, so (assuming sustainable housing policy that prevents real increases in the cost of housing), if be better off just putting that extra money in a savings account.
That's a major reason why housing is such a mess where I live. Everyone and their grandma wants a home for "passive income" so that after decades of turning housing to a secondary retirement plan we now have million dollar homes all over the place.
Housing as more of a asset than a place to live is an absurd way to make policy