There’s more campaign talk about housing. The talk of needing more housing is highly welcome, as one prominent person after another (including Jerome Powell!) talking like a YIMBY.
A lot of the concrete proposals are of course terrible, but not all of them. I’ll start off covering all that along with everyone’s favorite awful policy, which is rent control, then the other proposals. Then I’ll cover other general happenings.
Matt Yglesias reminds us rent control is not the answer, unless the question is how to destroy the housing stock of a city without resorting to aerial bombing. He also reminds us that Biden’s actual rent control proposal is in and of itself a nothingburger, but the act of proposing or enacting it carries expectations issues.
Matt Yglesias: The tired, old, neoliberal conventional wisdom is that rent control is a bad idea but if you delve into the most up-to-date research on the subject you’ll see that … yeah, it’s still a bad idea.
Iron Economist: The funny thing about rent control advocates is that their argument that it’s different this time always boils down to a version of ‘rent control can’t hurt supply because we already made supply illegal’ and it’s like yes, you have identified the problem there.
…
Unmanaged Reality (being unusually honest about the alternative perspective): yes, the problem is population growth well done!
Oh, it’s worse.
Rent control does not only impact future building, where if you already made all future building irreversibly illegal then I suppose you can’t do any more damage.
It also impacts the current supply.
What, you say? How could that be? Several ways.
Rent control directly means landlords will not maintain the current housing stock. It will be allowed to decay, or be actively sabotaged, eventually abandoned. Why invest if the price will remain fixed no matter what?
Rent control means that you withdraw housing from the rental market every chance you can get. If you rent out the property, you have effectively sold it. How do you think people are going to react to that?
Rent control begets more rent control. Landlords rightfully presume that they should anticipate further restrictions and unreasonable rules, so even if they are not directly impacted, why put yourself into such a position?
Remember your functional decision theory. If you choose to be the type of person or government that imposes rent control because the buildings already exist, then that is correlated with a lot of things. One of those things is the past decisions of people deciding whether to build on the basis of what government might do in the future.
That generalizes beyond housing. If we establish we are willing to confiscate private property retroactively because we feel like it, people will notice. And indeed, people likely have also already noticed in the past, and are adjusting.
It would be a world of hurt on renters if there was a common expectation of a high chance of future meaningful rent controls being imposed.
Jay Martin: Today, I discovered that some actual human adults believe:
The majority of a rent check is profit to a building owner.
That you can renovate an apartment after 42 years in NYC for a few thousand dollars.
That an apartment in a 98 year old building, lived in for 4 decades, doesn’t need to be renovated if it’s “taken care of.”
That rent laws implemented in 2019 enacting vacancy control should have been anticipated by any “savvy businessperson” who owned their property before the law was changed.
That all property owners get a tax break for providing rent stabilized housing so it evens out.
That an owner can always “just sell” a building that losses money every month. ( big pool of buyers for people who like to lose money apparently)
0 of these things are true.
Mike Solana: Partly the problem of rent in most of our cities is subsidized housing (enormous fraction of supply gifted to a lucky few, either randomly or for political connections), partly we can’t build, partly we can’t rent. but one hundred percent of the problem is our government.
Several of these claims are rather absurd, but yes, this does help explain public support for rent control. Hallucinations all over the place.
The government still is not entirely responsible. Even the properly built versions of NYC and SF and so on would be rather expensive. Not anything like today, but living where the action is would remain valuable.
Cagan Koc and Sarah Jacob (Bloomberg): How Rent Controls Are Deepening the Dutch Housing Crisis: A law designed to make homes more affordable ended up aggravating an apartment shortage.
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Moraal is among the growing number of Dutch people struggling to find a rental property after a new law designed to make homes more affordable ended up aggravating a housing shortage. Aiming to protect low-income tenants, the government in July imposed rent controls on thousands of homes, introducing a system of rating properties based on factors such as condition, size and energy efficiency. The Affordable Rent Act introduced rent controls on 300,000 units, moving them out of the unregulated market.
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The government, in office since July, has no plans to change the legislation, which had been championed by the previous cabinet.
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One provision of the law bars short-term leases, instead requiring all contracts to be open-ended.
De Starter: The law applies to new contracts. Simply untrue the person would have to move out due to that. Lobbyists crying for attention of the new government.
From the post, what is happening is that because no new contracts can be signed that do not effectively sign over the property permanently at a well below-market cost, landlords are withdrawing properties from the rental market en masse, and selling them instead.
A proposal to coin the term Rangel effect, for when people like second longest serving member of the house Charlie Rangel end up with multiple rent controlled apartments.
The UK may soon be effectively bringing back rent control, in case you were worried they hadn’t sufficiently destroyed their housing stock. It is rather amazing that rental markets function at all when the renter kind of gets a permanent option to keep your property.
Despite everything, rent control remains absurdly popular. Increasingly, as I understand how the public thinks about economics, it is remarkable how we even get to have a civilization at all.
Kamala Harris: We need to build more housing in America.
We will cut the red tape and work with the private sector to build 3 million new homes, and we’ll provide first-time homebuyers $25,000 in down payment assistance so they can get their foot in the door.
The plan is a mix of things. The headline proposals like the $25k are not great. If you dig into proposals and details, there’s other things that are a lot better.
Harris is talking the talk on the stump, also for some reason on a podcast called Call Her Daddy. She’s being clear that what we have is a shortage of housing. She’s talking about the need to ‘build more housing.’ Three million new homes. Not ‘affordable’ housing (although she says ‘for the middle class’). Housing. She’s talking about cutting red tape, including local red tape.
There’s also Obama’s now-famous YIMBY endorsement, which is quite good, although if I never hear the preamble used (‘we can’t rely on ideas of the past’ etc) that would be awesome.
Barack Obama (at the convention): If we want to make it easier for young people to buy a home, we have to build more units. And clear out some of the outdated laws and regulations that make it harder to build homes for working people in this country, and she’s put out a bold new plan to do just that.
Yes, the headline actions proposing imposing ‘temporary’ rent controls are terrible, and the proposals to subsidize demand via handing out public funds to homebuyers are if anything even stupider than they sound, but they also have some other ideas.
They are spending $100 million in grants to help overcome barriers to building affordable housing. As always the better plan is simply build more housing, and if desired also doing redistribution in more efficient ways, but if this is how we remove barriers to building housing, then it is helpful.
Providing interest rate predictability for federal financing makes a lot of sense. Uncertainty is a killer, so you’d rather charge slightly more as a base while providing insurance against higher rates. Thumbs up.
Accelerating historic preservation reviews for federal housing projects also seems obviously good. The details seem like obvious common sense, in a ‘how is this even necessary’ kind of way, even if you are high on the need for historical preservation.
Offering another $250 million in Section 108 loan guarantees for retooling and complementary infrastructure (e.g. water and sewer pipes). Small, but sure, why not.
Enable more housing types to be built under HUD code, in particular manufactured homes, which as noted can offer big cost savings. We need to talk with Fannie and Freddie about how they handle manufactured housing, that would go a long way. Why do we actively prevent homes from being manufactured, when that is obviously the way the future was supposed to go in baseline situations?
As Alex Armlovich notes, the spending elsewhere doesn’t much matter, that’s more vibe markers, but changing HUD codes like this could be a really big positive deal.
Expediting housing permitting, again you’d have had me at expediting permitting, and mostly had me at expediting.
The central theme is ‘we cannot talk about building more housing, only more affordable housing’ despite the fact that what makes housing affordable is not ‘we set aside some of it to have an artificially low price and be allocated by favoritism’ but rather ‘build enough housing to force down market prices.’ The good news is a lot of this should indeed spill over into more housing in general.
As noted above, many announced Harris campaign plans are less great. You’ve got the terrible $25k down payment subsidy plus $10k tax credit. You’ve got banning algorithmic pricing because people have it in their heads that this is some sort of conspiracy to raise prices. Would I accept both of those to get 3 million new homes constructed as well via good policies? If the good policies actually happened and worked, and the housing was where people want to live, then yes. It’s hard to tell what to take seriously or literally, when such economic illiteracy is being spouted everywhere, by both sides.
Let’s say the price rises by $35k, since everyone is either collecting the $35k subsidy or selling their own home for an additional $35k when they buy a new one.
So the initial wealth effect is a flat $35k to everyone who owns a home and everyone who has never owned a home, on a per-household basis.
Homeowners and home buyers get richer, those who still can’t afford to buy, or who bought previously and then sold to rent again, get poorer. Not great.
This is on a per-household basis, so the bigger your household the worse off you are. Discourages marriage until you’ve both used your credits, effectively taxes kids, and so on. Not great.
It is a flat size transfer, so it is progressive redistribution in that sense, if a highly inefficient way of doing that.
So no, I don’t think that works at all. It’s not a good version of this.
If I had to make a case for it, I would make this case instead:
The main barrier to buying your first home is often the down payment.
The down payment has to be a fixed percentage of the value of the house, to ensure you do not walk away too easily, you have skin in the game.
By letting you stake your $35k subsidy, you can far more easily get a down payment that lets you buy, or lets you get a lower interest rate.
The net money it costs to buy stays the same otherwise, but that’s fine.
I mean, I guess, a little, maybe? The government pays so that the payment can be staked back to the government so the government can (through a bank) issue you the subsidized mortgage to buy the house, and you have something to lose.
That also raises the danger that this tempts people to buy a house they cannot afford. If you use the $35k to buy a house you could not have otherwise bought, and then you can’t pay your mortgage and you lose the house, you are completely screwed. Your $35k credit is used up permanently, and all houses cost an extra $35k.
On Harris’s headline housing plan of national rent caps, what fascinates me is not that all the economists say it is terrible – so far so obvious – but that so many do not ‘strongly’ say so. Economists really do have too many arms.
Trump has gone full NIMBY regarding hallucinated plans to ‘destroy the suburbs,’ similar to how Project 2025 says localities must have final say in zoning laws and regulations, and a conservative Administration should oppose any efforts to weaken single-family zoning. Which is one of the low-key most destructive ‘normal’ policies available.
Donald Trump: Almost one-third of the landmass of the United States is owned by the federal government, with just a very, very small portion of that land… we should hold a contest to charter up to ten new cities and award them to the best proposals for development. In other words, we’ll actually build new cities in our country again.
Yes, this is indeed a great idea. We should do that. If we do it at sufficient scale, and think truly big, then that can make up for quite a lot. You’d have to put in a lot of effort on many levels to make it impactful rather than a marginal win, but we should do that too.
Elizabeth Warren: You ever wonder how your grandparents bought a home for 7 raspberries, but you can’t afford a one bedroom apartment? It’s not you.
We’re facing a national housing shortage. The government needs to tackle this crisis head on.
Arthur B: Very much a “stopped clock” type of situation, but yep, there is a housing shortage and a bill to reduce land use restrictions is a good thing. It’s both funny and sad to see the knee jerk fuming in the replies when, for once, Warren gets the economics right and proposes deregulation…
Only on one policy would she dare give us the rasberry.
Obviously, they want their particular home to go up in price (if they own it), but they want lower prices everywhere else. Let’s do this.
Noah Smith sees it differently, that homes are both a consumption good and an asset class, and we need to finely balance the need for high prices with the need for low prices. We thus need what one might call a goldilocks housing market (not his term).
I do see that prices crashing too low too fast might in theory cause real issues, but mostly I think this is a confusion of prices and paper wealth with actual wealth. You will always need a place to live. If all home prices go up, yes you are ‘wealthier’ but if you sell then you need to buy or at least pay rent going forward. And it is more common to want to step up to a bigger house, than step down to a smaller one.
Most people are either short housing because they rent, are short housing because they want to upgrade, or are about flat housing. Only a handful who have active real estate investments, or are looking to step down in order to retire or to go into elder care, are in any real sense long. Yes, you can borrow against the house, but that’s liquidity not solvency, and mostly gets people into trouble.
People mostly understand that. They’ll fight for higher local house prices, but not higher house prices overall. So you can have a grand bargain if you act big.
I say no, this is a civilizational skill issue, as in NIMBY, full stop. The outflow is a mechanical result of there not being sufficient houses where people want to live. If the cities worth living in, like NYC and SF but also other majors, had more housing, people would move to that housing. They can’t build them, so people bid up housing and price people out. Simple story.
Tyler similarly speaks of the surplus from cars, and yes most people get large surplus from their car, of course they do, but exactly because they lack alternatives. They are priced out of places cars are unneeded and we don’t supply mass transit. If you can’t go anywhere without a car, because the suburb was designed that way, you need a car.
Your periodic reminder that our most beloved neighborhoods would mostly be illegal under modern zoning rules, and that the rules are typically arbitrary, destructive and stupid. Meanwhile we have ‘historic preservation’ as a priority, and not only for a handful of iconic buildings were it makes at least some sense.
Cary Westerbeck: I deal with “non-conforming” structures frequently. The irony is the non-conforming areas of our city and n’hoods are usually the most BELOVED! “Conforming” means adhering to our absolute worst zoning ideas ever conceived, like giant setbacks, parking mandates, huge lots.
This was prompted by a single family residential new house project where there is an existing 70 y.o. garage on the property that is non-conforming bc it’s over 5% of the lot area. WHAT A DUMB RULE. So it’s: make it smaller, demo it, or connect to the new house. ARBITRARY & LAME.
I am connecting house and old garage via a breezeway with a foundation and roof, so that it’s “attached” and not detached. But wow is this convoluted, silly, unnecessary and totally ARBITRARY. Who decided 5% was max. This seems born of exclusion, classism, and NIMBYism. Period.
What I’ve gathered after this post, & in my years of observation, is most people who design, build, & work in placemaking & creating our built environment hate “non-conforming” zoning rules & agree they hold us back from making lovable places. So how’d we get them? NIMBYism
Jonathan Berk: All of these, and most of Downtown, is existing nonconforming in Salem. We have intense historic protections on all of these buildings… you just couldn’t build anything like them today.
Max Dubler: Basically all of America’s best-loved neighborhoods were built before zoning and the overwhelming majority of them would be illegal to build today.
Will: Before a rezoning a few years all but 3 lots in the entire city of Somerville were non conforming. Recently one city councilors house burned down and he wasn’t allowed to rebuild it without a zoning variance as he didn’t have enough parking.
Richard Morrison: Old structures: Historic and valuable, can never be changed. Identical structure proposed as new construction: 100% illegal, don’t even think about it.
Alex Contreras rants about floor area ratio and 20 foot setbacks and facade rules in particular, as it can render projects impossible for no good reason. There are indeed supposedly good reasons, people talk about shade and about how it feels imposing to have buildings go too close to the sidewalk or whatever. I am not buying it. These things matter, but we are using stupidly crude and high power tools to solve relatively small problems, and as always if you see a cost to something you should tax it not ban it. That way, if this really does kill a valuable project outright you can pay up.
In this first case, we learn it in Toronto. A house costs what it costs to buy the land with permission to build, plus the cost of building. Solve for the cost of permission.
I do think this is a tad too harsh, because land and location would still cost money no matter the zoning requirements, but:
Kevin Bryan: Building isn’t expensive: in Toronto, for 2000 sq ft house, 500k for builder grade, 800k for quite fancy, 1.4m for literally top builders. At *Bridle Pathland costs, that’s 900k for a new 4br family house! Everything more than that is planning regs and tax screwing you.
Urban economists measure regulatory distortion in housing in both these ways: markup over build costs, and cost of land w/ right to build vs. land w/o right to build. Gaps on either are a “tax”. In Toronto, back of the envelope this tax doubles housing costs.
It really ticks me off when people (and politicians!) blame “greedy developers” “the rich” or “boomers” for high housing costs. It’s regulation! And my numbers above are inflated by other regs I didn’t mention: those build costs are crazy by Texas or France standards.
In a second more fun case, Scott Sumner shows us the auction for The Chet Holifield Federal Building, also known as the Ziggurat.
Scott Sumner: The OC Register has had a series of news stories on the auction, where feverish bidding has pushed the price to a much higher than expected level. This is presumably because the property includes not just the office building, but also 89 acres of land in one of California’s most desirable communities, just a few miles from Laguna Beach. The article contains this graph [of the auction going from $125 million up to so far $154 million].
Note that the original asking price was only $70 million. One reason why people were caught off guard is that this is actually the GSA’s second attempt to sell the building:
Not a single developer was willing to bid even $70 million for this highly desirable property at a time when there was requirement that the building be saved. Once that restriction was lifted, at least two developers were willing to pay more than $150 million (and the auction is still ongoing.)
From this information, we can infer that the economic cost of this particular regulatory barrier was at least $84 million, the difference between the current auction price and the previous auction’s reserve price.
But even that figure is a gross underestimate of the cost of regulation for this property. Although the new owner will be allowed to remove this eyesore, they will continue to face a Byzantine thicket of regulations and lawsuits, from all sorts of interest groups that hope to minimize the amount of development. After all, this is California.
While I cannot be certain, I suspect that a developer would be willing to pay many hundreds of millions of dollars for this property if given a completely free hand to develop it any way they wished. I also suspect that the resulting development would be extremely impressive—the sort of grand project that the US used to be good at doing, but that has somehow become beyond our ability.
Can you imagine what would happen if we auctioned off, with actual no zoning restrictions you can build however you want, a large plot of land in New York or San Francisco? We should try it.
Nolan Gray: Canadian suburbs are building more high-rises than the typical major US city.
Aaron Green: There are currently only nine high-rises under construction in Los Angeles. In Austin, 23. In Atlanta, 51. And we wonder why housing is so expensive.
Who is building them? Toronto, New York City, Vancouver and Miami.
New York is large enough that its 207 are not impressive on a per capita basis. It is still in sharp contrast to places like San Francisco.
The very concept increasingly fills one with rage.
I get the original concept. Yes, there are a handful of buildings that are indeed historical landmarks, that we don’t want people tearing down willy-nilly.
But let’s face it. There aren’t that many.
Also, zero of them are parking lots people want to turn into food banks.
Tod Hickman: The location they want… It violates the law, violates CEQA. The main problem is the City of Alameda did not do proper review, environmental review of the project. They circumvented the law. This location is a historic parking lot,” he said.
James Medlock: We’re all entitled to our opinions but the moment you invoke the idea of a “historic parking lot” to prevent a food bank you should be given about as much credence as a person raving about lizard people
I prefer the line that you should be transformed into a pillar of salt, but I lost that link. Also this illustrates how we obviously need to get rid of CEQA, a building replacing a Berkley parking lot does not require ‘environmental review.’
Rather than ban on tearing down landmarks, of course, we should tax doing so – attach a price to each building that represents how much we care.
We could even do it organically, where anyone can contribute money to the city to put that money towards preservation of a potential landmark, then if the developer values it more than that they can match the funds. Whereas if no one cares enough to put down a deposit, then why should we?
Delays really do matter a lot.A new research paper estimates that a 25% reduction in approval times would increase the rate of housing production by 33% (!), of which 11.9% is purely pulling current projects forward (!) and the rest is starting more projects.
So yes, even if the ultimate decisions don’t change, this is a huge deal. And if housing supply is this elastic purely in the face of less delays, that means that other changes should also have huge impacts on supply.
Or at least, that such changes would do that up to the limit of the supply chain. At some point, if we accelerated construction enough in enough places at once, we would start to run out of various components including construction labor, until we adjusted.
Brad Hargreaves: The resurrection of Robert Moses was inevitable as it becomes increasingly clear that the reaction against him – handicapping our government’s ability to do anything meaningful – was worse than anything he did.
Jason Crawford: We desperately need a third alternative to:
1. Authoritarian leader can build anything he decides on, over all objections from anyone affected
2. No one can build anything because it is stuck in years of permitting and approvals
Neither of those are viable.
For ordinary projects like an apartment building, the answer is simple. You build the building. It is none of anyone’s business.
For things that would involve demolishing neighborhoods or planets to build bypasses, well, I do agree you have to build bypasses but yes you need to do a proper cost-benefit analysis. That continues to be my proposal – mandatory developer-pays third party audit of costs to stakeholders, followed by a proposal including distributional effects, and a panel that makes a go or no go decision. You can sue for damages, but not for an injunction. Mandating Minimum Housing Sizes is War on the Poor
Kelsey Piper: A formative moment for me was when I was living in a not-up-to-code tiny bedroom, it was fine and I was very happy, and I mentioned online that I thought the bedroom size requirements were too strict and was immediately accused of wanting to reinvent slums.
People were absolutely furious that I was willing to call for smaller bedrooms and insisted I wanted to subject poor people to presumed enormous misery. And I couldn’t explain that I lived in a tiny bedroom and it was fine because you shouldn’t confess on the internet to crimes.
I sat there in my tiny illegal bedroom reading person after person insist that any building code that allowed it amounted to a declaration that the poor deserved to suffer and that we should bring back slums. It was a perfectly fine room. I still think it should be legal.
Zac: I lived in a studio that was less than 300 sq ft in order to live in the Chicago neighborhood I wanted on a budget and it was totally fine for me as a single person.
Quite the contrary. When you tell the poor that they must spend their money on something they do not want, you are declaring that you know better than them, and that they should instead give up other things and work harder. You are taking away their ability to live, and waging war on them.
Location and price often matter far more than size. The best way to be upwardly mobile is to move to where opportunity knocks, and not spend your money.
I’ve lived in studio apartments. It was totally fine. If they had been substantially smaller, it would have impacted my life very little.
I also lived in college dorms, and that too was totally fine. The main problem with even a very tiny dorm room is you don’t have a (private) kitchen, but with the rent savings you can eat out (and go out) every day and still come out way ahead, at least in places like New York City. Renting that space 24/7 makes very little economic sense.
Matthew Yglesias: It should be legal to build buildings in in-demand areas of American cities *withoutneeding to persuade specific officials to back you on a case-by-case basis.
Many advantages to this idea, including less bribery!
The first proposal to take advantage of San Francisco’s newfound inability to veto all new housing construction after SB 423 triggered is a modest 200 apartment units, 28 of which will be dedicated low income housing, on 1965 Market Street. So of course The San Francisco Standard reports it this way, to be clear it is not the project that they say is controversial here:
I always find it curious why projects proposed in such spots are so modest. The people opposed to you are going to oppose you the same amount either way.
Here we have plans for Outer Sunset, with a proposed apartment complex doubling in height… to eight stories. Headline says it ‘just might get built.’ The building has been stalled for nearly a decade, so seems more than fair to double the proposed fun. Again, if you are face people who are going to oppose anything you do equally strongly no matter what, why not go for the brass ring? The objections quoted are things like ‘I don’t like it’ and ‘they’re taking away one of our gas stations’ which the article notes is not a real concern in this context.
Berkeley was slated to vote on a very important upzoning proposal for the ‘missing middle,’ both a big deal there and potentially an example for other places. They’ve been working on this for five years. It is a compromise where there are silly restrictions on density but not to the full insane previous extent. So of course they postponed the vote to work on the proposal more. Sure, why not.
San Francisco has instead moved its focus to banning ‘a controversial form of software that is widely used by large property owners to set rents.’ This software used various information to figure out the proper rent to charge. The argument is that the software was effectively a form of soft collusion. There certainly is some danger of that effect to a small degree, but mostly this ensures that the market functions more efficiently.
By default, rental markets are highly inefficient. Some places set prices too low, and get snapped up or find many applicants quickly. Others overcharge without realizing, and sit empty for months until people realize. That means that renters need to be active and do their homework, constantly refreshing for new deals and going to place after place that stuck on the market with a rent that is too damn high. Otherwise research and search costs go up, vacancy times increase reducing effective supply and matches are relatively poor. As usual, I’d prefer to let better information and more efficient markets work their magic.
A story in remarkably many acts: The last building permit appeal, at least of a sort, by the condo a block away from a proposed 100% affordable housing project. AB 1114 prohibited this hearing, but the city pretended there could be one last one. What will be their next excuse?
Oh, right, they do have Golden Gate Park, a bigger park than NYC’s central park, except they put it in a place where there’s no one near it and there’s no BART that gets you there either.
Patrick Hoge (SF Examiner): The legislation would waive 49 license fees that include charges for varied items, including having outdoor seating, billiard tables, extended operating hours and even a cash register or candles. Such fees are among roughly 100 charged by individual departments that are combined on a unified license bill, Fried said.
Laurie Thomas, owner and operator of Nice Ventures, which runs two restaurants in the Cow Hollow neighborhood, said she recently paid license fees totalling $8,182, including table and chair fees of $3,313 for Rose’s Café and $1,366 for Terzo. That is in addition to the gross-receipts taxes the restaurants pay to The City, she said.
Then again, better to tax something than to restrict it. I wouldn’t be taxing candles or cash registers or tables and chairs, but if those are things the city wants to see less of, or at least doesn’t care about enough to mind if that is the result, there are certainly worse taxes.
Density bonuses sound like invitations to game the system, because they are. And That’s Good, mostly, also well played, everyone.
Joe Cohen: This is fascinating:
One of the unanswered questions about the State Density Bonus is if you can “ask the genie for more wishes”
The idea: because it lowers costs per-unit, in theory a dev can use an incentive to request additional density beyond what they’re normally entitled to.
By the letter of the law, this should be legal, but it seems like there’s no way this would actually be allowed.
Well, a project was just approved in unincorporated LA county that used an incentive to get an extra 1287% density bonus!
I am of course all in favor of this. There should not be a cap on density in most cases, if the project makes economic sense. If the costs per unit are indeed much lower with higher density, presumably because it reduces land costs plus some economies of scale, then sure, why not? Yes, first best would be something more consistent and straightforward, but I’ll take it.
Don’t threaten me with a good time: Looks like another case of ‘we built a lot more multifamily housing and now we have a rental glut and prices are falling.’
Which of course is being reported as bad news.
The first step in getting more housing is to stop actively sabotaging housing construction, including sabotage in the name of a concern that someone, somewhere might earn a profit. In Boston this was named ‘fair’ housing, meaning it is on the building of a new large building to investigate ‘possible impact’ on the area and then offer various bribes to locals in a ‘negotiation process.’ Since the area often is fine with no deal, that means they will often demand all or more than all your forward looking profits, ignoring sunk costs. Given that, there is no reason to start trying to build something.
The rule triggers on 50k square feet of floor space, has been in place for three years, and only been triggered three times.
Chris Elmendorf: Similarly, Detroit mandates “community benefit agreements” for large projects. And S.F. does so as a matter of policy for projects in “priority equity geographies” (again, justified on AFFH grounds).
Nationally, the Democrats’ “consensus” permitting reform bill would institutionalize similar equity-impact-analysis requirements & invite anyone to sue and hold up a project if they think the equity analysis was inadequate.
That is essentially damn near a proposal to ban large housing projects outright.
There is a big fight over the ‘City of Yes’ proposal ongoing. The local boards hate it, because local boards hate housing and freedom, but that has been overridden before. It sounds like momentum is building. There’s still a lot of room to be more ambitious. It’s so absurd that New York City itself still has parking requirements, and all this talk of various ‘density bonuses’ makes one wonder why you need to be negotiating on that at all. This is New York City. It’s time to build. Your limiting factors here should be economics and technology, full stop.
Matt Yglesias: Never take a poll at total face value but this seems like a fair wording of the question.
Ben Furnas: New poll shows overwhelming approval among NYC registered voters for the City of Yes housing proposal:
+50% overall
+55% among renters
+63% among under 45
+67% among independents
The shared housing mandate is slightly underwater at -7%, parking mandate elimination is ‘only’ +15%, complex expansion only +18%. Office conversations are +70% (!). Other provisions are around +50%.
It seems New Yorkers are broadly highly supportive of building new housing, and would be up for going substantially beyond even this proposal.
I mean, lol, no. That would require there to be enough housing units for everyone who wants to live in the city. Otherwise, you need to price some people out, also known as being unaffordable to those people. Claude estimates that if NYC was truly ‘affordable,’ as in its housing prices declined to the national average, then about 10 million Americans would want to move here. I think that’s way low.
Whereas if you add 500k units, you’d likely get a price decline on the order of 10%. Which is a lot, and would help a lot, but no NYC and especially Manhattan is not suddenly going to have abundant affordable housing unless we build The Cube.
The Manhattan Institute analysis of what it would take to get to 500k new units seems sensible. We’d need far more permissive zoning and ability to get zoning changes, a credible lack of rent controls, consistent rational taxation policies that no longer disfavor building new rental apartment buildings, and a series of additional reforms. There is plenty of good land available in Brooklyn and Queens, if we gave it reasonable zoning. Whereas instead of facilitating this, we have new rules like requiring zoning changes to submit a ‘racial equity report’ which is Obvious Nonsense, and continuing to require environmental review for NYC housing, which is also Obvious Nonsense – moving people to NYC is strictly positive for the environment versus not doing that.
Reading a document like that one makes clear that we have so many needless barriers to new construction. Making things dramatically easier would, in turn, be rather easy.
Then they say that NYC rents have also continued to outpace the national average, with rent up 2.4% versus a decline of -0.8% nationwide and above ‘other major cities,’ although this is still below inflation.
They say NYC hotel rates have risen 7.4% versus 2.1% nationwide. That’s actually not a big deal? It instead shows that AirBnB wasn’t doing that much to lower prices. And if you consider that rents are +3% compared to nationwide, that could explain the majority of the disparity. Also a lot of it could be that NYC has been legally forced to use a substantial percentage of its hotel rooms to house immigrants, reducing supply.
They say NYC vacancy rates are unchanged, but they were already very low at 3.3%, and some of those ‘occupied’ apartments were de facto hotel rooms and thus it is likely the true vacancy rate did decline.
I do understand that AirBnB was highly useful as a form of regulatory arbitrage, and now this is unavailable. And yes, I would prefer to allow AirBnB to come back. But I don’t think losing it did all that much damage.
Another Pete Buttigieg project is a new rapid transit rail line for NYC… in Brooklyn and Queens?
Mayor Pete: In NYC, we’re helping plan the Interborough Express project to bring better light rail to Brooklyn and Queens. Better transit means more options for riders, and with funding from the Bipartisan Infrastructure Law, we’re helping NYC plan for the future.
Ben Furnas: “If the IBX is built with street running, it will be chronically delayed and overcrowded from day one…But if the IBX is entirely grade-separated, it could run at far higher frequencies, use longer and larger trains, and potentially even be automated.”
Turns out this is nothing, only $20 million for planning, which is chump change compared to the cost of actually building anything like this. It’s certainly worth building, almost any new rail line in NYC is worth building. My guess is this is still a lot less valuable than expanding capacity to existing lines especially within Manhattan, or facilitating the Second Avenue Subway for real. On the plus side, Let’s Go Mets with a much better route to the game from Brooklyn?
Nathaniel Hood: While it’s been detrimental to new housing production, housing affordability, expanding our tax base, and improving our downtown through residential conversions …
On the plus side, we have provided the rest of the country with a great Case Study in “What Not To Do”
Nick Erickson: Any policy that adds costs or serves as a production roadblock should be a non-starter.
“After [St. Paul MN] voters approved rent control, applications for new multifamily buildings plummeted by 82 percent.”
Seems rather conclusive to me. That’s not a coincidence.
A full 20% of Florida homeowners are going without insurance. That seems eminently reasonable. If you have insurance, you lose value in the ‘Fed put’ that the government might pick up the slack, and adverse selection issues plus profits plus administrative costs plus fighting the insurance company means you would prefer to avoid that. So if you own your home outright and can afford to replace or repair it, why pay for insurance?
I consider it a substantial cost when various things like mortgages require one to buy such insurance. What you get is worth a lot less than the amount you pay for it.
Homeowners associations lose veto power over rooftop solar, also various other home upgrades like EV charging stations. I do not love the idea of the government invalidating private contracts like this. Also, it does not seem wise to brazenly break the rules of your HOA, even if they cannot enforce that particular rule against you. What do you think happens next?
Watch out, Labour’s forces are out there with a dastardly plan to build houses.
The Mail tells readers how to ‘become a green belt SUPER NIMBY’ and warns them to ‘watch out for officials turning up with binoculars,’ but provides comfort that ‘but don’t despair – some areas could see house prices rise 20%.’
“be alert if you live near an old golf course or disused car park” 😵💫
Matt Palmer: Around a third of the commercial buildings in my neighborhood are straight up vacant, more like half if you count the ones being parked as a “gallery” or similar unproductive function.
At this point I think govt needs to force landlords to sell properties that they won’t fill.
This has been a problem everywhere I’ve ever lived, it’s wild how far below capacity we actually run the real economy.
Systematic misuse/disuse of this sort of asset is not smart irrespective of your ideological position (I hope lol) and ought to be corrected proactively.
Tedks: If you think this is a San Francisco issue, you should know it’s very common in New York also, even in the very gentrified parts where San Francisco style homelessness isn’t tolerated.
Humble 3rd Print Farmer: Can also confirm this is a Las Vegas issue, a lot of vacant commercial property with for rent signs that are not necessarily listed online in places like Loopnet.
David Hinkle: My understanding is they can’t lower the rents because it will trigger a loan re-collateralization they can’t pay. Commercial real estate is always valued as a multiple of rent prices. These contracts don’t work in a market going down. It’s only designed to go up.
They just ignore unoccupied units. It’s bullshit and maybe this is the change that needs to be made. In many cases, the bank doesn’t even require you to pay the portion of the mortgage for unoccupied units because it’s in their best interest to keep the property value high.
Thus, in order to maintain the fiction – with the knowledge and approval of the bank as well – that the building hasn’t lost value, prices become massively sticky downwards, and large amounts of space stay vacant.
This is rather flagrant bad design. A contract was designed that predictably does a very stupid thing if the market clearing rent goes down. The bank either would like to ‘extend and pretend’ and let the owner muddle through as best they can, or else would want to take the property now before things get worse. Now it doesn’t get to do either.
Perhaps we can fix the banking regulations so that they choose better terms?
The alternative is to tax extended vacancy. Or it might be sufficient merely to end the tax benefits of staying vacant. A lot of the attraction of staying vacant is that you effectively get to bank the loss.
There would be massive lobbying against this, but what if the rule was that if a commercial property was vacant longer than 6 months or a year, that the profits of the building would be taxed as if the property was occupied at the last known rental price, or at a market value assessment, or similar? I bet they start filling up a lot faster.
• Three pick up/drop off locations (Port Authority, Grand Central, Penn Station)
It makes a lot of sense, 15% of bookings last year came from airport trips.
Meatball Times: “Lmao they reinvented the bus” Ok but consider if they can profitably run this route that means *buses are failing to serve a brain dead obvious route that everyone usesand something has gone horribly wrong with bus transit.
Daniel Eth: *a new coffee shop opens up in my town*
People on Twitter: “omg they reinvented the coffee shop 💀 “
Caesararum: the bus that goes from GCT->Penn->EWR is so often so delayed that there’s a cottage industry in ubers and black cabs that poach people from the queue
the M60 (by far the most common bus to LGA) is not as bad but similar.
Laboratory for Social Minds: LGA bus works extremely well — free, then to E or F train; often faster than Uber to Manhattan given traffic. Meanwhile Uber from NYC airport often more expensive than Yellow Cab. Uber is targeting low-information tourists and business travelers (ease of receipts).
Or at least it was seen as a business opportunity. Why not integrate the shuttle with the app? Yes, the Q70 exists to get you to the subway, but a lot of people don’t know that, or they want to go one place and stop worrying about it rather than transfer into the subway system.
Indeed, for some reason I’ve never taken the Q70, even though it is a clear win once the route is pointed out. Now we need to do something about JFK – yes you have trains available, and I do take them, but they’re both terribly slow.
As an aside, your periodic reminder that the whole Title Insurance Industry is a scam.
Yes, they technically provide a service, but they pay out pennies on the dollar. Somehow you have to buy it, and they manage to price fix by a factor of about five to ten. So it is no surprise that real estate agents often take kickbacks to steer customers to a particular provider. Indeed, what surprised Matt Yglesias was that this is illegal, and companies in the DC area are being fined $3.3 million for doing it.
Jeremiah Johnson: I recently bought an apartment, and one of my big takeaways is that the entire “Title insurance” process is one of the biggest scams on the planet.
These parasites get 0.5%-1% of every real estate transaction in New York. For what? Keeping a big ole list of who owns what?
SaaS CTO, PhD: The loss ratio for title insurance is around 4-5%, vs ~80% for property/medical insurance.
Jeremiah Johnson: Jesus this must be the greatest business model of all time:
Sell an insurance product where claims are only 3% of revenue, and it’s also legally mandated on every transaction, and you also have a cartel to fix prices.
How do we get a politics where ‘end title insurance’ is a good part of someone’s platform? Have the state take over tracking titles.
Matthew Lewis: You know what aren’t scarce in the United States? Cars.
You know why cars aren’t scarce? Because we build 16 million of them per year.
You know how many homes we build per year? About 1.4 million.
Don’t tell me the United States is a country. We’re a car company.
We don’t even need that many homes. Maybe ~ 5 million STAT, and then a steady stream of 2-4 million per year after.
But nope!!! We don’t build homes in the USA, we build cars. Thanks to the electoral college, car jobs are the single most important part of our economy.
Logan Bowers: Imagine how expensive cars would be if every city and town in the country had a distinct 2,000 manual detailing exactly how each type of car has to be uniquely built to match the other cars in the neighborhood, but also the existing models of cars are illegal to build too.
Five million homes plus 2-4 million per year would indeed be more than enough… if and only if we put those units where people want to live, largely in the top cities.
I’d split the latest housing roundup into local versus global questions. I was planning on waiting a bit between them.
Then Joe Biden decided to propose a version of the worst possible thing.
So I guess here we are.
What is the organizing principle of Bidenomics?
This was the old counterproductive Biden proposal:
Unusual Whales: Biden to propose $5,000 credit for first-time home buyers, per WaPo.
The Rich: House prices about to go up $5,000 everywhere.
Under current conditions this is almost a pure regressive tax, a transfer from those too poor to own a home to those who can afford to buy one, or who previously owned one and no longer do.
If there were no restrictions on the supply of housing, such that the price of a house equalled the cost of construction plus the underlying price of land, then the subsidy would work, but also you would not need it.
Yes, this implies that many good policy interventions are available.
Biden then literally doubled down on this proposal, which Tyler Cowen correctly labeled ‘from the era of insane economic policy’: Joe Biden proposes to pay new homeowners $9600 of taxpayer money at $400/month for two years. Why are we transferring money from existing homeowners and those who cannot afford to home to this particular middle group?
To be fair to Joe Biden here, and I initially made this mistake as well, no prices will not rise by almost $9600 per house allowing existing homeowners to capture all the loot in an accounting sense. Only about half of home buyers are first time purchasers, and by buying they are using up a valuable one-time resource. So my guess would be this only increases home values by about $5000.
Also note that if all home values go up by $5000, that does not mean that homeowners are that much wealthier unless they own more house than they need. If you live in one house and own one house, you are closer to economically flat housing than to being long one house. You have to live somewhere.
I also note that Biden’s proposal of $400/month for two years means that the first time homebuyer likely cannot use that $9600 as part of their down payment on the house. So the one actual plausible thing this might have done, to allow first time buyers to assemble their down payment, doesn’t even work. Madness.
Zack Kanter: I’m amazed at the outcry in response to this. “Subsidizing demand will just drive up housing prices!” Anyone smart enough to understand the fundamental irrationality here should be smart enough to know that the goal isn’t to drive down housing prices, but rather to buy votes.
GFodor: At this point it is so ridiculously corrupt and stupid I would rather we just be transparent and set up online auctions for my vote to be bid on.
He is right, of course. I am aware that this is centrally a fully cynical bribery scheme to buy votes, with at most a minor amount of being so foolish as to think this might accomplish anything else.
Daryl Fairweather: From Biden’s just released housing plan: This “lock-in” effect makes homeowners more reluctant to sell and give up that low [mortgage] rate, even in circumstances where their current homes no longer fit their household needs.
The President is calling on Congress to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter home, defined as homes below the area median home price in the county, to another owner-occupant.
This is mostly a giveaway to banks. Families are staying in their homes because banks issued what for the banks are highly unprofitable mortgages. So we are going to bribe families to prepay horribly unprofitable mortgages.
Also note that if there is no such mortgage we are literally handing people checks exactly because they own their home, in exchange for paying the costs of moving.
Also we reduced ‘mortgage insurance premiums’ by $800, which sounds like another transfer from people without homes to people with homes, and a complete disregard for how insurance is supposed to work.
Why does Biden keep trying to write public checks to richer than average Americans, ultimately funded by poorer than average Americans? Why does he seem so keen on finding new ways of stealing taxpayer money for them?
Yes, there is a real issue here where we have less dynamism and mobility than we would like and people feel unable to move. If we want to solve that, we can stop having the government bribe people into long term fixed-rate mortgages designed as if to create exactly this problem. At least, as a first step.
Waiving the requirement for title insurance seems somewhat more justifiable, given that it ‘typically pays out only 3% to 5% of premiums.’ That certainly does not sound like a product anyone should buy, let alone one we should force them to buy. Nor does it sound like anything that happens in a remotely free market.
Oh, they say, we can fix the distribution issue, because we are also going to force prices up via paying people $25,000 in ‘down payment assistance’ when buying their first home if they haven’t ‘benefited from generational wealth building associated with homeownership.’
The result of this will inevitably be to put people into homes they do not want and cannot afford, because that bribe is too big to pass up.
Also they plan to ‘fight egregious rent increases,’ in order words to impose rent controls, confiscating private property and destroying the housing stock. Why should a price increase ever be illegal on the federal level?
Reading all this makes one wonder where such people think money comes from and where it goes. Who do they think is paying for all this? How do they think this impacts various markets? Do they have any idea how any of this works, at all?
Here Matt Yglesias goes over some things the federal government could do that might actually help. He says ‘the issue isn’t that the Biden administration doesn’t get it.’ I agree that they get we need to ‘build, build, build,’ but then they go ahead and do all these other things anyway. So while there is one level where they get it, there is another level where they very clearly don’t.
Emmett Shear: Rent control is a transparently terrible idea. But has a city ever tried price caps per square foot on rental housing? If set right, that would at least accomplish the theoretical goal by preventing “luxury” housing, while leaving cheaper housing untouched.
Of course it has all kinds of nasty potential side effects, like any time you intervene in the free market. Wealthy people would on the margin consume more by renting much bigger houses since they can’t spend more per sq ft. But it seems less-horrible.
There is the danger that it drives everything into sold housing rather than rented, but I think that should only impact the higher end. The biggest issue will be variance in prices making the cap wrong locally, I think.
I mean, if the cap is set high and maintained high over time (they tend to drift downward) then this is less harmful than other rent control rules, but only because it applies less often, and where it matters less?
The result is effectively to ban renting out units with sufficiently high value per square foot. If the place is that valuable, it should be easy enough to convert it to a condo or co-op. So that is what would happen. Not a huge tragedy, but rather pointless destruction of all high-end rental stock.
His thinking seems to be that this would ensure that the quality of the housing stock was worse, because that is good, actually?
Alex Krusz: Why is preventing luxury housing good?
Emmett Shear: Makes the housing that gets built more affordable.
I mean, sure, if you want to destroy the housing stock of a city only down to some threshold, then you can use a pinpoint form of rent control that substitutes only for highly selective aerial bombing. That does not make it a good idea, unless it is a compromise that kills other worse rent control.
I wrote that a weeks ago. Speaking of which…
Despite recent Supreme Court decisions saying he would be immune from prosecution, Biden is determined not to use aerial bombing to level our cities.
Joe Biden (well, his Twitter account): I’m sending a clear message to corporate landlords: If you raise rents more than 5%, you should lose valuable tax breaks.
Families deserve housing that’s affordable – it’s part of the American dream.
Jason Furman (top economist, Obama administration, quoted in WaPo): Rent control has been about as disgraced as any economic policy in the tool kit. The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better.
Jeff Stein and Rachel Siegel (WaPo): White House officials, however, say the rent cap would give short-term relief to renters before an estimated 1.6 million new housing units become available in two years, which should also drive down prices. (The Biden plan would only apply to rental units for two years, by which point, in theory, this fresh supply would alleviate costs.)
The extent to which those defending this rule simply do not believe in private property boggles the mind.
“It would make little sense to make this move by itself. But you have to look at it in the context of the moves they propose to make to expand supply,” said Jim Parrott, nonresident fellow at the Urban Institute and co-owner of Parrott Ryan Advisors. “The question is: Even if we get all these new units built, what do we do about rising rents in the meantime? Coming up with a relatively targeted bridge to help renters while new supply is coming on line makes a fair amount of sense.”
This is implemented in a triply ham fisted way to mitigate its worst impacts.
Limited to removal of a tax break.
Limited to landlords with 50+ apartments.
Limited to a two year period.
Limited to already constructed apartments.
The last two give the game away.
Biden’s team realizes that if you imposed rent control on newly constructed apartments, people would build far fewer rental apartments.
Their solution? Don’t (yet, today) propose confiscating the wealth of those who create the housing stock we need tomorrow. Instead (today) confiscate the wealth of those who already created housing stock. They’re stuck.
Then, tomorrow, we can discuss the housing stock we build today.
I say ‘Biden’s team’ because Biden does not seem to know what his policy is.
Eric Levitz (video at link): Biden has not just been having difficulty with extemporaneous speaking. He’s also been struggling to read speeches off a teleprompter. Here, he mistook text promising a 5 percent cap on rent increases for a cap on rent increases larger than $55.
Paul Graham: This is painful to watch. Rent control is already a stupid idea, but he misreads the 5% on the teleprompter as $55. That means he doesn’t even remember what his own policy is.
Jesse Singal: I 100% think this is not because he is lying but because he is not capable of reading off a teleprompter in a coherent, accurate way at this point.
Alex Tabarrok: Biden is doing everything he can to drive me away.
Terrible policy that he flubs by reading 55 off the teleprompter instead of 5%.
This is different from confusing names. This is a rather large conceptual error that one only makes if one is reading off a teleprompter without understanding the words. It would also be a complete disaster to actually cap rent increases at $55, which in major cities would often be well below inflation and is remarkably close to a de facto ban on rentals.
Whereas a 5% cap, with 3% inflation, for only a two year bridge period? Shouldn’t that be Mostly Harmless, as the advisors claim?
Except, of course, builders of real estate can see that future, too. Fool me once, shame on you. Fool me twice, can’t get fooled again.
Even if it is not permanent, the seal has been broken. So I need to anticipate that my temporary rental agreement could turn into a permanent seizure of my property, at any time.
(Indeed, I wonder the extent to which even proposing this policy as the President does great harm, for exactly this reason.)
The 50+ apartment rule is, if the tax break is substantial, a de facto a ban on landlords that long term own 50+ apartments in hot rental markets.
What would inevitably happen if this was implemented and seemed likely to be permanent? When the market rent increases are substantially above 5%, the large landlord will sell the relevant apartments to new smaller landlords. Then the smaller landlord raises the rent.
Then, probably, once things cool down or the rent has been made safely high enough, if things are likely to remain cool, they likely sell those apartments back to large landlords again.
So this involves a lot of real estate commissions and negotiations and weird contracts, and tons of extra work and paperwork, and wiping out of landlord reputations and relationships that tenants could count on before, to get back to where we started.
In the case of buildings with more than 50 apartments, this gets somewhat awkward, as the building ownership will need to be divided. In some cases, they’ll give up and convert to condos.
Also, of course, everyone will raise all rents somewhat higher, in anticipation of perhaps needing to raise them in the future, and to compensate for the related expenses.
And also large landlords will stop trying to improve apartments, and start skimping on maintenance, as they always do under rent control.
That’s kind of a ‘best case’ scenario for implementation.
The bad scenario is that this creates pressure to lower the 5% cap, or inflation gets higher so as to effectively lower it, and there is pressure or worries about pressure to extend the rule to smaller landlords and future buildings soon. Or perhaps federal rules on what a ‘fair base rent’ would be in the first place.
Once rent control starts, it gets stricter and more oppressive. So anticipating that, expect somewhat of a decimation of the rental housing stock.
So in short: The impacts would be severe, but nowhere near as severe as the full version. But if this led or looked like it would lead to the full version, it could quickly end up being the full devastation version, wrecking all our rental markets. Who wants to risk renting a place when the Federal government might decide to effectively confiscate your property whenever it feels like it?
A long time ago I had high hopes in this area. Whatever his other faults, however many crazy tariffs he might impose, Donald Trump is famously a real estate developer. He built, baby, he built. So it seemed highly plausible he would adopt policies helping real estate developers to develop real estate, whether or not that involved massive graft.
Then it turned out, no, Trump instead did things like warn that Democrats wanted to ‘destroy the suburbs’ by building housing where people want to live. Either way, it did not seem like any sort of priority.
Matt Yglesias: Trump’s administration was initially pushing zoning reform but then some time in 2019 he fell in love with the idea that Cory Booker’s zoning reform bill would destroy the suburbs and they flip-flopped. But the man was a professional urban infill builder at one point, he knows.
Bloomberg interviewed Trump this week, in which sometimes substantive questions are asked (and at other times not) and then Trump is given room to talk, so we got in some questions about actual economic policies. It was a good reminder of how he thinks about all that.
The transcript includes fact checks, which is fun, but they missed some spots, including the whopper in the very first line.
Donald Trump: Well, I think manufacturing is a big deal, and everybody that runs for office says you’ll never manufacture again.
Even if you change ‘everybody’ to the implied ‘most people’ this is still obviously false. Joe Biden very much has said the opposite in both of his campaigns and with his policies. Many candidates at all levels are constantly saying the opposite.
I would not normally mention it, except as a first line in a ‘fact checked’ interview I find it pretty funny. The actual fact checks are also often highly amusing. You can learn a lot by thinking about how Trump decided which claims and numbers to pull out of [the air].
Also, if you are a thin guy, and you ever meet Donald Trump, drink a Diet Coke, purely to blow his mind.
So on housing, what did we learn?
Q: I wanted to ask you about the housing market because that is a huge cost to people. The mortgage rates are so high, there is a huge housing supply problem right now. What is your plan to make housing more affordable for people?
Donald Trump: That’s a very good question. So 50% of the housing costs today and in certain areas like, you know, a lot of these crazy places is environmental, is bookkeeping, is all of those restrictions. Building permits. Tremendous [restriction]1.
Plus, they make you build houses that aren’t as good at a much greater sum. They make you use materials that are much less good than other materials. And the other materials are, I mean, you’re talking about cutting your [permits] down in half. Your permits, your permitting process. Your zoning, if—and I went through years of zoning. Zoning is like… it’s a killer. But we’ll be doing that, and we’ll be bringing the price of housing down.
The biggest problem with housing now is that you have interest rates that went from 2.5% interest to 10%. Can’t get the money. So, you know, I don’t know if you can stop at 10 because if you can’t get the money, that means it’s higher. But people, they can’t get financing to buy a house.
Other than calling for lower interest rates at various points, Trump does not take this or other opportunities to talk about any actual actions on housing. He does not actively talk rent control or subsidizing demand, but neither does he back up his complaints about permitting and regulations with any plans or intentions to fix that.
No, he’s focused on getting rid of regulations in other areas. Like AI. Of course.
There are of course other things going on with the Presidential candidates than the places where I focus. But I leave such discussions to others.
Darrel Owens: Evan Mast did a study, highlighted by the Minneapolis Federal Reserve, on the city’s flat & decling rents, finding that for every 100 market rate apartments built, 70 existing apartments were freed up in low income neighborhoods. What lessons on gentrification can be extracted here.
Scott Lincicome: ICYMI: I review the latest evidence of “filtering”, which shows that places like Austin & Raleigh that build more housing have lower prices/rents for ALL classes of homes/apartments (not just “luxury” units). But I also caution that true US Housing Abundance is still a ways off.
Jacob Shamsian: I need to read a New York mag essay titled “NYC or kids?” that explores the tension between being able to afford this city vs building a family.
Matthew Yglesias: The two things I hear about ~every affluent city:
1) Voters’ number one concern is housing affordability and they are desperate for politicians with bold solutions
2) Broad, city-wise relaxation of land use rules would be toxic and unpopular
Despite my reputation, I actually do think there’s a lot of stuff more market rate construction can’t solve.
But “middle class people with decent jobs can’t afford a bigger home / more convenient location” is like THE thing you can fix with pure deregulation.
Is ‘affordable housing’ better than market-rate housing?
I would bite the bullet and say ‘affordable housing’ is simply some combination of:
An inefficient tax on building or owning housing.
An inefficient allocation of housing to those who value it less.
An inefficient allocation of capital, where we massively subsidize a few people.
An inefficient lowering of the quality of the housing stock.
An inefficient way for people to seek rent or feel righteous. Sometimes both.
I put affordable in quotes because what people mean by ‘affordable housing’ is ‘housing where we allocate below-market units to those who have our favor’ rather than ‘the market price of housing gets more affordable.’
I am all in favor of that second one. Ideally the prices decline sufficiently, and we allow the renting of sufficiently small units, that housing becomes highly affordable.
There are three legitimate purposes this is trying to address.
We need to tax something. Residential real estate makes sense to tax.
We want to do progressive redistribution. We can write that into the tax code.
We would like some less good apartments to exist. We can remove regulations.
Thus, we have much better options than this affordable housing.
I realize this is not a consensus view.
Also one could argue that current convention allows requiring that a developer provide ‘affordable housing,’ but it does not allow the state to require that developer write the city a large check or agree to take on higher property tax rates. So while affordable housing is never first best, it could in practice often be superior on the margin to the alternatives.
What should be clear to everyone is:
More market rate housing is good.
More non-market rate housing is good.
A combination of more of both is also good.
The problem is too little of one, not too much of the other.
Matthew Yglesias: We have some of the longest-standing YIMBY organizing efforts here in DC, but there isn’t really a single strong pro-housing person on the Council championing ambitious legislation and big ideas.
It’s very disappointing.
Martin Austermuhle: I mean, D.C. has by no means been perfect, but there’s been loads of housing construction in recent years, and the city has put more money into affordable housing than most comparable jurisdictions. The D.C. Council also passed an updated Comp Plan.
The main criticism has been that D.C. has allowed too much market-rate housing, hasn’t invested enough in fixing public housing, and hasn’t done enough to enforce existing tenant protections. And some criticize the continued existence of single-family zoning.
Matthew Yglesias: Yes this is what I mean. The dialogue in DC is about whether there is too much market-rate housing when we should be arguing about how to create dramatically more of it. Right now, ~zero people on the Council are championing the cause.
Right now the Council is debating how much to raise taxes and how much to cut services in order to address a big fiscal crunch. The best solution is to substantially roll back anti-housing regulations and grow the economy.
As in forcing you to include ‘affordable’ housing, meaning misallocated mispriced housing, in order to build new housing.
Aaron Green: Look at how housing production plummetted after inclusionary zoning took effect. Now the people who would have lived in these new buildings are out competing with others for existing rental stock, pushing rents up for everyone. IZ makes the housing crisis worse.
As always, San Francisco found a way to make this more of a disaster. The city tried to specify a wide variety of conditions for who can rent its ‘inclusionary’ units and rules on how much owners can charge, and the whole thing is such a mess that 80% of the units are sitting empty. The city fails to deliver a tenant they are willing to let lease the apartment, and are unwilling to let someone else rent it instead. Chris Elmendorf suggests some obvious potential fixes, via giving some window for ‘qualified’ renters to appear after which the units can be leased to a market rent tenant. That would work, but misunderstands what the city cares about.
Offered for contrast and humor, because yes you can do so much worse than rent control, that challenge has been accepted successfully: Here is the Guardian attempting to blame the UK’s housing shortage, caused of course by their ‘never build houses’ policy, to not the absurd lack of supply but rather on ‘landlordism.’ The proposed solution is ‘landlord abolitionism.’
Hunter: The UK has a deep state and it’s the planning system. If you can’t build dense housing in the North London Business Park then you’ve made it illegal to build dense housing. London has the worst housing crisis in the world.
The current planning system should be utterly abolished.
Armand Domalewski: It blows my mind that UK politics is not an endless, 24/7 screaming match about the housing crisis. London has Detroit wages and San Francisco rents and yet people are still anxious that it is adding too much housing.
Alec Stapp: New degrowther idea just dropped in the UK: Instead of making it legal to build more housing, they’re just gonna… checks notes… reallocate the spare bedrooms in “under-occupied” houses.
Forest Ratchford: This reminds me of a story my Polish friend told me that during communist period, when his parents went to ask for permits to expand their house the government said if they did they would relocate another family to live with them.
Symon Pifczyk: Funny. In Poland and the USSR, the government would really do this but mostly because of war time damage. It was universally agreed that it’s temporary and housing construction must solve this issue. The UK wanting to do this just so that they can avoid skyscrapers around is wild.
Stefan Horn: I’ve written a new piece for the @IIPP_UCL blog: Meeting housing needs within planetary boundaries requires opening the black box of housing “demand.”
The key idea of the paper and research agenda is that housing can be used very differently: 1) to meet the housing needs of the population, and 2) as a luxury good or status symbol. Housing policy is typically about achieving 1).
The central tool to deliver housing policy has been to “just build more homes”. However, it has been shown that this is both ineffective and resource-intensive. We therefore take a step back to look at the entire housing stock.
It turns out that, in England, there are already more than enough houses to meet housing needs. But a large part of the housing stock is not used to meet housing needs. Around 19% of bedrooms in England are second or further spare bedrooms.
You see:
Gabriel: ngl telling people that the government is going to take away your spare bedroom instead of allowing the redevelopment of crumbling buildings from the 80s into medium density mixed use housing has gotta be one of the worst political strategies ever conceived in a democracy.
Yoni: it’s so much worse than that. “in NIMBY england your teens have to share a room.”
Sam Bowman: This surprising result comes from using a definition of “spare bedroom” that, among other things, describes two teenagers having separate bedrooms as involving a “spare bedroom”, because the teenagers could be sharing one of the rooms instead.
And they need to enable people to live with the people they want to live with.
Kevin Erdmann (via Alex Tabarrok) tackles the with whom portion of the problem. We have an all-time high in houses per capita, but we also have less people per household.
I am actually surprised that adults per home has been this stable and this high, given other trends. The drop in children still has to be accounted for.
There is also the issue of where you want to live. If no one wants to live in St. Louis anymore, which is mostly true, then the extra empty houses in St. Louis give people a free option that no one wants, but are limited in their ability to solve our problems.
Scott Sumner points out that the declining number of people per household means we can effectively have a housing shortage even when we have more units supporting fewer people. This is not a huge effect, a 4% decline in household size, but it matters.
Jeremiah Johnson: The ’empty quadrant’ is one of the most replicated findings in housing research. There expensive cities that don’t build. There are cheap cities that do build. And there are no cities that build lots of housing and still see very high housing costs.
But that chart’s data only goes through 2013, you say! Sure. What if we use a completely different data source and time period? Top right quadrant is still empty.
It works for both overall price level as well as *changesin price level. No city that has large increases in inventory also sees increases in housing cost. Upper right still empty.
Seth Burn: One of the things about new construction that might not seem obvious is that they have an urgent need to fill all of the units ASAP. They start off with debt and need cash flow, so they have to price these units to move. In short, they need to undercut the market.
The counterargument would be that most places have stopped building tons of housing, and the only places that still do so are ones with lots of empty space around and a willingness to grow via sprawl. Those are not going to be high rent locations, so this relationship might not be causal. Except, supply and demand, so of course it also is causal.
Megan McArdle: One of the more interesting paragraphs I’ve read in a while.
Paper: If internet search is increasing equilibrium match quality, then some of the recent observed house price increases may be due to improvements to match quality rather than basic supply and demand factors. Assuming that gross output measures should be adjusted for quality changes, this implies that real growth in the output of housing may be understated due to quality increases being misattributed to the price deflator. Standard hedonic methods for estimating constant-quality price deflators in housing typically only control for the observed physical characteristics of a home, and do not account for unobserved match quality between the buyer and the house.
Megan McArdle: Basically improved search technology might mean people find homes better suited to them, and since they value them more, they might be willing to pay more. So some portion of the house price increases we currently treat as inflation should actually be seen as quality improvement.
So first off, no. Even if true, that is some bullshit, on the conceptual level. That is not what quality means. My being able to find the right house raises the utility I get form my house. It does not improve the quality of the house, and that increase should not impact the deflator. We can talk about matching as another product we produce perhaps, Zillow and StreetEasy count as services, or we can talk about the resulting utility or both, but that doesn’t measure the quality of the housing stock. That is the quality of the matching market.
What about the underlying dynamics? Does better matching increase prices via increased willingness to pay?
This is not obvious. How do people choose how much to spend on housing?
One obvious strategy, that many actually employ, is to buy the best place you can afford. In this case, if matching improves, then one should expect higher consumer surplus, and also for customers to sometimes ‘move down’ and buy a place that is generically worth less because it is better for them. So if anything this would point the other way?
Another obvious and common strategy is to meet your needs, and pay whatever it takes to do that. In that case, better matching will mean you ‘need less house’ to meet your needs. So you will end up paying less, and overall the market should stay static or decline once more.
The standard economic strategy of maximizing consumer surplus, of moving up in price until you aren’t getting enough out of it, could potentially raise overall demand, if better matching meant greater marginal returns not only greater absolute returns.
Then there’s the contrast between houses with multiple matching buyers, where the price gets bid up higher, versus places that are not actually great fits for anyone, so the price collapses. As with many markets, this means that details matter more, and the places that do everything right (the ‘A-level’ real estate) profits, whereas those who are flexible get better deals.
This feels like another one of those ways in which economists tell people they are better off and getting richer, and people look at them like they are crazy.
Why do I want Balsa to help us intervene in housing at the national level, rather than the local and state levels where all the action has been so far? Because if you act everywhere at once, then everyone knows they are not the target, that their particular neighborhood will probably not much change in relative terms, and they can accept the deal.
Kevin Erdmann: The irony of the immediate yimby project is that the solution – that we need to legalize and build 10-20 million extra housing units – sounds outrageous. And yet, if those units were equally distributed across every city, would be barely noticeable in the built environment.
Matthew Yglesias: This is exactly right — dramatically reducing land use regulation in your neighborhood would be very disruptive but doing it in *everyneighborhood (including yours) would transform the national economy without changing that much in any specific place.
We still should change certain specific places quite a lot. The most valuable cities, especially New York City and San Francisco, should grow much bigger. And there are some hugely underbuilt other areas like Palo Alto. But mostly this is a deal that should have overwhelming support, if done all at once.
Here’s some rhetoric that I presume is not helpful, although obviously true:
Matthew Yglesias: YIMBYism makes leftists insane because “it should legal to build apartment buildings where there is demand” is obviously correct, but they also don’t want to admit that a significant social problem could be ameliorated with less regulation.
If you own a home, you own two things.
The home.
The land.
When zoning changes, you get to build on your own land too, or sell it someone who will. It is not crazy to think that the land might go up more than the home goes down.
Alas, this does not seem to be the case.
Harlo Pippenger: If you’re a YIMBY and homeowner, do you believe you’re supporting policies that will cause you to forgo thousands in home equity?
Matthew Yglesias: My view is that better regulatory policies will increase the value of land but decrease the price of housing.
Buildhomez: I don’t think so based on Houston.
The study says it did not happen in Houston, perhaps because so much new housing was built that this was sufficient to offset the value of being able to build.
Ben Southwood here walks through the obvious fact that if all the homeowners of Palo Alto got together to turn it into the density of lower Manhattan, they would come out massively ahead, creating by his estimate $30 million in profits per household. So, he says, NIMBY is not about money and home values. Alas, that does not follow, because homeowners are not thinking this way and considering this alternative, merely opposing each marginal change in turn.
It does however propose an alternative. We are talking about $1 trillion in total net profits, to be divided between landowners and developers, and a total investment required on the order of $2 trillion to get it including upgrading city services including mass transit.
So the obvious thing to do is to run for mayor with a city counsel slate, on a platform of full Manhattanization, and an offer as part of that to buy all existing homes for their current assessed value plus $5 million. Get funding from every VC in the Bay, stop thinking so small. Sure, some people would still vote no, but would half of them turn that down? Plenty of other places to buy elsewhere with your windfall, if you want to keep the old lifestyle going.
Space can definitely be oversupplied where people less often want to live. Once it starts, it makes the problem worse.
The largest office building in St. Louis has sold for $3.5 million, per WSJ.
In 2006, it sold for $205 million.
Konrad Putzier (WSJ): “It’s a classic chicken and egg kind of deal,” said Glenn MacDonald, a professor of economics at Washington University in St. Louis’s Olin Business School. “People don’t go there because there’s nothing to do. There’s nothing to do because people don’t go there.”
…
From there, desolation spread south. Across the street from the garage, a St. Louis Bread sandwich shop—part of the Panera chain—shuttered. That left the attorneys at law firm Brown & Crouppen without a lunch spot.
“It’s pathetic that a Panera was the thing holding this area together, but it really did,” said the firm’s managing partner Andy Crouppen. “It brought people from five, six blocks away, it created a little bit of activity.”
“When that left, it created a noticeable void in the area,” Crouppen said. “People started walking in another direction.”
This is the 44-story AT&T tower, so I presume it is the building on the left. The majority of area storefronts sit empty.
Several replies claimed this failed to include assumed debt, but there does not seem to be debt? According to Wolf Street, this same building was sold for $4.1 million in a foreclosure sale in 2022, which means it was bought debt-free. It also means this was a loss even from that low point.
Danielle Fong: imagine you just bought this. what would you do with it?
Benjamin: there is a crazy power incentive that came with this, something like <7c/kw hr I think.
Obviously at that point turn the whole thing into a btc mining farm.
The obvious play is to convert a lot of this to housing plus commercial space, while leaving some offices for those same people.
Indeed, one could imagine building one hell of an intentional community and world community hub with this much space. And there would then be plenty of space to include what would effectively be a convention hall on a few floors, and other public areas. I imagine one could get really creative, if the law allowed it.
But the regulatory issues and costs of conversions have defeated many who have tried in St. Louis already, and I am assuming anything like this would be a giant mess.
And of course, the $3.3 million is almost exactly $0, when compared to the cost of upkeep. Claude estimates that cost at between $5.6 million and $8.7 million per year, including property tax of 3% on the new value of $3.5 million, although you would get some discount on that if the building was largely unoccupied. So in a sense the ‘cost to own’ in a practical sense here is on the order of $100 million, or about $2 million per floor or just under $100 a square foot.
I am actually rather excited by what you could do with a building like this at a price like that, assuming it was in good physical condition, and especially if you had the budget to make supplementary investments in the area. You could think big, and ensure that the area suddenly had good versions of everything people actually want to have locally available, by being willing to initially run them at a loss, including inside the building.
Why is this building worth something rather than nothing? The price is an option. If you buy the building for $3.5 million, you always have the option to sell it for $0, as indeed effectively happened in 2022, since transaction costs ate the entire sale price. If you figure out how to make the building profitable, or St. Louis gets a downtown revitalization and suddenly people want to come back, you win big. So that is worth something, even if you then must pay millions a year if you want to hold onto it. Alternatively, it is pure winner’s curse. The option value is not worth the ongoing costs, but someone will be willing to try.
My guess is that the bet is good if you can afford to make the full bet and lose, considering the upside. But if you have this kind of budget, risk appetite and willingness to actually do physical things, then you have many great opportunities.
More surprising is this sale, given that Washington D.C. is going well. It looks like it was due to massive floating rate debt, and in this case all we actually know is that no one thought it was worth assumption of the debt?
Triple Net Investor: JUST IN: Holiday Inn Express in Washington DC sells at a shocking ~80% ‘discount’ to debt owed.
The lender was the only bidder in the foreclosure auction, bidding $18.5M.
The lender was owed $83M as the largest secured creditor.
Brooke Sutherland and Sri Taylor (Bloomberg): Boston Mayor Michelle Wu is seeking to raise commercial property tax rates to help protect homeowners from the brunt of the historic slump in office property values.
It is especially baffling given the recent jump in interest rates. With a 3% fixed rate mortgage, sure, a 140 ratio is not so crazy. At 7.22%, it seems pretty crazy. After other costs of ownership, that makes ownership very clearly unprofitable versus renting. In general, why does the rent-to-price ratio change so little when interest rates move?
Tomes Pueyo also notes that population has previously been going up. Soon it will begin going down, as it already started doing in China. Declining demand follows. He has a bunch of other speculations as well.
What if the ‘superstar cities’ like New York and San Francisco are not superstars after all, and merely ‘closed access’ cities? Kevin Erdmann makes that case. Their rents and productivity numbers are only high, he says, because they prevent housing construction and choke off supply. Yes rents are high, but also they fully capture the gains in income, if you include that they price less productive people out of living there. He says we shouldn’t see such cities as having such high demand, and contrasts this with Detroit’s heyday, when it was more productive but only modestly so because it did not keep people out.
I don’t buy this at all. Yes, it is sad for you if you move to New York, your productivity doubles, your salary doubles and after rent and taxes and other higher expenses you do not have any more money. That does not mean your productivity did not double. Even if you are doing the same tasks, the fact that people willingly pay you twice as much is strong evidence that your production is worth more.
Also, price will always be the ultimate measure of demand. So when he says ‘it isn’t remotely clear that demand for living in Los Angeles is higher than Dallas’ (really Dallas-Fort Worth) because Dallas-Fort Worth grew by 77% from 1995 to 2022 (it seems like Dallas itself only grew about 30%?) while LA only grew by 10%, again, look at prices and population.
Or ask people where they would live if the economics was similar. Yes some people will prefer Dallas for political or social reasons, or because of particular people there, but obviously most people would, if given the choice where money canceled out, rather live in Los Angeles, or in the version of Los Angeles that was growing faster.
He also highlights other trends, and especially points to house prices dramatically declining in poor areas of cities like Atlanta due to inability to get mortgages in the wake of the financial crisis and the subsequent tightening of lending standards. This seems to now be fully reversed, but the inability to get mortgages remains, forcing people to rent, and the lack of interim building forced rents up. Well, then, that sounds like a problem that should fix itself in turns of rental stock. In terms of mortgages, that is a policy choice.
But as always, if someone is saying no one can afford to buy a house, one can respond that the homeownership rate is up rather than down. So that’s weird.
Zvi Mowshowitz (October 10, 2022): A remarkably high share of the responses to ‘why is it illegal to have a bedroom without a window?’ seem to be willing to bite the bullet that it should be illegal for me to have the blinds down and the window closed.
Ja3k: Wow, I had no idea. I almost think a bedroom with no windows would be desirable as I only use the room for sleep and tend to expend a lot of effort preventing light from coming through the window
Zvi Mowshowitz: Yeah, that’s the funny part in all this, if everyone was like me we’d make sure all the windows were in the common areas and the bedrooms were always dark.
And now:
KUT Austin: “Windows should be a human right,” said Juan Miró, an architecture professor at UT Austin who has advocated against windowless bedrooms.
Headline: Austin outlaws the construction of windowless bedrooms.
St. Rev Dr. Rev: Imagine the society we could build when the upper middle class forces even more of their preferences and consumption habits on the rest of us in increasingly ridiculous and unsustainable ways.
Luis Guilherme: Building windows wouldn’t be hard if fire codes didn’t require more than one staircase. Both together severely limit what you can build.
Tracing Woods: This is a petty case, but I’m always fascinated by those who use the language of human rights to remove them. “I want to ban people from building things I dislike” becomes, with the wave of a hand, “My preference should be a human right.”
Neat trick if you can manage it.
Dan Elton: Some problems with windows in the bedroom:
– More noise
– Harder to maintain consistent temperature for sleep
– Higher heating/cooling costs
– Need to install blackout curtains (extra cost, need to be maintained).
(Otherwise light trickles in from moon, street lamps, etc)
The first thing a large percentage of people I know do when they move into a bedroom is to do all they can to functionally destroy the window.
As a reminder, no this is not about real safety. Many such bedroom windows offer no meaningful means of egress or entry.
I continue to see this as obviously and exactly backwards. Windows in a bedroom are a mixed blessing at best. Yes, you get a reminder of when it is light or dark outside, but in exchange that interferes with your sleep. Not ideal, my blinds are down most of the time and I paid a lot to effectively get rid of my giant window most of the time. Whereas windows in living areas are obvious goods, and of much higher value.
So my preference order would be:
No requirements because people Capitalism Solves This. If people want windows people will pay more for windows and we will get the right number of windows. Banning what you dislike is the opposite of a ‘right.’
Require a window somewhere in the apartment, on the theory that ‘windows are a human right’ or the worry that people will feel pressured into moving into windowless places and go insane. I disapprove, but I do get it.
Require a window in the living area.
Require a window in the bedroom area.
A tour of a fully minimalist 250 square foot bachelor apartment in Tokyo for $300/month. Ten minute walk from the train station, has all the basic things for a base of operations, completely illegal to build basically anywhere in America you would want to build it. This seems pretty great, we should do a lot of this. Yes, it sucks to be this cramped, but letting people conserve capital and have a good location is really important.
Matthew Yglesias: Not only are European homes small, twenty percent of the square footage is occupied by clothes hanging up to dry.
But they have more orderly public spaces!
Ryan Radia: Maybe the American Home Shield® analysis of Zillow data is more accurate than the HUD-Census Bureau American Housing Survey, but for those who are curious about the latter, it tends to show somewhat smaller housing units in the United States (only certain states are available).
Looks like American Home Shield includes houses and condos, whereas the American Housing Survey includes houses, condos, and apartments.
[first graph below is Zillow, then the one below is HUD]
You know who goes small and stays home if they have one? The UK.
Yes, I am going to go out on a limb and say that having tiny houses in general is bad. Having more house is good.
The counterargument is that having smaller dwellings is good for the UK in the sense that the amount of housing seems permanently fixed. So if you only have so much space, you need to divide it into smaller locations, or you’ll be even more short on housing than you already are.
Brian Potter: The above graph is color-coded: green is the structural framing, blue is exterior finishes (including doors and windows), orange is services (electrical, HVAC, etc.), red is interior finishes and appliances, dark gray is foundations and light gray is outdoor work and landscaping. And if we look at a similar breakdown of tasks given by the Craftsman Construction Estimator, we see a broadly similar division.
The most striking thing here is that there is no one striking thing. Construction costs are lots of different little things, not one big thing.
Also note that this excludes the direct costs of dealing with regulations and zoning and approvals and permits and such, and also the cost of the land. Here are some additional costs:
And a further breakdown of some of the hard costs:
Brian Potter: Per the NAHB, on average hard costs are about 56% of the total costs, soft costs (including builder profits) are about 25%, and land costs are about 18%.
Stephen Smith: Elevators in North America have become over-engineered, bespoke, handcrafted and expensive pieces of equipment that are unaffordable in all the places where they are most needed. Special interests here have run wild with an outdated, inefficient, overregulated system. Accessibility rules miss the forest for the trees. Our broken immigration system cannot supply the labor that the construction industry desperately needs. Regulators distrust global best practices and our construction rules are so heavily oriented toward single-family housing that we’ve forgotten the basics of how a city should work.
…
Nobody is marveling at American elevators anymore. With around one million of them, the United States is tied for total installed devices with Italy and Spain.
…
Behind the dearth of elevators in the country that birthed the skyscraper are eye-watering costs. A basic four-stop elevator costs about $158,000 in New York City, compared with about $36,000 in Switzerland. A six-stop model will set you back more than three times as much in Pennsylvania as in Belgium. Maintenance, repairs and inspections all cost more in America, too.
The Europeans have a standard building code for elevators, and they build lots of small ones, large enough for a wheelchair and one additional person. They do not let the perfect (and huge) be the enemy of the good. We instead impose tons of requirements, force everything to have its own uniquely American supply chains, and due to various requirements our labor costs are, like the most famous of elevators, through the roof.
This and other similar limiting factors hugely raise the cost of housing construction.
The solution to elevator regulations could not be simpler.
The European Union has a perfectly good set of rules. They work. Adapt those.
Similarly, we can copy their rules about what buildings require multiple staircases.
Or even better, let developers choose. You can either follow the local rules, or you can follow the EU rules. Easy. Simple. One page bill.
Yes, that means that various first responders might not be able to use some elevators to transports some types of equipment. But when Switzerland has twice the elevators per capita as New York City, the first responders cannot use the non-existent elevators at all.
The bigger apartment buildings, where the amount of passenger traffic and number of apartments served justifies a larger size, will still choose to build big. The market will demand it. And all those little buildings can get little elevators.
There is also the problem of the elevator unions, which it seems are of the pure rent extraction variety.
Architects have dreamed of modular construction for decades, in which entire rooms are built in factories and then shipped on flatbed trucks to sites, for lower costs and greater precision. But we can’t even put elevators together in factories in America, because the elevator union’s contract forbids even basic forms of preassembly and prefabrication that have become standard in elevators in the rest of the world. The union and manufacturers bicker over which holes can be drilled in a factory and which must be drilled (or redrilled) on site.
Manufacturers even let elevator and escalator mechanics take some components apart and put them back together on site to preserve work for union members, since it’s easier than making separate, less-assembled versions just for the United States.
Ryan Smyth: And if you’re in multifamily you know how unreliable most elevators are and the exorbitant ongoing maintenance costs involved. They usually take days to fix and the down time hammers resident satisfaction.
Bryan: When this sort of rent-seeking happens all of us pay for it. A lift should not cost five times less in *Switzerland*.
Noah Smith: The problem with American unions is not that they exist. It’s that too many of them look backward to the 1950s and want to RETVRN instead of embracing modern technology. Unions elsewhere are more forward-looking.
Noah is exactly on point.
If the union uses its position to get higher pay and better working conditions, up to a rather high point that seems fine and often actively good. Costs go up, but the workers benefit in line with costs.
If the union is as described here, and engaged in active sabotage and massive driving up of costs in order to create makework? That is an entirely different scenario. The union only captures a small fraction of the additional costs and everything becomes hostile and terrible.
We need to find a way to ensure that extraction is in the form of higher wages, not in the form of enforced inefficiencies to create work, and to draw a clear distinction between those two modes.
Of course, the Elevator Theory of Housing, saying it explains housing costs, is going too far. This is a surprisingly large form and cost factor, since it restricts entire classes of construction, but not the main event.
Hal Singer: Why have housing costs skyrocketed?
→ Progressives: Hedge fund/private equity have been buying up hundreds of thousands of homes. Pricing algorithms allow landlords to coordinate price hikes.
→ New York Times Op-Ed: No no. It’s the high cost of elevators and the elevator union!
Epilogue: The reason why elevator costs are so high is because of extreme concentration. It is not the fault of the elevator union or regulations, as Yglesias & YIMBYs would have you believe. His team could never blame companies (ie, prospective clients).
…
First, it’s a fixed cost, which shouldn’t enter the pricing calculus.
I love little windows like this into people’s thinking. Why would fixed costs matter?
More than that, he’s claiming that the reason costs are 5x higher in America is because of ‘extreme concentration’ without citing any evidence. Well, why exactly do we not see market entry? And what does this have to do with the central claims?
Matthew Yglesias: So many leftist professors are genuinely incapable of engaging with an argument on the merits and just resort to bullying.
The op-claims that US building codes make elevators more expensive than European or Asian elevators. Is there a rebuttal to that claim?
I know there is a lot of leftist fascination with private equity investments in housing but the explicit thesis of the investors is that regulatory barriers to supply will make these bets pay off.
Hal Singer: Who cares about elevator costs? Many buildings don’t have one, and for those that do, the elevator is a small % of total costs.
The whole reason most building do not have elevators is that we have made it prohibitively expensive in space and money to put in elevators to most buildings. Versus Europe, where a lot more buildings do indeed have elevators. And that difference also rules out a variety of housing construction and is hell on the disabled. That’s the whole thesis.
I do not know how much of the additional costs are due to unions as claimed, versus due to regulatory requirements, including labor shortages due to licensing requirements and immigration laws. All of that, of course, is constantly on my ‘fix it’ agenda all around.
This is not the biggest problem facing those who wish to build housing. Fixing it would still make a substantial difference, on the margin, to one of our biggest problems.
Tweets from Zack Weinberg: The reason everyone feels poor is because of housing prices and nothing else really matters is a view I hold stronger by the day.
Nabeel Qureshi: I genuinely think housing scarcity in/near cities explains 80%+ of the vibecession & the pessimism you encounter when you talk to practically anybody nowadays. It’s way worse than it used to be.
I’ve lived in both NYC and London and in both cities this has gotten significantly worse in my memory; you now often need to write personalized letters to landlords just to convince them to *rentyou their place, and 100+ applications for a single place is super common.
I sympathize with the “but the economy is so wonderful, look at the GDP number go up” people but sometimes I want to send them this quote & ask them to go talk to normal people once in awhile
I assume that the 100+ applications are because of rent control. Otherwise, you can respond by raising your price.
I am in the 50% or more camp. Indeed I think this is more than 100%.
As in, if the UK was allowing and even encouraging energy including wind and nuclear, and allowed housing construction throughout the country, then the UK would be booming even with all its other problems.
Tyler’s main cause is that the UK is not making products people want to buy, that there was a specialization mismatch. There probably was a mismatch, but I think that dynamism would have allowed that to be solved without issue. I definitely would not blame 20% of the issue on Brexit.
Be careful what you wish for.
Pacific Legal Foundation: [In Sheetz v. El Dorado County] today the Supreme Court unanimously ruled that legislatures cannot use the permit process to coerce owners into paying exorbitant development fees. The ruling, a major victory for property rights, will remove costly barriers to development, thereby helping to combat the housing crisis.
The fee in question was $23,000, supposedly for traffic impact. It is obviously crazy to claim that a single family home will cause that much damage to traffic. I could see a case that it could lower property values by that much by increasing supply, by lowering each of 230 properties by $100 or something like that, although the owner intends to live on the property.
If this changes the rule from ‘you can build a house but you owe us $23k’ to ‘you can build a house and pay us $230’ then that is good on the margin.
I worry that is not the relevant margin. Instead, I worry that this payment, while outrageous, is also a mostly non-destructive and not so distortionary tax. If your new home is not generating $23k in surplus for you, then there is no great loss that you could not build it, and if you have an empty lot then the purchase price is now presumably $23k lower. So all you are doing it imposing a tax on the value of land, which is one of the best ways to tax. In exchange, the city feels good about letting you build, and is less inclined to impose other barriers.
If they tried to charge $230k instead, that seems a lot worse, but this seems fine?
Yes in God’s backyard? Six states propose bills allowing various charities to get around zoning laws or get tax advantages for building affordable housing. I do not see any reason to give preferential treatment to religious organizations, or to give to them a large share of the surplus available from building new housing. It is still miles better than not building the housing. Paris is worth a mass.
Ben Yelin: MD Senate currently debating one of Gov. Moore’s housing measures that you’ve written about! My own Republican State Senator is excoriating it.
Funny twist: After attacking the bill for 20 minutes about how this bill was unfair to landlords, he says he’s going to vote for it because he was able to secure amendments that made it better.
Matthew Yglesias: He’s complaining about legislation “battering the state’s landlord community” 😂😂😂
Alexander Turok: Many landlords own one or two properties. They’re not all millionaires.
Yes. One could argue that it would be better if identical housing was more expensive, rather than housing being cheaper, so that those who own the existing housing stock can profit off of those so unwise as to need to rent or buy. It is a preference one can have.
Jeff Collins: A Los Angeles County judge found that charter cities aren’t subject to Senate Bill 9, the 2021 “duplex” law that allows up to four homes to be built on a lot in single-family neighborhoods.
The law fails to accomplish its stated purpose of creating more affordable housing, and therefore, doesn’t meet the high bar of overriding local control over zoning, Superior Court Judge Curtis Kin said in a ruling released Wednesday, April 24.
SB 9 “is neither reasonably related to its stated concern of ensuring access to affordable housing nor narrowly tailored to avoid interference with local government,” Kin wrote.
…
” ‘Affordable’ refers to below market-rate housing,” Kin wrote. The state gave “no evidence to support the assertion that the upzoning permitted by SB 9 would result in any increase in the supply of below market-rate housing.”
Yelling ‘the whole point of building more housing is to lower the market rate so all the housing is more affordable, you absolute dimwit fwads’ might feel good but the polite version does not seem to be working.
So, restate the stated purpose, then? Or require that one of the four homes be ‘affordable housing’ in the narrow sense?
Or perhaps something more drastic, like removing all zoning over residential and commercial buildings entirely from the bastards (they can keep the industrial restrictions), if that’s how they want to play it, provided you include at least some ‘affordable housing’?
Emmett Shear explaining once again that if you stop restricting supply of housing, cost to buy will converge to cost of construction, which would drop prices in areas like Manhattan by more than half.
Crossover issue: Using federal subsidies for a housing project can trigger NEPA, at which point you might well be might better off without the subsidies. Even if we do not fix things in general we should absolutely change this rule, so that subsidies alone do not trigger NEPA.
Governor of Oregon uses legos to illustrate that when demand exceeds supply prices go up and poorer people can’t buy houses, whereas if you build more houses then prices go down and also everyone can have a house. Quite good.
Tesho Akindele: Density allows everyday people to outbid the rich for land.
This is not quite right, since cost per square foot goes up if you build higher, and also if you go bigger as a builder you will want bigger profits. It does seem mostly right, and it excludes the impact on overall supply and thus price level.
Alec Stapp: This article from the London School of Economics is quite possibly the worst housing policy analysis I’ve ever seen. What’s their magic solution that gets around the law of supply and demand?
Headline: “Solving the Housing Crisis Without Building New Homes.”
Stephen Hoskins: I am begging the London School of Economics to understand that houses provide both shelter and location.
We’re inventing new forms of “there are more vacant homes than homeless people” every single day.
The thread has more details, but seriously, I can’t even. No, a bunch of price controls and redistribution is not magically going to fix having less supply than demand, and forcing the nominal official ‘price’ to be a non-economic number does not help.
And no, housing in places people do not want to live does not substitute for housing in other places where those people do want to live. Although I do think we can and should do some work to give people reason to want to move to the less desired places, especially if they are currently homeless. But the homeless mostly do not want that.
Three huge reasons.
People in denser areas consume vastly less carbon.
Sam: Urbanism protects rural and natural land whereas suburban sprawl frequently requires paving over natural landscapes and chopping down tons of trees.
Jason Cox: It really wrecks some people’s brains to learn I’m pro urbanism largely ~because~ I’m pro rural & agricultural areas remaining such.
They’re so excited to let me know I’m a clueless urbanite that doesn’t know where food comes from or what freedom looks like in my crime infested city abode without realizing I live much of the year on a working rural farm.
Both areas add value to society and the first shouldn’t be allowed to swallow the second unchecked because we lack the will to let cities be cities.
We all know the various definitions of democracy.
One major problem with democracy is people do not know economics. It shows.
Rent control polls around 87%. The only thing ahead of it is ‘property tax control’ meaning California’s Prop 13, a true nightmare of policy arguably worse than rent control.
The people want to not pay taxes, and to not pay market rent, and for existing residents to collect these economic rents forever, and to the extent they realize there is a price to pay for those things (beyond that no one can ever move) they want others to fit the bill.
They also want a ‘renter tax break’ and housing vouchers to go with the homeowner tax break. Why not give everyone a tax break and free money? Oh. Right.
Meanwhile, the policies that are underwater are ‘allow people to build apartment buildings,’ and the close one is to reduce parking minimums.
This is a chart of renter support for policies minus homeowner support:
So yes, their favorite policy in relative terms is ‘give us money,’ what a shock, but mostly there is not much voting one’s interest.
Chris Elmendorf: But do any of these policies matter when push comes to shove, and voters have to make tradeoffs with policies like abortion, health care, minimum wage, climate?
Yes. Rent control is near the top, w/ property-tax controls, IZ, and “Wall St” restrictions not far behind.
Also, people who want rent control and Wall. St. restrictions care a lot more about these policies than do their opponents, whereas opponents of market-rate infill development care somewhat more about it than do the proponents.
Joey Politano: Rent control, property tax control, down payment subsidies, and inclusionary zoning requirements all polling at like +80%.
I care quite a lot about opposing rent control. But I am the exception.
The whole thing is deeply sobering. People do not want the things that cause housing to exist.
Yet somehow, in many places, YIMBY policies are happening anyway. And in many other places, there is tons of popular NIMBY red meat available, and the politicians do not take it.
Something is working, and has been working for a while. One must ask, what allows our civilization to survive at all? Why do we get to tax things and pay some of the bills? Why is there some housing rather than none?
Rob Wiblin: Keir Starmer is the prince that was promised. 🔥🔥🔥
YIMBY Alliance: NEW: Local residents will lose the right to block housebuilding, Keir Starmer will announce today.
NEW: Keir Starmer ‘will unveil plans to build 1.5 million houses over five years by forcing councils to approve new homes, including on the green belt, warning that those who refuse will have development imposed upon them as part of a “zero tolerance” approach to nimbyism.’
The Times: The Labour leader will unveil plans to build 1.5 million houses over five years by forcing councils to approve new homes, including on the green belt, warning that those who refuse will have development imposed upon them as part of a “zero tolerance” approach to nimbyism.
If you give indigenous people the right to do what they want with their land, and it would be highly profitable to build housing on it, guess what?
Jason Crawford (quoting): “Because the project is on First Nations land, not city land, it’s under Squamish authority, free of Vancouver’s zoning rules. And the Nation has chosen to build bigger, denser and taller than any development on city property would be allowed.”
Warren Wells: As a non-indigenous person, I would simply avoid telling indigenous people what “the indigenous way” is.
Kane: The best parts of left nimbys losing their minds about indigenous people building new homes is the leftists telling the indigenous people they’re being indigenous wrong.
I have no idea if this is a complaint that is all that common. As usual with such matters, the people who are very loud mostly represent a highly unpopular viewpoint.
Stanford hates fun, but if you really hated or truly loved fun, perhaps you would get the law to do something about the fact that 94% of elevators on campus have expired permits? The author of the article is sufficiently onboard with hating fun that this is framed as an actual safety issue.
Sheel Mohnot: Caltrain deputy director built himself an apartment (with kitchen & shower) inside the Burlingame train station with $42k of public funds (each invoice <$3k), and it took 3 years for it to be discovered.
I demand a short documentary about this! I haven’t seen footage anywhere.
Jerusalem: knowing literally nothing else about this… go off king.
Jail?? you should hire him to figure out how to build housing this cheaply in California.
Jason Crawford: My main takeaway here is that you can build a home in CA for $42k as long as no one is watching.
Land trusts are super weird. Shouldn’t we either make who owns what properties public, and something you can take in a legal judgment, or not? Instead you can pay a small fee to get around those issues.
In honor of San Francisco failing its housing target and becoming subject to SB 423, this special edition of housing deals with various state and local developments. It is presumed (although plans never survive contact with the enemy) that this greatly streamlines getting housing built, to the tune of several thousand per year.
Court says UCSFis exempt from local height and zoning restrictions because it’s an educational institution serving the public good. I notice this ruling confuses me, especially because the building proposed is a hospital. That seems like something where zoning should apply. Or else you could say all hospitals are public goods, and I would agree.
Hayden Clarkin: Given an 8-3 vote tonight by San Francisco’s leaders to downzone the wealthy waterfront neighborhoods to protect the views of millionaire homeowners, I figure I’d show a visual representation of the amount of housing the city approved in January. Yes, it’s in red, look closely.
This photograph makes it very clear that whatever the area in question is about, building housing is not it. That is a huge amount of land on which building high would be highly profitable and no one can build.
This next photograph is also illustrative.
Hayden Clarkin: Don’t have the eyes of a hawk? No problem.
Sachin Agarwal: Eight Supervisors voted to save Aaron Peskin’s view. Unbelievable. Every one of these people has got to go.
London Breed: Today is a setback in our work to get to yes on housing. But I will not let this be the first step in a dangerous course correction back towards being a city of no. We will not move backward.
My statement on the Board of Supervisors downzoning vote.
Gianmatteo Costanza: YIMBY action lost this lawsuit re 469 Stevenson parking lot? How disappointing.
Garry Tan: The worthless SF bureaucrats are hard to beat. “Historic Nordstrom parking lot” is preserved, instead of building 495 new units of housing in a transit corridor (23% affordable) …
Corrupt nonprofit TODCO, Aaron Peskin and Dean Preston and their NIMBY agenda won this time.
sp6=Underrated: Will @California_HCD do anything about this? #sanfrancisco permitted 1 housing unit in February, bringing the total to 7 for the year. And 1,143 under this housing element.
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I seriously don’t know why @CAgovernor even bothers talking about housing if he’s not going to intervene in a city that thumbs its nose at statewide housing targets.
San Francisco needs 82,069 units of housing under the RHNA formula (which is too low but besides the point).#sanfrancisco has only permitted >5k houses in 1 year since 1980.
@GavinNewsom you worked here. You know SF will never build willingly.
Armand Domalewski: San Francisco permitted ONE UNIT OF HOUSING in Februrary and we have someone launching a Mayoral campaign on Saturday centered on the premise that this is too much.
So London Breed’s plan is, despite this, to rezone the city for more housing.
In particular, her plan is to upzone some places from 3 stories to 8 stories, and reducing or avoiding super-tall 50 story buildings elsewhere, partly because with current interest rates those get expensive.
All right. How is she going to do that?
She is going to write a letter politely asking the San Francisco Planning Commission to rezone for more housing especially around transit stops, instead of doing their best not to.
London Breed (link includes text of letter): We need a future that includes housing for all San Franciscans. This past week, I directed Planning to revise our proposed citywide rezoning plan so we see actual construction spread across the entire City.
Rezoning is an iterative process. We have time before our January 2026 deadline to propose a rezoning that is far bolder than the City’s current draft, and results in actually building new homes.
But what’s most important is that San Francisco can, and should, adopt a rezoning plan that results in far more housing than the current draft. This is the only way to meet our CA state requirements, and this is what we committed to do when we passed the Housing Element.
My North Star on housing has always been grounded in being ambitious, data-driven, and embracing change. These are my San Francisco values. Let’s redo the math and re-up our commitment to housing.
I’m excited to see what the talented staff at the Planning Department returns in response to my letter, and this renewed call to recalculate our zoning plan based on the actual probability of where development will actually occur.
We have until January 2026 to pass a robust, citywide rezoning that will be the most significant change to San Francisco housing since parts of this city were downzoned in the 1970s. It’s time to lean into this historic moment and see this challenge as an opportunity.
sp6r=underrated: #sanfrancisco housing permits through 15 months of the current RHNA cycle.
15 Permits this calendar year. 1,151 total.
I have no idea why SF’s nimbys feel so down. You guys are winning.
I don’t why anyone brags about yimby Sacramento laws. They aren’t doing anything.
Perhaps one place to start on building more housing would be to not give money to organizations whose central purpose is to stop housing construction? As in TODCO, a SF ‘affordable housing nonprofit’ that works to block the construction of any new affordable housing while reducing upkeep on its existing buildings and providing no new affordable housing. Why play into such a racket?
It is not only housing. Remember that story about how so many women dreamed of opening a 24 hour coffee shop and bookstore with a cat?
It’s super hard to build new homes in SF, partly b/c we made getting permits a chaotic, politicized, long process. We had the longest housing approval time in CA (26 months on average).
Under SB 423, that timeline is now capped at 6 months.
Permit streamlining is already in use across California under SB 35, the 1st law I authored as Senator. But it’s mainly used for 100% affordable housing, which is a small fraction of total homes. SB 423 expands SB 35’s successful streamlining to the vast majority of new homes.
San Francisco needs streamlined housing approvals badly: Last year, the state housing agency found that 18 SF housing policies and practices violated state law.
But we’re not stopping here—if cities don’t meet their housing goals, more will start triggering SB 423 next year 😈
Grow SF: San Francisco needs to build 82,000 units of housing in the next eight years. Since our Board of Supervisors can’t get the job done, the state has taken over control. It’s time to build.
SF Chronicle: S.F. being subject to SB 423 means that most proposed housing projects will not require approval from the Planning Commission and therefore won’t be able to be appealed to the Board of Supervisors.
Using the ‘ask Claude’ principle, I get a prediction of several thousand additional units of housing built per year, accelerating to close to 5,000 new units per year in the long term (e.g. 5+ years out). Presumably the city will do its best to prevent anything from actually being built.
Los Angeles city planning department proposal would revise zoning codes to make room for up to 250,000 new homes, also expand the adaptive reuse program to move from only applying to things built before 1974 to applying to anything built more than 15 years ago (so 2009), or 5 years with a conditional use permit. They have about 180,000 homes worth of empty offices.
Meanwhile Los Angeles is dealing with the consequences of ED1, an emergency declaration that the city needs more affordable housing. It turned out that no, they did not actually want lots of new affordable housing. I am not sure exactly why not, but there are limits, they are declaring them.
Jake: We’re doing the entitlements for a 39 unit ED1 project in LA, and here is where we are at:
Case was submitted about 2 months ago
We received a hold letter from the city
We addressed every change/correction with the architect
We resubmitted to the city
They deemed the case complete
They confirmed they are working on the letter of determination, which they will be issuing shortly
We then receive a letter of non compliance
We say WTF
So we get on a call with the city planner to find out what is going on, and it turns out their interpretation of state density bonus law has changed, and they will no longer be granting more than 5 incentives and 1 waiver for these projects.
Their stance must have changed in the last week. It’s a strong stance though. They made it very clear that this is the position of the city.
My advice to those working on these types of projects is to be proactive, and get in touch with your city planner to discuss what the best option is moving forward.
Toby Muresianu: Unbelievable but true: If you want to build exactly the 100% low-income Affordable housing the city declared an emergency need, years into a crisis, on land you own. They can’t simply tell you how much you’re allowed to build & may change their mind months after they do.
Mishka: LA deputy mayor of housing told NIMBY crowd @ UCLA’s land use law conference a few months ago that they were going to water down ED1 because it was getting too much housing production done, too soon. Citing a story of a dryer vent ‘blowing directly out onto a single family home.’
Los Angeles wrote an “emergency declaration” to address the housing crisis that somewhat accidentally *actually unleashed a torrent of applications to buildand now the city is furiously backpedaling.
There’s lots of room to disagree about specifics + genuine uncertainty about which policies generate lots of new units.
But the fundamental question for politicians to ask themselves is do they, in fact, want to make housing less scarce? If not it would be better to say so.
That’s right. The problem was that there was too much purely affordable housing being built. Can’t have that.
Hayden Donnell: Auckland’s housing market has been struck by a disastrous plague of affordability, to the point that some buyers might even be *pauses to retch violentlygetting bargains.
Monthly Earth Day – Crypto Whales NFT: This is ridiculous…..we can all read between the lines on the purpose behind this! 😡
Ariesangel1329: You want more housing yet you’re not deporting the EXTRA 50,000 illegal aliens that taxpayers are now paying for which includes housing. So in reality this will now allow 30 people in a 2 bedroom. The single-family neighborhoods are now gone. NWO plans are happening in CO.
It’s rough out there. Here is an op-ed on the subject from the Denver Post Editorial Board, arguing that the combination of ADUs and ending occupancy limits are excellent steps in the right direction.
This was only one of six major land-use bills signed by Polis this cycle. In addition to ADUs, we get increased density around bus and train stops, we eliminate many parking minimums, a new ‘right of first refusal’ for the government to buy properties to turn them into affordable housing (seems like an invitation to incinerate cash but not that destructive I guess), lifting occupancy restrictions (underrated), and requiring housing need assessments. Not bad.
But then Polis goes and makes a much bigger problem elsewhere? What is this?
Merrill Stillwell: Big shift in Colorado with a light form of rent control. This does not have the formal process in other States but it does open up lease renewals to legal scrutiny (including for unreasonable rent increases).
Sam Dangremond: Happy 4/20 to my fellow Colorado housing providers – and guess what… you’re now subject to a type of rent control!
Yesterday, @jaredpolis signed into law HB24-1098, the “For Cause Evictions” bill sponsored by (among others) Pueblo’s @NickForCO.
This law make it so that existing tenants cannot be “termed out” on a lease, and must be allowed to continue to rent a property UNLESS certain conditions apply.
One of those conditions is if the tenant refuses to sign a new lease “with reasonable terms.”
So, how much rent increase is still “reasonable”? Who knows! We’ll be spending lots of lawyer fees to find out.
The law even specifically says that we can’t try to get around being forced to continue to rent to a tenant by engaging in “retaliatory rent increases.”
But what’s this we see over here…? This law of course explicitly prohibits discriminatory and retaliatory rent increases, in accordance with existing law… but they also somehow snuck in a ban on “unconscionable” rent increases as well!
How much rent increase is “unconscionable“? Who knows!
Morgan: This is awesome! Now landlords can’t refuse to re-rent to you just so that they can jack up the prices for more profit.
Real Estate Ranger: I would prefer rent control over this lol.
Sam Dangremond: I had the same thought. An outright rent control regime at least gives owners certainty about what we can or can’t do.
Moses Kagan: Caused me to walk away from a sale process we were spending a bunch of time on.
They are very stupid.
Honestly don’t know how you underwrite a value-add MF deal in CO, at least until there are some court decisions about what constitutes “reasonable” I am particularly concerned that a court will look at the incremental return on capex for a given unit, rather than property-wide returns.
I don’t get why Polis did not know better. This is a disaster.
The good news is it could have been worse. According to the summary, you can choose to live in the property or have a family member do so, or put the property on sale.
Still, ‘sign a lease on reasonable terms’ is not something you ever want to be writing into a law. You need to define what are reasonable terms, at least to the extent of creating a generous safe harbor. Otherwise, this is rent control.
One obvious response to this is that a lot of properties might change hands a lot more. If the only way to evict a tenant is to sell the property, and the tenant is below market price and you can’t raise the rent? Well, guess what.
The lack of permission for a 24 hour bookstore is not unique to San Francisco.
Bernoulli Defect: It’s literally illegal to open a 24 hour coffeeshop (with a cat) in the UK without a council issued license.
These regularly get denied for spurious reasons and are a major reason London’s nightlife is below par.
Iron Economist (May 17): Great article by @jburnmurdoch in the FT today. People really don’t get the scale of the Uk problem. If we want to have outcomes like the good places we really do need to expand the total stock by 25-35%.
Simo: London – a city of 9 million people with the housing stock of a city of 6.5 million. In that context, the crazy numbers you see for rent start to make sense.
You would need to push more than that to get to normal levels, because there is tons of latent demand to live in London.
Following up on British growth deterioration, Tyler Cowen notes Claude 3 estimates 12%-15% of British GDP is land rent, and he estimates NIMBY issues account for about 15% of their GDP shortfall. I continue to think the counterfactual cost is vastly higher, if we compare to actually building to demand. Lowering the cost of housing would radically alter competitiveness and supercharge everything else, if it were fully fixed. That does not tell us what would be available from practical forward-looking marginal changes. My guess is still quite a lot.
Alce Stapp: Guess the floor area threshold at which French law requires a licensed architect to establish the plans for a new home.
A reasonable extrapolation is this means 75% of square footage above 170 ART (about 1830 sq ft) was not built due to this requirement. That is one hell of a cost, well in excess of what the architect could plausibly cost themselves especially if you presume that having one should be a benefit. So this must somehow be a much bigger deal than that, presumably around regulatory uncertainty and delays and that architects are absolute pains in the ass.
There is a difference between noticing absurdity and wanting it to stop or to bet against it, and being able to pull any of that off. The story here is a lot of people assuming Xi would not want to stop it, or at least being sufficiently worried that Xi would choose not to stop it. Yes, the investments clearly made no economic sense, and were in some sense absurd.
But we all know the market can stay crazy longer than you can stay solvent. For the Chinese government doubly so. These were not easy short bets to make.
What this doubles down on is that when there is what we will later call a historic real estate bubble, to the extent that ‘bubble’ is a thing, it is going to be rather obvious that a bubble is present. China recently, America in the 2000s, Japan before that, and so on. These were not subtle situations. These were very obvious, absurd situations. You might not be able to profitably bet on a reckoning, but if you buy in near the top that is on you.
Supply of rental homes up 240% and real rents down 34% from when Milei took office to May 20. That is what happens when you dismantle rent control in a country with extreme inflation, meaning that the resulting rents could easily get absurd in all directions.
Sacramento adapts new general pro-housing plan, mayor claims it makes it the most pro-housing city in the country. He correctly points out this is highly progressive, in the sense that this advances things progressives care about, although it also helps with things conservatives care about.
Welcoming Neighbors Network: The hits keep on coming in Arizona! HB 2721, which legalizes up to fiveplexes on all residential lots in larger cities just passed the AZ House of Representatives with a big bipartisan vote of 36 to 18.
There was talk that the governor would not sign, but Katie Hobbs came through, which now makes four pro-housing bills in Arizona.
She did veto another law, HB 2570:
Dennis Welch: Governor Hobbes vetoes the bipartisan “Arizona Starter Homes Act” (HB2570) that would have limited the zoning authority of most of the state’s cities and towns.
Daryl Fairweather: This logic makes no sense to me. Why is the Department of Defense telling the Governor of Arizona to block zoning for starter homes?
Legalize housing. It is both a good slogan and also a good idea.
The struggle is real, ongoing and ever-present. Do not sleep on it. The Housing Theory of Everything applies broadly, even to the issue of AI. If we built enough housing that life vastly improved and people could envision a positive future, they would be far more inclined to think well about AI.
What will AI do to housing? If we consider what the author here calls a ‘reasonably optimistic’ scenario and what I’d call a ‘maximally disappointingly useless’ scenario, all AI does is replace some amount of some forms of labor. Given current AI capabilities, it won’t replace construction, so some other sectors get cheaper, making housing relatively more expensive. Housing costs rise, the crisis gets more acute.
Chris Arnade says we live in a high-regulation low-trust society in America, and this is why our cities have squalor and cannot have nice things. I do not buy it. I think America remains a high-trust society in the central sense. We trust individuals, and we are right to do so. We do not trust our government to be competent, and are right not to do so, but the problem there is not the lack of trust.
Reading the details of Arnade’s complaints pointed to the Housing Theory of Everything and general government regulatory issues. Why are so many of the things not nice, or not there at all? Homelessness, which is caused by lack of housing. The other half, that we spend tons of money for public works that are terrible, is because such government functions are broken. So none of this is terribly complicated.
Matt Yglesias makes the case against subsidizing home ownership. Among other things, it creates NIMBYs that oppose building housing, it results in inefficient allocation of the housing stock, it encourages people to invest in a highly concentrated way we otherwise notice is highly unwise and so on. He does not give proper attention to the positives, particularly the ability to invest in and customize a place of one’s own, and does not address the ‘community buy-in’ argument except to notice that one main impact of that, going NIMBY, is an active negative. Also he does not mention that the subsidies involved increase inequality, and the whole thing makes everyone who needs to rent much worse off. I agree that our subsidies for homeownership are highly inefficient and dumb. A neutral approach would be best.
Zoning does not only ruin housing. Taylor Swift’s Eras Tour skipped New Zealand because there were not sufficient resource consent permits available to let her perform at Eden Park. They only get six concerts a year, you see.
With Pink’s two shows on March 8 and March 9 and Coldplay’s three shows on November 13, 15 and 16, it leaves Eden Park with only one concert slot this year. Considering the Grammy winner is playing seven shows across two Australian venues this February, Sautner says: “Clearly, this wasn’t sufficient to host Taylor Swift.”
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The venue also needs to consider the duration of concerts in any conversations – as the parameters of Eden Park’s resource consent means shows need a scheduled finishing time of 10.30pm, something that may have been too difficult for Swift to commit to.
A short video making the basic and obviously correct case that we should focus on creating dense walkable areas in major cities. There is huge demand for this, supplying it makes people vastly more productive and happier, it is better for the planet, it is a pure win all around.
Jonathan Berk: “Only 1% of the land in America’s 35 largest cities is walkable. But those areas generate a whopping 20% of the US GDP.”
Elizabeth Warren: 40 years ago, a typical single-family home in Greater Boston sold for $79.4k—about 4.5X a Boston Public School teacher’s salary. Today, that home would go for nearly 11X what that teacher makes now.
We must bring down costs, which means we need more supply—plain-old Econ 101.
Elizabeth Warren: America is in the middle of a full-blown housing crisis. There are a lot of ways to measure it, but I’ll start with the most basic: We are 7 million units short of what we need to house people. What can we do? Increase the housing supply. It’s plain old Econ 101.
Exactly. We do not need specific ‘affordable housing.’ What we need is to build more housing where people want to live and let supply and demand do the work. So, Senator Warren, what do you propose we do to make that happen?
The actual proposal seems to be modest, allowing small accessory dwellings. Which is a great proposal on the margin, happy to support ADUs, but not where the real action could be.
Jake Moffatt: Median home in California is 850k Median salary is 77k Even with 0 other debts, and a 200k down payment, you can only even get a loan for about 450k This isn’t gonna be addressed by people eating spam and white bread every day.
Matthew Yglesias looks at attempts being made in Maryland. On principle we have a robust attack on local control. In practice, the ‘affordability’ requirements that attach mean it likely won’t result in much housing. I agree with Matthew that we want the opposite, to maximize housing built for a given amount of local control disrupted. Even if your goal is to maximize only the number of specifically affordable units built, you still want to ease the burden on projects to the point where the project happens – as he notes, if you ask for 25% of units to be loss leaders, you likely get no building without a huge subsidy, if you ask for 5% you might get them.
Same thing with ‘impact fees’ and other barriers. If they are not doing any work other than throwing up a barrier, get rid of them. If they are doing good work (e.g. raising revenue) then you want to set the price at a level where you still get action.
Nolan Gray: This is the most potent zoning reform framing, and why YIMBY has been more successful than previous efforts: Most people live happy, normal lives, oblivious to zoning. When you point out that things like duplexes or townhouses are illegal, it shocks many into action.
It also makes sense that one can start with the basics, like pointing out that duplexes are illegal in most places, rather than starting with a high rise. Many don’t know. Others of course know all too well, but duplex construction has broad popular support.
Detroit may be going Georgist. Faced with so much unused land, they propose lowering the property tax from 2% to 0.6%, while raising the tax on the underlying land to 11.8%. Never go full Georgist, one might say, so will this be full or more-than-full Georgist? A per-year tax of 11.8% of value is quite a lot. Presumably the way the math works is that the value of the land gets reduced by the cost of future taxes, which should mean it decline by more than half, while the additional value of built property goes up as it is now taxed less than before. It seems good to turn over the land quickly, so perhaps charging this much, well past the revenue-maximization point, isn’t crazy?
Rebecca Tiffany: Communities should be designed for 12 year olds & senior citizens who no longer drive & people using mobility aids to be able to comfortably & safely get around without a car or driver – to all of their daily needs.
Also we should build so much housing that an 18 year old trans kid can move out from unsupportive family member’s homes into a micro apartment or rooming house with a barista job. Those economic dynamic used to be the norm & we need to build that way again.
We need so much housing that a domestic violence victim or just a woman who is done with mistreatment can get an entry level job & quickly get a small, safe apartment for themselves & their kids.
A lot of ppl think they’re fighting for the disadvantaged when actually, they’re just vaguely fighting against broad categories like ‘landlords’ & ‘developers’. Lots of slogans, zero policy. If we’d redirect our energy to just fighting to get volumes built, we’d see stabilization.
In every market where there are more homes than people seeking housing, it becomes quickly affordable. The inclusive city can only be built on this understanding that a LOT of newcomers will flood everywhere desirable for the next decades.
Fighting against infill means you’re fighting FOR the destruction of farmland & forests. Fighting against densification means you’re fighting FOR suburban/corporate/car-centric lifestyles.
The inclusive city isn’t frozen -it’s dynamic, constantly changing. It’s designed for the newcomer, the ppl w/o assets, the young adult with big dreams, the artists, the elderly. Car infrastructure &limited zoning kill off the vitality of what makes cities beneficial to the whole.
All true, the question is does such rhetoric convince anyone?
Scott Sumner emphasizes how much more destructively regulated so much of our lives has gotten since 1973, and that this is likely a central cause of the productivity slowdown (‘great stagnation’) that followed.
One specific note is that 1973 is when we prohibited manufactured homes from being transported on a chassis and then placed on a foundation, killing the industry, as detailed in this (gated) post by Matthew Yglesias:
Longer term, Balsa will hopefully be exploring and pushing these and other Federal housing opportunities as its second agenda item. Standardizing building codes seems like excellent low-hanging fruit. Standardizing zoning would be even better.
Strong Towns: If we want more than a bandaid on the housing crisis, the next increment of development should be legalized by right, in every neighborhood across North America.
Emmett Shear: This is a brilliant compromise. By-right construction throughout the US, but only one incremental step denser each time. Ensures change is possible broadly, without causing massive disruption. Of course you’d still be able to permit bigger change, but one step by right.
This will of course lead to some highly silly situations, in which the right thing to do is build house A, tear it down to build B, then tear that down to build C, and so on. Presumably you want some sort of minimum pause in between. I do like that this gives an additional incentive to move up at the first opportunity. Also a lot of very temporary housing is going to get built, but my guess is that is a minor cost, and hey it creates jobs.
Shoshana Weissmann: @GovGianforte stresses he focused on supply issues. Apparently government regulations account for 40% of the cost of a new home. Permitting delays raise prices. He streamlined permitting by helping builders apply to a growth plan tags already gone through public hearings
NotaBot: 40%! I knew that individually, a some reforms like removing off-street parking requirements could lead to big cost reductions, but this is wild. Represents a huge opportunity to make housing more affordable, if elected are willing to prioritize housing over other concerns.
Misinformation Guru Balding offers us a thread explaining how much American government, and especially liberal American government, acts as a barrier to ever building anything, from buildings to clean energy projects.
A paper by Alex Tabarrok, Vaidehi Tandel and Sahil Gandhi, Building Networks, finds unsurprisingly that when there is a change in local government it temporarily slows down development in Mumbai, India. Delayed approvals explain 23% of the change. Part of this is the obvious bribery and corruption ties that need to be renewed. The harmless explanation is that you were planning on building whatever the current government approved of building, and now that has changed, and also the change in government interrupts all the work done towards approvals and some of it needs to get redone.
Abstract: We introduce a new way to measure the stringency of housing regulation. Rather than a standard regulatory index or a single aspect of regulation like Floor Area Ratio, we draw on cities’ self-reported estimates of their total zoned capacity for new housing.
This measure, available to us as a result of state legislation in California, offers a more accurate way to assess local antipathy towards new housing, and also offers a window into how zoning interacts with existing buildout. We show, in regressions analyzing new housing permitting, that our measure has associations with new supply that are as large or larger than conventional, survey-based indexes of land use regulation.
Moreover, unbuilt zoning capacity interacts with rent to predict housing production in ways conventional measures do not. Specifically, interacting our measure with rent captures the interplay of regulation and demand: modest deregulation in high-demand cities is associated with substantially more housing production than substantial deregulation in low-demand cities. These findings offer a more comprehensive explanation for the historically low levels of housing production in high cost metros.
This makes sense. Permitting lots of supply is not effective without the demand. If you have the demand, what matters is what can be supplied, which this measures.
Cooper McCoy: A wave of multifamily supply is coming this year. These housing markets will see the most. JBREC: “While 2024 and 2025 should be the busiest years on record for new apartment construction and deliveries, the pipeline will thin out after that” A significant amount of multifamily supply, financed during a period of ultra-low interest rates during the pandemic, is set to come online this year.
However, the impact of this influx of apartment supply won’t be uniform across all markets. Recently, researchers at John Burns Research and Consulting published a paper finding that the biggest multifamily unit pipelines can be found in…
(1) Dallas (55,212 units)(2) New York (53,330 units)(3) Phoenix (51,208 units)(4) Austin (42,986 units)(5) Newark (38,809 units)(6) Atlanta (34,250 units)(7) Charlotte (33,309 units)(8) Houston (30,893 units)(9) Washington D.C. (29,359 units)(10) Denver (29,164 units)
Cooper McCoy: However, beyond 2024 and 2025, multifamily competitions will begin to decelerate. “While 2024 and 2025 should be the busiest years on record for new apartment construction and deliveries, the pipeline will thin out after that. We expect the surge in housing apartment construction to be temporary,” wrote Basham at JBREC. Basham added that: “Current permitting numbers [see chart] suggest development will slow once the current wave delivers. As interest rates rose and apartment fundamentals softened, financing for new apartment developments evaporated.”
There is still plenty of eagerness to build housing in the places people want to live, if it were further legalized. But with only marginal opportunities available, and the need to account for long delays and additional costs, the higher interest rates are going to sting.
Alyssa Vance: Apartment rents are going down. Adjusted for overall inflation, rent is actually slightly cheaper than in 2018
Daniel Parker: Wouldn’t be surprised if this is mostly caused by people moving from places where rent is crazy high to places where it is more reasonable.
Inflation-adjusted is the watchword, but so I presume is composition, and this chart is easy to find but highly misleading.
Rent growth has declined since its peak. Overall rent price increases have slowed down since a February 2022 peak of 16% and remain lower than pre-pandemic rates, according to Zillow. Year-over-year rent growth ranged between 4.0% and 4.2% throughout 2019.
Rents average $1,957 across the U.S. Typical asking rents in the U.S. are 3.3% higher than at the same time last year.
That seems far more sane, comparing the same metro area to itself over time.
Alfred Twu: Density of new housing in the US is similar to China. While the 30-story towers look impressive, the 6-story buildings popping up throughout American cities are more efficient. Both have around 150 homes per acre.
How did the US and China end up building the same density so differently? In the US, height limits of wood construction, zoning, and urbanist design guidelines create buildings that fill the block.
In China, buildings are made of concrete, and there is a premium for south-facing units and green space. Zoning allows taller heights, but still has density limits, and so the result is towers in the park.
So, why do Chinese cities have higher population density than American ones? Suburbs. While China does build oneplexes (they call them villas), these take up a much smaller fraction of the land, vs. American cities where 75% of land being oneplex-only is typical.
[More great detail in the thread, I especially loved the detail about ‘transferable development rights’ in NYC where landmarked buildings can literally sell their zoning height.]
Frye: A unique aspect of American apartments is how little light and air each unit gets half of the units on the left will never receive direct sunlight! Asian-style tower apartments don’t have internal hallways, so there’s always light on two sides. And you can cross ventilate.
Emmett Shear: What’s great about 6 story buildings vs 30 story buildings is that they offer a lot more commercial street-level frontage, which makes walking around much more pleasant and productive. “Towers in the park” does not objectively seem to produce good neighborhoods.
My guess is that America got this one essentially right, and China got it wrong, although neither country did it for the right reasons. The Chinese advantage in light and views is nice.
But I think Shear’s note is very important here.
I don’t have the lived experience with it, but if you have a ton of green space and a few large towers, then a lot of people are effectively farther away from street level, and with so limited a supply of ground floors you are not going to get interesting areas with lots of opportunity. Our approach is also cheaper. The American mistake seems better than the Chinese mistake.
There are rapidly diminishing marginal returns to green space. I am very happy to have a small park very close to us to walk around. It would indeed be really cool to be right by a larger one, especially something as well-designed and expansive as Central Park. But once you have a very close playground and tiny walkable green area, and one reachable large park, additional public green space seems of relatively little value, mostly serving to create more distance.
My guess is a synthesis is best. New York actually does a version of this very well, except our density is not high enough. You want enough parks and green space so everyone has some available. You want the majority of the space to be taken up by relatively small buildings that are 6 or 12 (or eventually 24?) stories, often but not always with storefronts. And then you want a bunch of taller buildings as well.
It makes sense to have a non-zero number of buildings designated as landmarks. I would however choose zero landmarks and take our chances (and allow those who care to buy the buildings in question, including the city, if they disagree) if the alternative is the current regime, this is ridiculous:
Sam: my coldest take is that every single surface parking lot in Manhattan should be replaced with high rise apartment buildings this specific parking lot in lower Manhattan was designated as a “historic landmark” for decades, preventing housing from being built.
they were trying to build mixed income housing here for years and were held up due to the fact that the parking lot was a “historic landmark”
John Burn-Murdoch: NEW: we don’t reflect enough on how severe the housing crisis is, and how it has completely broken the promise society made to young adults. The situation is especially severe in the UK, where the last time house prices were this unaffordable was in … 1876.
My column this week is on the complete breakdown in one of the most powerful cultural beliefs of the English-speaking world: that if you work hard, you’ll earn enough to buy yourself a house and start a family.
The last time houses were this hard to afford, cars had not yet been invented, Queen Victoria was on the throne and home ownership was the preserve of a wealthy minority. After ~80 years of homeownership being very achievable, that’s what we’ve gone back to.
It’s a similar story in the US where the ratio of prices to earnings has doubled to 8x from the long-term trend of 4x. To state the obvious, in both countries last time houses were this difficult to afford homeownership rates were much, much lower than today.
This has significant knock-on effects. In both Britain and America, the most common situation for young adults used to be living as a couple with children. Today it’s living with their parents.
Note that the scales in the first two graphs are distinct.
Democrats were split on whether affordable housing developments should be forced to offer lots of parking spaces, Republicans largely understood that this requirement is dumb.
I am curious to see this question asked for general housing projects. I can see this changing the answer both ways. Presumably the original logic was ‘in order to be virtuous and affordable these projects need to offer less parking’ but the standard Democratic position could turn out to be the opposite, ‘you will not cheat the poor people out of a parking space, but if rich people don’t want one I don’t care.’
Both groups strongly agreed that speeding up construction and giving local governments deadlines are good ideas. This is a great idea and also a greatly popular idea, so it should be a relatively easy sell.
Alex comments on the last post, not bad but Patrick is still champion for now:
Allison Shertzer: Guys you will never believe what just happened. A neighbor here just cold-called to make sure I knew that they are *gasptrying to build apartments behind my house and asked that I come to a meeting to speak out against this. It was like my research came to life!
Since I have never encountered a real NIMBY in the wild, I just let her speak. Her points were that (1) her home is an important part of her wealth so she has to protect it, (2) rental units just enrich landlords and do nothing for renters.
When I told her I was renting this property for the year, her tone completely changed. She said, “Well, I guess you aren’t interested in what happens to the neighborhood then.”
I answered that actually I am interested, since I would like to live here long term, and decades of underbuilding in nice neighborhoods like this one have made it hard to find a home.
Then she said that I’m not the kind of renter she was talking about. That my “likely income” made me an acceptable sort, or something to that effect. But she reiterated that I wouldn’t attend the meeting since renters aren’t invested in anything.
But now I will attend the meeting. I have no idea how this person got my number, but she may regret calling all the neighbors to unite us against building something.
(I note here that we’re renting a church property temporarily, which she did not realize, and her assumption was that I was associated with the church and would still gladly go out and ensure the less fortunate cannot live anywhere near me. I was in awe).
I was very nice. I told her that I understand the desire to keep one’s home value as high as possible, but giving neighbors veto power over development has created a housing crisis for future generations and that I consider this one of the great social problems of our time.
She protested that she was only trying to protect her beautiful “green” neighborhood against greedy developers and renters who desire to live here but can’t afford to. I really just could not believe how close the stereotypes were to reality.
Anyway, the world is on fire but I had to share that my research came to life and called me out of the blue today. We are never going to have abundant, affordable housing until we can stop local “interests” from blocking everything.
Orange Owl: Lol. This reminds me of when my kid’s (public) school was getting overcrowded and some parents were chatting and said maybe one “solution” would be to limit attendance to homeowners!! One of the parents then said she was a renter. The others’ facial expressions were priceless.
Corrine Low: We show a series of policy changes eroded the relative contract strength of marriage compared to non-marital fertility. Without a strong contract, people couldn’t harvest as much value from marriage to make jointly optimal, but individually risky choices, such as specialization.
Prior to these reforms, if one partner invested more in children while the other worked more, there was a guarantee of income sharing. Once divorce became easier + more common, women had to protect their own income streams! Which meant marriage no longer offered as much value!
Who was still able to harvest the value of marriage? Those with access to collateral. Wealth–assets, houses, etc–would be divided at the time of divorce, guaranteeing some recompense to the lower earning partner. Homeowners have NOT seen the same erosion of marriage rates!
[thread continues]
The thesis is that marriage rates are declining because marriage no longer represents an assurance of physical security, so it does not enable specialization for having and raising children. Such a strategy can no longer be relied upon without a large bank of marital assets, people realize that, so they don’t see opportunity in getting married, the contract is not useful.
I would be careful about attributing too much to this particular mechanism. I do buy the more general argument, that marriage is declining because the contract no longer makes financial sense if it cannot be relied upon. Failure in the form of divorce can be devastating to both parties – the high earner can be put into virtual slavery indefinitely, the low earner left without means of support. Without true commitment the whole thing is bad design.
A straightforwardly correct argument that labor should strongly favor building more housing. If we don’t build more housing, then all the gains from moving to high productivity areas, all the higher wages you fight for, will get captured by landlords.
Instead, unions typically hold up housing bills if the bills don’t extract enough surplus and direct it to unions. If a bill allows more housing to be built, and thus there to be more construction jobs, while not requiring those jobs to be union or pay above-market price for labor, they will prefer that housing not be built, those job not exist and their housing costs remain high. Similarly, unions have opposed streamlining CEQA in California, because CEQA presented a leverage opportunity they could use in negotiations.
The good news is that in California some unions are coming around, as the above Vox article chronicles. As we’ve discussed a bit previously, it has been a struggle to get them to begrudgingly agree to things such as a rule that, if ‘prevailing wages’ are paid and workers treated well, and not enough officially ‘skilled and trained’ workers are available, other workers could also be hired.
David Huerta, the president of California SEIU State Council, said after surveying members on issues they’re dealing with, it became clear SEIU needed to stand up more on housing. “Regardless of if you’re a janitor or a nurse or a health care worker or a home care worker, everyone overwhelmingly said the number one issue was housing affordability,” he told Vox. “We have members sleeping in their cars, who have big families sleeping in one-bedrooms, who are traveling hours and hours to get to work because they can’t afford to live near their jobs.”
…
But in April a major twist happened: two more construction unions — the California Council of Laborers and the state Conference of Operating Engineers — broke with the Trades to publiclysupport Wiener’s housing bill. “We believe the balance that this legislation strikes will result in more available housing and ultimately lead to more affordable housing that could be utilized by our membership and those in need,” said the Operating Engineers in a public letter.
The problem is that the incentives for unions are beyond terrible. They are there to protect the exact existing jobs of the exact existing members, and help them extract as much as possible. Offering to grow the union, and create more good union jobs? They might actively oppose you.
One important factor shaping the politics in California is that not all labor groups see rapid membership growth as inherently positive.
Laura Foote, executive director of YIMBY Action, recalls one of her earliest memories of advocating to expand California’s housing supply. “I was just starting to map out who would be pro-housing, and anyone who built housing seemed like a natural ally,” she told Vox. Foote met with a San Francisco planning commissioner who was also a member of the electrical trades.
“I had a one-on-one with him like, ‘Okay, all the construction industry trades are going to be on board? Let’s build a lot of housing!’ And he was very blunt that no we do not want to unleash production … For him, there was a problem that if we unleashed housing production and grew our labor force, then when there’s a downturn all of his guys would be banging down the door at the union hall when times are low and out of work.”
They don’t want to allow more jobs, because if those jobs are union they might later be lost or existing members threatened, and if they are not union then they’re not union.
How much does the ‘prevailing wage’ requirement cost? No one knows for sure.
No one could say exactly how much more a project might cost if prevailing wage is required, and different estimates abound. Ben Metcalf, the managing director of the Terner Center for Housing Innovation at UC Berkeley, told Vox his organization believes it increases prices in the 10-20 percent range, but can vary a lot by region. Some estimates have it lower than that, and some others have it higher.
The snappy answer is that if the ‘prevailing wage’ was indeed the prevailing wage, paying it is what you would do anyway. Which tells us this means something else, and a 10%-20% total increase in costs implies it is quite a bit higher indeed, and you don’t get much in the way of higher quality in return.
That still seems highly affordable given how things are going these days, if it alone lets you build. The problem is that if others also come for large shares of the pie, for too many others, it can add up fast.
If we are spending that money well this is fantastic, and note that the bottom of the chart is indeed the zero point. Are we spending the money well? In the places and for the things we want, and efficiently?
Airbnb offers us a housing council, convening various government officials and experts, to ensure that their offerings ‘make communities stronger.’ As far as I can tell, this is them supporting a few unrelated generic good-vibes housing-adjacent things.
Matjaz Leonardis: If you read this story and it enrages you, you are The Batman. If instead it makes you try to come up with clever ways of showing to everyone that they too would let someone freeze to death in the name of upholding a contrived standard, then you are The Joker.
Cranky Federalist: I am going to become the Joker.
Story (no citation was offered): Outrage spread Friday after the story about a pastor in Ohio who was arrested and charged for opening his church to homeless people when extreme cold weather struck his town gained national attention.
Chris Avell, the pastor of an evangelical church called Dad’s Place in Bryan, Ohio, pleaded not guilty last Thursday to charges that he broke 18 restrictions in zoning code when he gave shelter to people who might otherwise have frozen to death.
Avell garnered the attention of the Bryan City Zoning Commission last winter, when he invited unhoused people to stay in his church to avoid the cold and snow.
In November, officials told him Dad’s Place could no longer house the homeless because it lacks bedrooms. The building is zoned as a central business, and Ohio law prohibits residential use, including sleeping and eating, in first-floor buildings within business districts.
Zvi: Who are you if you think ‘aha an excellent illustration to help convince people to loosen their zoning laws’?
Andrew Retteck: Commissioner Gordon.
Matjaz Leonardis: It’s interesting to struggle with finding a character because this highlights how irrelevant “the people” are in that story.
Austin keeps building gorgeous new office buildings, often giant skyscrapers, despite little demand by anyone for new offices to work in, and few tenants lined up. People worry about a bust, older less cool office space is losing value.
I would not worry. Austin’s real estate prices have gone through the roof in the last few years. Yes, they are running ‘Field of Dreams’ here, but that should be fine. If the price comes down a bit? Good. High rents are not a benefit. High rents are a cost. I do not much care if some real estate developers lose money. If it turns out Austin ends up with too much commercial space versus not enough residential space to support it, the solution is to build more residential space.
Tyler Cowen calls for NIMBY for commercial real estate, predicts strong gains from resulting mixed use neighborhoods. As he points out, if commercial real estate was cheaper and more plentiful, and I would add more convenient, more people would use it rather than working from home. He is more gung-ho on this than I am, seeing in-person interactions as more valuable than one’s freedom to not have those interactions, but certainly the option would be appreciated.
When I think about Tyler’s example of adding a bunch of commercial towers to the Upper East and Upper West Sides of Manhattan, that does not seem obviously good to me. I think it would be good to have a bunch of commercial midrange stuff there, but that going pure vertical (e.g. 30+ stories) in those areas would be a tactical error, destroying vibes people value. Central Park makes it difficult to pull off well. As usual (see discussions of congestion pricing), Tyler Cowen does much not care if inhabitants of Manhattan are happy.
It is on. San Francisco refuses to build, and the state of California is having none of it.
Sam D’Amico: The state has figured out specifics of why SF doesn’t build any housing and has fixes SF will be compelled to implement. Meanwhile it’s highly likely SF’s board of supervisors (who are … notionally, members of the exact same political party) are going to try to block it.
Chris Elmendorf offers a thread: When SF adopted its new housing element in Jan. 2023, it committed ex ante (behind the veil) to adopting any “priority recommendations” from the audit.
Today’s report reiterates this commitment in bold font and then leverages it, listing 18 “Required Actions” that the city must undertake on pain of having its housing element decertified (exposing city to Builder’s Remedy).
Each “Required Action” comes with a deadline. Some arrive in just 30 days!
SF’s Board of Supes has spent last 6 months hemming, hawing, watering down & wavering on @LondonBreed’s draft constraints-removal ordinance.
California says: pass it in 30 days, or else.
Here’s the money finding from the audit: – SB 35 projects (ministerial under state law) go fast – everything else get stuck in the city’s molasses – ergo, all housing development permits in SF should be ministerial
Getting there will not be easy, politically. Some tells: – HCD invited the current supes, planning commissioners & historic preservation commissioners to meet about the audit. Most declined. – City’s own planners (!) told HCD they operate in shadow of a lawless Bd of Supes.
And while there are many strong “Required Actions” in the report, there’s also significant ambiguity on the central question of what class(es) of housing projects must be made ministerial.
The report says that by Jan 2024, a small class must be ministerial. And by fall of 2026, city must establish “a local non-discretionary entitlement pathway, w/ progress updates to HCD every 6 months.” A pathway for what? For *allcode-compliant housing projects? Or just for projects that are ministerial per specific state laws? (SB 423 will require certain projects to be ministerial starting mid-2024. Housing Element Law will require certain other projects to be ministerial starting in 2026. But what about the rest?)
[thread continues]
Annie Fryman: Surprise! By next summer, most housing developments (including market-rate) in SF get streamlined, objective approvals through a last minute update to @Scott_Wiener’s SB 35 — now known as SB 423. No CEQA, discretionary review, appeals… my piece.
Sam D’Amico: SB 423 is now law … SF NIMBYs are now (specifically) de-powered.
Benjamin Schneider: What happens to a San Francisco neighborhood when development is allowed? Ironically, we have the answer because of the most notorious NIMBY incident in recent San Francisco history. In 2021, the Board of Supervisors delayed a 495-unit development on Stevenson St. in SoMa, on the legally dubious grounds that the parking-lot replacing project failed to analyze its gentrification impacts.
A year later, the new environmental impact report was released. It found — wait for it — that the development would not cause displacement because it was to be constructed on a parking lot. In fact, the analysis determined that leaving the site as a parking lot would be more likely to cause displacement than developing it with nearly 500 homes, including 73 deed-restricted affordable homes.
Overall, he is optimistic that the new regime is a vast improvement.
Unleashing lots of housing construction does not automatically increase racial or economic diversity. In plenty of cases, it has done the opposite. But what San Francisco has going for it, and what it continues to have going for it even under its new housing policy regime, are strong tenant rights and strict regulations governing the demolition of existing housing. State laws like AB 2011 direct development toward under-utilized commercial areas. Other local and state policies require homes slated for redevelopment to have been previously occupied by the owner, not a tenant. In theory, this should mean that the person whose home is being redeveloped is voluntarily cashing out, not involuntarily being pushed out.
Is this a perfect system for development without displacement, for improving affordability, or for creating a green, transit-oriented metropolis? Probably not. But is it an orders of magnitude improvement on the previous housing policy regime? Absolutely.
Meanwhile in Palo Alto, new builder’s remedy project aims to build 3x taller, 7x denser than city zoning code allowed, with a 17 story tower. Comments complain about there not being enough parking, because everything is maximally cliche.
Alas, those central planning instincts never go away. A council member effectively vetoes and ends a Crown Heights project that would have given the local community everything it asked for, while building on a vacant lot, because the Adams administration plans to do a ‘larger rezoning’ and they should wait for that. Wait, what? Under the new plan, the building would be permitted, so why not allow it now?
The key is not to build housing. It is to let people build housing.
Greg David: NYC Will Build Just 11,000 Homes This Year, Half of 2022 Total, Annual Report Finds. The forecast by the New York Building Congress reflects the fallout from the expiration of a major tax break for developers.
But the key issue in the report is the decline in residential construction, driven by the expiration of the 421-a tax break.
First implemented in the 1970s to spur affordable housing construction, 421-a eliminated or reduced property taxes for up to 35 years for developers of rental buildings. Those breaks currently cost the city $1.8 billion a year in lost tax revenue. Developers receiving the benefit in recent years were required to set aside 25% or 35% of their housing units as income-restricted affordable apartments.
Research by the Furman Center had suggested that developers in 2022, anticipating a lapse in the 421-a program, applied for permits to build 70,000 units — enough to produce 20,000 new homes a year for three years. A year ago, the Building Congress expected a similar result, forecasting 30,000 completed units for 2023.
However, to qualify for the tax break, builders had to both put foundations in the ground by June 2022 and be able to complete construction by 2026. The data from the Building Congress and the Real Estate Board suggest that relatively few projects are moving ahead under those conditions.
I agree that the incentive is worthwhile, but this looks a lot less like ‘there was a real decline in housing construction’ and more like ‘everyone moved their actions in time to quality for a major expiring tax break.’ The question is what happens after 2026, once all that construction finishes.
From 2021 ICYMI: Did you know that if you offer tax breaks for ‘low-income’ housing, but purchases still require large down payments, you are effectively subsidizing the children of the rich who borrow the money from their parents? Bloomberg investigated the related program in NYC, and that’s exactly what is happening.
Getting rid of parking minimums seems pretty great.
Joshua Fechter: Breaking: Austin just became the largest U.S. city to get rid of minimum parking requirements for new developments Nixing those requirements will allow more housing units amid the city’s affordability crisis, encourage density & discourage car-dependency, supporters say.
Austin also tried letting developers build taller in exchange for more affordable housing. It turns out that they technically violated Texas state law and ‘the interests and legal rights of Austin homeowners’ according to the villainous Judge Jessica Mangrum.
Audrey McGlinchy (Kut News): Judge Jessica Mangrum said the city failed to adequately notify property owners that developers could build more than what is typically allowed near them. As a result, the city has to throw out the policies, although they will not be fined despite the plaintiffs’ request. A fourth housing policy adopted in 2019, which lets developers bypass certain building rules as long as half of what they build is for people earning low incomes, was upheld by the court.
A notification problem, you say? Annoying, but ultimately no problem. Let’s put everyone on proper notice.
Except it seems they tried that, and shenanigans?
In the ruling signed Friday, Judge Mangrum said the city again failed to send proper notice to nearby homeowners. The city did mail homeowners to notify them about one of the housing programs, but the plaintiffs’ lawyer argued not all homeowners within a required distance received the notice and that the language of the mailer was not sufficient.
“I’d really like to see the city start following the rule of law. It’s not that difficult,” Allan McMurtry, who owns a home in Austin’s Allandale neighborhood and is one of the plaintiffs, told KUT.
Allan McMurtry is, of course, lying. He wants Austin to continue to technically fail to follow the convoluted notification rules so that he can keep suing to block development.
Still, there is lots of good progress:
Becker said he is looking into additional legal action against more recent zoning changes made by the City Council. Last week, council members voted to let people build up to three homes on land where historically only one or two homes have been allowed.
Steven Doan: A great thread on House Bill 102 I sponsored. Having served on the board of directors for a local homeless shelter, I felt the need to do more to address housing insecurity in our state. I look forward to addressing this issue for the people of Kentucky.
Nolan Gray: Wow. Kentucky State Representative Steven Doan that would implement…basically the entire YIMBY program! I’m still learning details, but this is a great model for a zoning reform omnibus bill.
Right off the bat, Section 3 forbids jurisdictions from arbitrarily mandating larger homes and apartments, which effectively place a price floor on housing. Jurisdictions must default to the building code, which is rooted in actual health and safety considerations.
Section 4 likewise preempts various design/architectural/amenity mandates (e.g. forcing the construction garages) that raise housing costs without any basis in health of safety. These can often quite onerous in exclusionary suburbs. Let homebuyers make these tradeoffs!
Arkansas passed a law doing something similar in 2019, banning arbitrary minimum home sizes and other design/architecture/amenity mandates. In Arkansas as in Kentucky, it was really a handful of exclusionary jurisdictions exploiting these rules.
Section 5 just goes there and legalizes fourplexes in residential districts statewide. Cities can’t be demolitions, but they can maintain current massing rules. Extra floor area will be needed to get units here, but an important (and symbolically valuable) step.
Section 6 legalizes ADUs, and preempts most of the usual poison pills, e.g. owner-occupancy mandates and prohibitions on renters. It also clarifies that mobile homes cannot be banned, and imposes a 30-day shot clock. Very nice.
Section 7 does something new: it legalizes manufactured tiny homes in all residential districts.
Section 8, AKA the unsexy process reform section that would matter a lot: establishes a 60-day shot clock for all residential permits, caps fees, and limits hearings/studies—all quiet sources of slowing housing production that benefit no one. Love it.
Section 9 extends all of the same protections to variance requests—again, very cool. The delays and costs associated with variances can fall hardest on lower-income families who may own non-conforming properties. No reason not to set clear standards here.
Section 10 ends minimum parking requirements within a half mile of all transit stops, statewide. Simple, but potentially transformative.
Section 11 legalizes home-based businesses statewide. Again, regulations here can’t just be arbitrarily invasive—they must be rooted in nuisances. Key for expanding entrepreneurship opportunities.
Section 12 allows residential uses in commercial areas. Potentially hugely impactful as we figure what to do with all of these half-empty strip malls and office parks. Corridor midrise has been a major source of new housing in reforming jurisdictions.
Lucky Section 13 ends prohibitions on rentals, and forbids occupancy limits tethered from health-safety codes. Jurisdictions regularly place arbitrary limits on the number of unrelated people who can live together. (Often using antiquated language about “blood,” etc.) Done!
Section 14 reinforces an enduring theme of the bill, which is that zoning ordinances adopted pursuant must be rooted in actual health and safety considerations—no arbitrary or exclusionary nonsense.
Section 15 clarifies the legal standards on which challenges to the law must be considered. Crucial as NIMBYs in e.g. Montana try to torpedo pro-housing reforms through the courts. Where there’s ambiguity, default to liberalization.
Section 17 requires cities to update their zoning ordinances in compliance with this section. Wonky, but so crucial. We haven’t done this in recent bills in California and it has come back to bite us. Cities need to change laws and update processes. Sections 17 and 18 clarify powers reserved by HOAs and cities. I know many of you won’t like Section 17, but in my experience, it can be a valuable compromise for passing bigger pro-housing reforms.
Tokyo keeps growing and allows lots of freedom to build while keeping prices low. Tyler Cowen proposes that instead those low prices in Tokyo are instead due to the NIBMY culture that is Japan. If you have no immigration and in general can’t do anything all that productive, but allow instead only low-value construction, you perhaps get low housing prices. The ‘true YIMBY’ would instead increase prices, because it would provide more value, and Japan remains poor relative to us instead. I see the point, but also consider this redefinition (reframing? reconstruction?) too clever by about half.
Kenneth Chan: Transit-oriented housing development will be the law of the land in Metro Vancouver, across BC. Overriding cities: – #SkyTrain stations: Minimum 20 storeys within 200 metres; 8-12 storeys, 201-800m – Density for bus loops
For transit-oriented density near bus exchanges, the BC government will require Metro Vancouver cities to allow the following: – 12 storeys within 200 metres of bus exchange, with 4.0 FAR – 8 storeys and 3.0 FAR, 201-400 metres.
As part of British Columbia’s new transit-oriented development legislation, minimum vehicle parking requirements for new buildings will be eliminated within 800 metres of a #SkyTrain station and 400 metres of a bus exchange.
Alex Bozikovic: It’s extraordinary what BC’s government has done: changing zoning to allow apartments in big swaths of each city, including Vancouver. Following California’s lead to make the changes that city governments have been fighting hard against.
Hunter: Wow…. you’re telling me that builidng housing…. keeps housing prices lower? Who could have seen this coming. This is such a twist.
That is not a small effect. Minneapolis has seen a dramatic drop in rents. For the five cities chosen, the more construction, the better the change in rents, although I presume they are somewhat cherry picked for that.
Presumably this involved a lot of good luck. The impact should not be this big from only ~25 new units per 1,000 people, although tipping points are possible. One could look at the timing and propose this has something to do with the riots of 2020, as well, although even excluding that drop we still have a big improvement.
As usual, we have the effect size dilemma.
Effect is big? Must not be causal, you can ignore it.
Effect is not big? Could be random, not big enough to care, you can ignore it.
Minneapolis is still one of a small group of pro-housing cities, successfully built more housing, and saw its rents drop dramatically.
Ryan Briggs: lord, I’ve seen what you’ve done for others.
Ryan Moulton: It is embarrassing how California gets lapped by Texas at all the things California wants most just by letting people do things. (building housing and renewable energy.)
Headline from Bisnow: Texas Apartment Markets Could Take A Financial Hit As Oversupply Fuels Rent Declines
Pricing power across apartment markets in Texas has slipped just as thousands of new units are coming online, sparking concerns that conditions are ripe for an onslaught of distress.
Yes. It is that easy. Let’s do it.
It looks like Ron DeSantis is a fan of legalizing housing at the state level, continuing his major push.
An update to last year’s monumental Live Local Act to boost affordable housing is on its way to the House after clearing the Legislature’s upper chamber by a unanimous vote.
The measure (SB 328) includes new preemptions on local development controls and clearer details for how some projects should rise. It also includes special considerations for Florida’s southernmost county and a late-added exemption for short-term vacation rentals.
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The original law, which Gov. Ron DeSantis signed last March, attracted nationalheadlines for its boldness and implications.
It forces local governments to approve multifamily housing developments in areas zoned for commercial, industrial and mixed uses if the project sets aside 40% of its units at affordable rates, defined as offering rents within 30% of the local median income. The developments, in turn, would be required to adhere to a city or county’s comprehensive plan, except for density and height restrictions.
[and other things]
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SB 328 would “enhance” the existing law, Calatayud said, and further address “quality of life issues” for Florida residents.
If passed, the bill would:
— Prohibit local governments from restricting a development’s floor area ratio (the measure of a structure’s floor area compared to the size of the parcel it’s built upon) below 150% of the highest allowed under current zoning.
— Enable local governments to restrict the height of a proposed development to three stories or 150% of the height of an adjacent structure, whichever is taller, if the project is abutted on two or more sides by existing buildings.
— Clarifies that the Live Local Act’s allowances and preemptions do not apply to proposed developments within a quarter-mile of a military installation or in certain areas near airports.
— Requires each county to maintain on its website a list of its policy procedures and expectations for administrative approval of Live Local Act-eligible projects.
— Requires a county to reduce parking requirements by at least 20% for proposed developments located within a half-mile of a transportation hub and 600 feet of other available parking. A county must eliminate all parking requirements for proposed mixed-use residential developments within areas it recognizes as transit-oriented.
— Clarifies that only the units set aside for workforce and affordable housing in a qualifying development must be rentals.
— Requires 10 units rather than 70 to be set aside for affordable and workforce housing in Florida Keys developments seeking the “missing middle” tax exemption.
— Makes an additional on-time earmark of $100 million for the Hometown Heroes Program.
Faith Alford: ‘Year of the renter’: Rent in Charlotte beginning to fall as more housing available.
Rent.com said that in December, median rent was $1,839. That is more than a seven percent drop since the July peak.
Anna: Apartment in Atlanta, rent is down 12% in 2 years and 18%! off last year’s asking rent. I suspect demand may also be down due to high rents driving some renters out of the market (combining households).
The corporate landlords with their price sharing did it to themselves.
Business Insider: Rents in Oakland have fallen faster than anywhere else in the US for a simple reason: The city built more housing.
Matt Baran Architect: It seems like it shouldn’t be that hard to figure out
Oakland presumably also has other unique factors, like issues with rising legalized crime and the previous stratospheric level of rent in the Bay area.
Jay Parsons: When you build “luxury” new apartments in big numbers, the influx of supply puts downward pressure on rents at all price points — even in the lowest-priced Class C rentals. Here’s evidence of that happening right now:
There are 12 U.S. markets where Class C rents are falling at least 6% YoY. What is the common denominator? You guessed it: Supply. All 12 have supply expansion rates ABOVE the U.S. average.
There’s no demand issue in any of these 12 markets. They’re all among the absorption leaders nationally — places like Austin, Phoenix, Salt Lake City, Atlanta and Raleigh/Durham, Boise, etc. But they all have a lot of new supply.
Simply put: Supply is doing what it’s supposed to do when we build A LOT of apartments. It’s a process academics call “filtering.” New pricey apartments are pulling up higher-income renters out of moderately priced Class B units, which in turn cut rents to lure Class C renters, and on down the line it goes.
Less anyone still in doubt, here’s another factoid: Where are Class C rents growing most? You guessed it (I hope!) — in markets with little new supply. Class C rent growth topped 5% in 18 of the nation’s 150 largest metro areas, and nearly all of them have limited new apartment supply.
Most new construction tends to be Class A “luxury” because that’s what pencils out due to high cost of everything from land to labor to materials to impact fees to insurance to taxes, etc. So critics will say: “We don’t need more luxury apartments!” Yes, you do. Because when you build “luxury” apartments at scale, you will put downward pressure on rents at all price points. Spread the word.
M. Nolan Gray: The cool thing about “luxury” housing is that, if you just keep building it, it becomes affordable.
The weird trick is that you offer, in exchange for the housing being 100% affordable, to otherwise get out of the way.
As in, you use Executive Directive 1, with a 60-day shot clock on approvals, based only on a set of basic criteria, no impact studies or community meetings or anything like that, you pay prevailing wages as in what people will agree to work for instead of “prevailing wages,” and are allowed to use the 100% affordable rule to greatly exceed local zoning laws.
And presto, 16,150 units applied for since December 2022, more than the total in 2020-2022 combined, with 75% having no subsidies at all. Or rather, the subsidies took forms other than money. That makes them a lot cheaper.
One catch is that ‘affordable’ here means cheaper than market, but not that cheap.
Ben Christopher (Cal Matters): To qualify as a 100% affordable housing project under the city of Los Angeles’ streamlined treatment, a studio can go for roughly $1,800. Compare that to a traditional publicly subsidized project which could charge as little at $650 for the same unit.
And you can bet this studio doesn’t have a parking spot.
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The bet is that housing costs are so astronomically out of reach in Los Angeles that even someone making north of $70,000 per year would jump at the chance to rent “a more bare bones product without all the bells and whistles” for what could amount to a modest rent reduction.
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“This is just a whole new product specifically catering to the middle-lower end of the market. That just wasn’t a thing that people were doing before,” said Benjamin.
It is a very good bet. There is tons of pent-up demand for bare bones apartments, because we don’t let people build bare bones apartments. With a modest discount many will be all over it.
Note that none of these projects have actually been built yet. As you would expect, lawsuits are pending. So we should not celebrate yet. There are also lawsuits over the city’s attempt to walk back approvals for a handful of projects in single-family areas, where the order has now unfotunately been walked back.
Reagan Republican: With Milei’s decree deregulating the housing market, the supply of rental units in Buenos Aires has doubled – with prices falling by 20%.
Austen: So many Twitter accounts have argued the opposite of this would happen for so long.
Washington State considering bill to cap rent hikes at 7% annually. When a tenant leaves, the new rent could still be raised more. Any form of rent control is a deeply destructive idea, but this is a lot less damaging than most, as vacant apartments reset and 7% should be sufficient over time. If this was indexed to inflation to guard against that failure mode (e.g. set at 7% of CPI+4% whichever is larger) and was clearly going to stick at that level then I would actually be largely fine with it as a compromise in the places in danger of implementing rent control more harshly, especially if this then allows for building more housing, purely to head off more destructive versions. There is a big difference between 7% and New York City’s historical much smaller allowed increments.
I do think that landlords will sometimes seek to ‘hold up’ the current tenant and extract the benefits of not having to move, and that this can be destructive. I don’t think this is important enough to risk installing such a regime, that goes very dangerous places, but the real danger is when you cannot keep pace over time, and 7% should mostly solve that.
Jay Parsons covers the trend of implementing such laws, or rather covers the coverage. Major outlets like The New York Times cover such efforts, and almost never point out that economists universally agree such laws are terrible, crippling supply and increasing overall prices.
This is, as he points out, like covering climate change denialists and not pointing out that scientists agree that climate change is real. It is that level of established as true. You should treat rent control supporters the way you treat climate change denialists.
Jay Parsons: Here’s what the science says: 1) A survey of 464 economists found that 93% agreed that “a ceiling on rents reduces the quantity and quality of housing available.” (AER)
2) A Stanford study found that rent control in San Francisco reduced rental supply, led to higher rents on future renters, created gentrification, and reduced housing options for all but the most wealthy people. (Diamond)
3) Numerous studies have shown that rent control incentivizes higher-income earners to stay put, reducing availability for lower-income earners. One famous one was former New York Mayor Ed Koch, who maintained a $475/month rent controlled apartment even while living in the mayoral mansion. This leads to a misallocation of housing resources. (Olsen, Gyourko and Linneman).
4) Rent control can “lead to the decay of housing stock” due to lack of funds to maintain rentals. (Downs, Sims).
5) An MIT study found that when rent controls were REMOVED from Cambridge MA in the 1990s, rental housing quality improved as maintenance got funded, crime was reduced, and nearby property values improved. (Autor, Palmer, and Pathak)
6) Rent control reduces supply. When St. Paul, MN, adopted rent control, multifamily building permits plunged 47% in St. Paul while rising 11% in nearby Minneapolis and rising in most of the U.S., too. (U.S. HUD data) 7) Studies show that “upper-income renters gained more than lower-income renters” from rent control. (Ahern & Giacoletti)
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Critics will claim there’s science favoring rent control, too, but that’s misleading. For one, even anti-vaxxers stake claim to research to support their views… but that doesn’t mean that the research is of equal weight or as widely supported by scientists as pro-vaccine research.
Aziz Sunderji: Agree! 95% of top flight economists surveyed by U. Chicago disagreed that “local ordinances that limit rent increases for some rental housing units…have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing…”
In a highly amusing synthesis of housing and transit policy issues, Matt Yglesias proposes YIMBY for cars. Building more houses makes traffic worse, but the way it does that is that people buy and use cars, so what if we put up huge barriers to cars instead of putting up huge barriers to housing? Congestion pricing talk so far is a good start, but what if we really dropped the hammer.
The stated goal is to have the high speed rail line working at 200 miles per hour between Los Angeles and Las Vegas in time for the 2028 Olympics. The train should be faster than driving, but analysis suggests from many places in LA it will still be slower than flying. Flying has high fixed costs due to security and timing issues, but the hour it will take to reach the train station from downtown LA is a problem.
The hope is that once you have one line, getting more lines becomes far more attractive and feels more real. It is very American to start its high speed rail with a line that gives up on getting the right to go to actual central LA and then connects it to Vegas. I suppose one must start somewhere.
Ben Southwood points out that when people say that additional roads or lanes induce demand, mostly this is not the case. Instead, what is happening is that demand to drive often greatly exceeds supply of roads. Expanding the road creates a lot of value by allowing more driving, but due to the way the curves slope speed of travel changes little. That does not mean demand rose or was induced. Over longer periods of time, yes, this then creates expectations and plans for driving.
Emmett Shear argues: Objectively, density is dramatically undersupplied. You can tell, because dense housing is more expensive than less dense housing by a lot. We should legalize increasing high-demand density.
Which is indeed the correct way to think about Scott Alexander’s argument that increasing density through more building would increase prices. Perhaps it is true, but if true that is because it enhances value even more, which means we should totally do that. Emmett has various old threads on this. Various causation stories still need to be considered and reconciled, since density follows from desirability to a large extent.
How big a tax would you pay, as a real estate developer, to get up-zoning? Seattle ran that experiment, results say that they charged far too high a price. I find the paper’s term ‘strings attached’ a strange way of describing extortion of money (or mandatory ‘affordable housing’), but in the end I guess it counts.
Note that they greatly underestimated the cost of providing this ‘affordable’ housing:
However, in the first year that MHA was in full swing, an overwhelming majority of developers (98%) chose the payment option. This suggests either that the performance option constitutes a large “affordability tax” on the developers or the payment option levels were set too low.
A simple and obvious solution is to auction off the up-zoning rights. As in, for each neighborhood, decide to allow construction of some fixed number of additional buildings, within new broader limits. Then for each building, auction off the permit to the highest bidder, and then pretend (reminder: money is fungible) to use that money to support affordable housing, or distribute the profits to local residents in some way, or something similar. And of course, if the local residents want to prevent construction so badly, they can buy the permit and not use it.
People Focus. You need bipartisan long term support and community engagement, including reaching out via social media etc.
Means to an End. Capacity, connectivity, carbon. OK I guess, sure.
System Integration is Vital. Yes, you also need stations and tunnels, who knew.
HSR as Environmental Opportunity. Hold that everything bagel for a second.
Leadership in Megaprojects. Realistic projections, risk communication, don’t shoot the messenger, ‘own the whole’ and be curious about opposition. OK.
A lot of generic ‘do all the good management things’ and ‘get buy-in from actual everyone.’ Most projects would never happen if they required such standards, but at least they are things one could reasonably aspire to. And then there’s that fourth one…
HSR projects can be described as environmental projects with a railway running through them and this is often a helpful perspective to adopt. Seeking to deliver a positive environmental legacy should always be high on the agenda for all future projects. For example, at the start of the project, there was a desire that HS2 sought to achieve a neutral impact on replaceable biodiversity, and a target of ‘No Net Loss’ was used to capture this aspiration.
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Setting these as requirements at the start of the project, allows nature-based solutions and initiatives to be built into the project as it is developed, and they become part of the thinking within the project’s culture. So, if a drainage designer is designing a balancing pond or a watercourse diversion, they will engage their environmental specialists to think about what habitat can be created in the area to encourage greater biodiversity as part of the development of their design. If this is an intrinsic part of the project, it is much easier to incorporate, and more elegant and complete solutions can be deployed.
No. Stop. Seriously. If we cannot do mass transit projects without ensuring they are net benefits on every possible environmental axis, if we cannot compromise at all? If every decision must be made to maximize superficial local greenness if you want a rail line? Then there will be no rail lines. If the planet is about to burn, act like it.
Adam Rossi: The first time I rode on a plane as a kid, people smoked on the flight. I brought a metal cap gun and employees at the airport did a “don’t shoot” joke with me when they handed it back. Family members met us when we got off the plane at the gate. Changes.
Leevon Grant: My first flight [in 1985] was 5yo parents put me on a flight from Kansas City to Rapid City with a change in Denver…by myself…no trouble at all. It was an adventure and we were a proper high trust society.
What is funny is that society today is worthy of much higher trust than society in 1985, except for the part where people would call the cops because the five year old was alone. But, if people did not do that and otherwise acted the way they do today, the world would be a vastly safer, more welcoming place, also you can carry around a cell phone.
If we wanted to, we could indeed go back to 1985 airport security. Also 1985 norms about what kids can do on their own. It would be fine.
US Department of Transportation: As you get ready to celebrate Thanksgiving, make sure you have a sober driver lined up to take you home. Alternatively, plan to take a taxi or use a ride-sharing service to reach your destination safely.
Lacar Musgrove: US Department of Transportation unable to name more than one form of transportation
