alt Hacker NewsMaybe other real estate savvy people can help me understand this plus two other things I'm confused about in the housing crisis:
1. Houses are unaffordable for many Americans. To get houses to prices where they'd be affordable again would require a housing prices drop that would likely be, market-wide, significantly low enough to put a ton of people underwater on their mortgages. What is society/the government meant to do about that? Is it an insurmountable floor on how low we can get housing prices? That floor feels very close if so.
2. We've been promising the last five generations (or more) of Americans that a house is an Investment, capital I, an excellent place to keep your money. How do we overcome the political pressure to turn a house into a depreciating investment for the length of time required to get housing to be affordable again? What kind of politician would put their neck on the line to piss off every boomer and 75% of gen X and 30% of millennials, or whatever the house ownership distribution is?
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#1 is the symptom, #2 is the problem.
High levels of home ownership combined with "local control" and "democracy" enables the "haves" who already own homes to weaponize government to keep supply low and home values high. Zoning restrictions, building codes, taxes, and other government tools are brought to bear to support this. The "have nots" don't have a chance.
Austin seems to be a counter-example when they "instituted an array of policy reforms" in 2015 that showed great results. Sadly the key may be appealing to the greed of existing homeowners. Changing zoning to allow tall apartment buildings where single family dwellings once stood lets existing home owners make even more money by selling than they'd make by continuing to restrict supply. While it's sad if that's the only path to success, we'll have to take small successes where we can find them.
I'd also rethink these questions under the assumption that incomes rise over time as the dollar reduces in purchasing power. The original premise was that due to inflation the cost you paid for a home would reduce your economic burden for housing. The slow and steady rise of inflation along with income would guarantee your loan to income ratio would improve.
The last few years have distorted this promise and I think some people have taken a more extreme view of the time window in the name of increased short-term profits.
All said the price you pay today being less of a burden over time was never meant to be a short-term profit motive in the discussion of homes as a economic safe haven.
There's a big difference between land prices and the building prices. When costs rise 5% per year for a house that's untouched, that's almost entirely the land price going up.
You can make housing cheaper by putting more houses on the same amount of land. In high cost areas, the price of land dominates the cost of housing.
Political pressure to change the investment nature of housing can come from various directions, for example establishing a land value tax, which eliminates the financial incentive to speculate on rising land prices by keeping people out of your area, redistributes all those unearned land rents to the population equally, as is only fair, and also results in a lot of people selling land to be redeveloped taht are otherwise hoarding it when the rest of society would be using it a lot better. Of course, in societies with high levels of land ownership, the voting public usually tries to vote away such extremely fair taxes.
Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.