It really depends on how the city chooses to restrict housing supply; we have the technology to ensure that housing is affordable, but most American cities make deploying said technology illegal: https://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B....
This is a fact of policy, not nature: https://www.bloomberg.com/view/articles/2018-03-14/californi...
That's not true. Zoning is the big problem: https://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B... or see Zoning Rules! by Fischel.
Blackstone's investments only make sense because of artificial supply limits. Remove those, and their whole strategy is destroyed. The situation really is primarily about supply and demand.
The real problem here is not Airbnb, which is a symptom; it's zoning, which forbids market-clearing prices and a sufficient number of units to satisfy demand for living in and visiting the city.
For more on this, see e.g. Matt Yglesias's The Rent is Too Damn High: https://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B... .
When we have sane zoning, we'll have sane prices. Today there was an NYT opinion piece that comes at the issue from a racial angle: https://www.nytimes.com/2017/08/03/opinion/sunday/zoning-law... but I don't think we even need the racial angle; we can come at it from a position of fundamental justice and human flourishing.
Zoning, basically. It makes density illegal in enough places that transit isn't terribly practical. It also makes even walking to a corner store something that is no longer an option in many new developments. If you'd like to read all about it, this book is very thorough:
If you'd like something a bit more tl;dr, these are good: http://amzn.to/2erOJXL http://amzn.to/2fyXrpG
Bullshit!
Look at the zoning codes for most cities. This is one of the most regulated markets in the US!
Minimum setbacks, heights, parking minimums, lot sizes, allowed uses - the list goes on and on, and is extremely prescriptive and detailed.
For instance, here in Bend Oregon, you can look through the city code for parking minimums:
"Beauty parlor and Barber shop: 3 spaces for each of the first 2 beauty or barber chairs, and 1½ spaces for each additional chair"
And this is pretty typical in the US.
Edit: I'll add that I am not a libertarian "markets solve all problems" kind of guy, but housing/land use is absolutely something where I think we could use more markets. I highly recommend these books:
The Rent is Too Damn High: http://amzn.to/2cxlP87
The Gated City: http://amzn.to/2cf7jBo
As well as this site: http://marketurbanism.com/ (some of those guys are pretty hard core libertarian, but I guess we can agree to disagree on many things and concentrate on markets and urbanism).
Recommended reading:
The Rent Is Too Damn High: What To Do About It, And Why It Matters More Than You Think: http://amzn.to/28W6et9
Edit - I'll add that I think it's great that YC is spending some money to look into this, as it's a huge issue for many desirable, productive cities these days. Huge as in billions of dollars:
http://www.bloomberg.com/news/articles/2015-05-07/here-s-how...
No: It's mostly about supply not meeting demand. See http://jakeseliger.com/2015/09/24/do-millennials-have-a-futu... or http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp....
There are two other major problems in parts of the U.S. and Europe (in particular) that're underrated: 1. insane land-use control laws that make it illegal to build reasonably price housing (see Matt Yglesias's The Rent is Too Damn High for more: http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp...) and 2. transfer payments to older people that were originally conceived and executed when the number of workers to retirees was much different than it is now.
The first is important because it impedes family formation and innovation. The second is important because it makes not having children easier, because other people's children will be forced to support you through their contribution to transfer payment programs. Yet neither issue gets much play in the press.
Also, this book, although it's pretty high level: http://amzn.to/1qsn2RD
I think this is one of the most important issues in this day and age. It's happening everywhere, and things need to change.
Edit: downvoters, care to actually state your opinions? I'm hardly a libertarian, and neither is Matt Yglesias, author of the aforementioned book. I don't think 'free markets' are the answer to all the world's problems. But I do think a more liberalized market would help housing a lot. These areas need more supply, and if you don't want LA style sprawl, the best way to do that is via density. And the best way to accomplish that is probably by letting the market work, within reason: I don't suppose I'd be in favor of allowing an outdoor thrash metal venue in the midst of an otherwise quiet neighborhood, but there are a lot of things you could add to make places more livable and walkable without cars.
No: The middle class is suffering because it's illegal to building housing for them. See http://jakeseliger.com/2015/09/24/do-millennials-have-a-futu... or The Rent Is Too Damn High http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp....
If you restrict the supply of a good in the face of increasing demand, prices rise. The rest is commentary.
The real tragedy here is land-use restrictions that most municipalities instituted in the '70s and '80s, which prevent the supply of housing to meet demand (http://jakeseliger.com/2015/12/27/why-did-cities-freeze-in-t...).
Many "gentrifiers" in many Atlanta neighborhoods would probably prefer to live in NYC, LA, SF, or Seattle, but those municipalities have strict rules that prevent the building of sufficient housing to meet demand. So people move elsewhere. Matt Yglesias discusses this in more detail in The Rent is Too Damn High (http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp...).
Economists generally suggest that easing the shift from low productivity areas to high productivity areas is very beneficial, but NIMBY housing policies stand in the way.
And these things have repercussions all throughout the country. Here in Oregon, there is a steady stream of people who are bailing out of California in part because of the housing prices. This causes resentment here, because it is pricing locals out of certain markets (Portland and Bend, likely others). Ultimately, without dealing with the root causes of the issue, the process will just keep repeating itself elsewhere.
My view is that there should be a wider range of densities, and more walkable, bikeable neighborhoods. Ultimately, it is a supply issue - you cannot keep that steady and increase demand without forcing people out. Granted, maybe not everyone can have a ranch house with a large yard and a two car garage, but... not everyone needs that, either.
Here are some sites I'm fond of:
http://missingmiddlehousing.com/
https://clubnimbyblog.wordpress.com/
and of course Matt Yglesias' book: http://amzn.to/21hwbb6
When demand outstrips supply of a good or service, prices rise. Some cities have spent decades strangling the supply of housing: http://jakeseliger.com/2015/12/27/why-did-cities-freeze-in-t....
Not really. Something needs to be done about parochial land use laws that prevent supply from rising to meet demand: http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp.... Until that happens, prices will rise. Despite many efforts to the contrary, you cannot legislate away supply, demand, and prices.
Preventing new development appears to have really taken off in the 1970s, according to Chapters 7 and 8 of William Fischel's Zoning Rules!: http://www.amazon.com/Zoning-Rules-Economics-Land-Regulation.... Until we reverse that dynamic (or make cities less attractive places to live) we're going to see rising prices.
San Francisco's housing policies drove housing into orbit: http://techcrunch.com/2014/04/14/sf-housing/. There are numerous other discussions of this: http://www.amazon.com/TheRent-Too-Damn-High-Matters-ebook/dp....
We have the technology to build lots of units (steel-frame construction, elevators): http://www.slate.com/blogs/moneybox/2013/05/03/silicon_valle.... "We" just choose not to use them.
Also, how does that really work out in practice - can I buy a house in a residential neighborhood and open a noisy biker bar in it?
The short version is this: Property owners now have shocking amounts of control over what their neighbors do with property. Owners, especially of single-family houses, elect officials who restrict development through zoning and similar means. Height limits and parking requirements effectively mandate single, detached housing in most of the U.S.
This only really got started in the 70s (see http://jakeseliger.com/2013/07/03/jane-jacobs-is-everywhere-...), and it didn't get really bad until the 2000s, when the shift back to cities ran into insane urban zoning rules to produce huge affordability crises. By now, most developers who dare to build condos or apartments have to build luxury apartments: http://www.wsj.com/articles/rents-rise-faster-for-midtier-ap... because that's the only way to make the economics work.
In the meantime, much of the population growth has shifted to Sun Belt cities in Texas, Arizona, Georgia, and Florida where development is easier and/or simply sprawls more.
Years ago, “anyone could live in Palo Alto,” says Saul Bracamontes, 30, Ms. Escalante’s boyfriend and the produce leader at the local Whole Foods market. “Now people are getting separated because some make less than others.”
People aren't really "getting separated because some make less than others" in this instance—they're "getting separated" because the entire Bay Area makes it incredibly hard to increase housing supply: http://www.citylab.com/housing/2015/07/whats-the-matter-with.... The Bay Area has an entirely self-inflicted housing crisis that primarily benefits existing owners. Matt Yglesias describes more in "The Rent is Too Damn High" (http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0...).
Housing affordability is primarily a political / legal problem. It can be solved relatively easily, if and when voters (and by extension politicians) want it to be solved.
Sort of, but not really. The market can't provide lower-priced housing because of intensive zoning restrictions: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0... or http://www.voxeu.org/article/causes-and-consequences-land-us.... This: http://www.citylab.com/housing/2013/10/san-francisco-exodus/... pertains specifically to San Francisco and environs.
This is an easily solvable problem: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0....
Capitol Hill height limits and parking minimums are insane. I used to live across the street from Seattle U, and the apartment building was only four stories high. It should've been 20 stories, since everyone in it was connected to the university. Every street west of Broadway / 10th and south of Prospect should have no height limits or parking minimums. The problem can be solved: Seattle's politicians (and, by extension, voters) choose not to solve it.
We've substantially and enormously empowered veto players at all levels: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0... , in part due to the influence of Jane Jacobs and her fight against Robert Moses: http://jakeseliger.com/2013/07/03/jane-jacobs-is-everywhere-... .
That being said, there seems to be something about wealthy, industrialized countries that makes local resistance to infrastructure development powerful. Europe and Canada are suffering from the same basic problems.
Actually, housing stock is not "naturally" limited; it is quite artificially limited: see e.g. http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0...
I'm not convinced this is as true as a separate issues: many desirable cities and first-tier suburbs have implemented severe land-use controls that force families who want better school districts to pay for housing. This is a point Avent makes in The Gated City (http://www.amazon.com/Gated-City-Kindle-Single-ebook/dp/B005...) and Yglesias makes in The Rent is Too Damn High (http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0...).
I read Progress and Poverty: An Inquiry in the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth but am worried that land-use controls weren't really even on George's radar for obvious reasons; in the 19th C the U.S. was a different place. I don't think the book is bad exactly but much has changed. think the causal issue runs from "land use restriction" -> "higher prices" rather than "dual income" -> "higher prices."
I've seen articles that argue this, but I think the bigger issue is that Millenials can't, because it's too expensive: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0... and municipalities simply won't let anyone build housing that millenials can't afford.
Except... for exurbs, which don't have existing veto players. Consider: http://marginalrevolution.com/marginalrevolution/2015/03/hou... :
Unlike most other big cities in America, Houston has no zoning code, so it is quick to respond to demand for housing and office space. Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000.
People move to Houston and exurbs because they can. They don't move to say New York and San Francisco and Seattle because those cities are so expensive, regardless of other preferences.
This, however, is primarily a policy choice: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0... .
I'd like to see better designed suburbs that combine dense larger housing with public transit to connect the suburb communities with each other and the city they encircle
Me too. But suburbs have all the political veto problems described at the link above, but worse.
People are moving to the South in general because housing is cheap there—as Matt Yglesias discusses in The Rent is Too Damn High: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0... :
There is another option besides denser cities or more sprawling ones: People can just relocate to other cities altogether. And increasingly, that’s what Americans have been doing. If the only way to afford a place in a safe neighborhood in some metropolitan areas is to bear the enormous costs of long commutes, those are just cities with little if any housing that’s truly affordable. The natural choice is to go to the cities that aren’t choked with these problems.
As Forbes magazine put it, “It’s no secret that the Southeast and Western United States are booming. The costs of living and doing business there are often cheaper than in big coastal cities.” People have to go somewhere, and by and large they’re going where it’s cheap. That’s why between 2000 and 2010 the Dallas and Houston metropolitan areas each added about 1.2 million people, dwarfing the approximately 500,000 each added by the much bigger New York, Los Angeles, and Chicago metro areas. But this kind of boom driven by a low cost of living is a particular kind of boom. The relatively sluggish population growth in New York City and its suburbs during this period wasn’t a repeat of the urban collapse of the 1970s. The financial services sector at the core of the region’s economy was, for all the (oft-deserved) opprobrium it’s attracted over the past several years, one of the decade’s major money-making success stories. The city’s specialization as the main headquarters of American journalism and publishing seemed relatively unaffected by the sweeping technological change reshaping media. The crime drop of the 1990s that turned the city’s momentum around in the first place continued. A wave of gentrification swept through the Lower East Side, vast swathes of Brooklyn, important parts of Queens, and even Hoboken and Jersey City across the Hudson River.
But while this kind of gentrification demonstrates the continuing appeal of the Big Apple, it represents only a small net increase in the population. The people moving in are largely replacing other people who are moving out as rents go up. Some of this is due to working-class families moving out of now-expensive neighborhoods. Other times, it is the cycling of twentysomething professionals out of the city as they start families and want more space. In both cases, the city can prosper without its population increasing very much.
By contrast, the “booming” cities of the Southeast and the western United States aren’t necessarily booming in the sense of getting rich. The ten metropolitan areas with the fastest population growth between the 2000 and 2010 censuses were, in order, Palm Coast, Florida; St. George, Utah; Las Vegas, Nevada; Raleigh, North Carolina; Cape Coral, Florida; Provo, Utah; Greeley, Colorado; Austin, Texas; Myrtle Beach, South Carolina; and Bend, Oregon. That geographical distribution supports the idea of a boom in the Southeast and West. But it’s striking that in 2009 all ten of these metro areas had per capita personal incomes below the national average of $40,757. Indeed, only Cape Coral was even close.
It may be a long-term mistake, but the localities that control building height, parking minimums, and so forth have ensured that people move to the desert states.
That's great news—SF has been the least affordable city in the country for a couple years: http://www.citylab.com/housing/2013/10/san-francisco-exodus/... , and for years I've been reading articles from people who say they a) hate high housing costs but b) also hate any new buildings. Which is amazing, because it's like saying, "I hate that supply and demand function!"
The solution to rising prices in the face of rising demand and constant supply is simple: build more, per Yglesias in The Rent is Too Damn High (http://www.amazon.com/dp/B0078XGJXO). That Lee is now doing so, on at least some level, is great!
At the moment, political and regulatory barriers dwarf technological ones, per Yglesias in The Rent is too Damn High: http://www.amazon.com/dp/B0078XGJXO.
In many areas, building with century-old technologies like steel frames and elevators is effectively illegal. Where it isn't illegal, the approval process is often so cumbrous that it substantially raise the price of building: http://www.theatlantic.com/magazine/archive/2007/11/a-tale-o....
We as a society have chosen to make a lot of housing very expensive.
Interestingly, this is a policy choice—and a bad one—foisted on us primarily by incumbent land owners who vote: http://www.amazon.com/dp/B0078XGJXO , rather than a law of nature.
In many cases, they are: most often to Sunbelt cities like Dallas, Houston, and Phoenix, which are the fastest growing in percentage terms in the nation (See Matt Yglesias at http://www.slate.com/blogs/moneybox/2012/06/14/in_the_future... or http://www.slate.com/blogs/moneybox/2013/05/23/fastest_growi...).
Yglesias also details some of this in The Rent Is Too Damn High (http://www.amazon.com/dp/B0078XGJXO?ie=UTF8&tag=thstsst-20&l... -- a must read on these issues, and I usually post a link when discussions like this one arise).
Anyway, lots of cities have dysfunctional political and legal systems that prevent the supply of housing from growing. San Francisco's problems are particularly acute: http://www.citylab.com/housing/2013/10/san-francisco-exodus/... and are exacerbated by rent control, which discourages owners from even utilizing existing space.
I too find it fascinating and I too live in a large apartment building, but a lot of other Americans would too if it were legal to build those apartment buildings. Matt Yglesias explains why in The Rent is Too Damn High (http://www.amazon.com/dp/B0078XGJXO?tag=thstsst-20&linkCode=...), but the short version is that cities forbid taller buildings through height restrictions and parking minimums in order to protect the property values of existing owners by limiting housing supply.
True, though they are rising rapidly: http://seattletimes.com/html/localnews/2021673014_rentincrea... .
Seattle has had a better response than San Francisco's: http://www.citylab.com/housing/2013/10/san-francisco-exodus/... ("Over the past two decades, San Francisco has produced an average of 1,500 new housing units per year. Compare this with Seattle (another 19th century industrial city that now has a tech economy), which has produced about 3,000 units per year over the same time period (and remember it's starting from a smaller overall population base)"), but it is still subject to many of the dysfunctional political-economic-legal beliefs described in The Rent Is Too Damn High: http://www.amazon.com/dp/B0078XGJXO.
It's worth noting too that Seattle and Washington don't have income taxes, which can be a substantial issue for many tech workers.
http://www.amazon.com/The-Rent-Too-Damn-High-ebook/dp/B0078X...
Fewer regulations and more freedom to experiment would be beneficial.
http://www.amazon.com/The-Rent-Too-Damn-High-ebook/dp/B0078X...
Less regulation would likely lead to diverse kinds of housing being available, and I'm sure there would still be plenty of suburbs.
I sent this thread to my Dad, and he observes that the West Side has always been much more expensive than the rest of L.A. since the 1970s, primarily because of the Watts riots. My parents left L.A. in the early 1990s, in part because of the (obscene) cost of real estate. And because of all the reasons the grandparent post mentions (plus crappy schools).
See also Matt Yglesias's The Rent Is Too Damn High: http://www.amazon.com/dp/B0078XGJXO .
The over-regulation of home building by cities is an issue not really on the public's radar, unfortunately.
The obvious solution to rapidly rising prices is to increase supply, as described here (http://www.amazon.com/dp/B0078XGJXO) or here (http://www.theatlanticcities.com/housing/2013/10/san-francis...). I've posted both links before but we keep seeing stories like these and the solutions remain the same.
The technology necessary to increase housing supply (steel frames, elevators) is a century old (http://www.slate.com/blogs/moneybox/2013/05/03/silicon_valle...) and well-understood. The problem is almost entirely political.
It's not inevitable; rather, it's because of a series of political choices. Steel and elevators are very old technologies and as such it's quite simple to increase the supply of dwellings on a given quantity of land. San Francisco's development rules mostly prohibit anyone from doing so, however, per Matt Yglesias's book The Rent Is Too Damn High (And What To Do About It) (see http://www.amazon.com/dp/B0078XGJXO?ie=UTF8&tag=thstsst-20&l...).
In the face of constant supply and rising demand prices increases. Want to change that dynamic? Increase supply by building new stuff.
To be fair to him though, its a hard line to walk when you are discussing the kind of complex open-ended issues which he does. I think his writing has done good to stir up thinking and provoke responses on some of the issues he discusses.
I keep posting variations on this, but this link is relevant here: http://www.slate.com/articles/business/moneybox/2012/05/face... . "Rent is absolutely absurd" because of basic economics at work: SF is a desirable place to live in many respects, but it's virtually impossible to build new housing there for reasons discussed at the link. In the face of exploding demand and constant supply, prices rise. For more on this, see The Rent is Too Damn High: http://www.amazon.com/The-Rent-Damn-High-ebook/dp/B0078XGJXO. Most big cities have this problem, as you note, and yet most commentators don't discuss the obvious connection between supply limits and prices, per my essay here: https://jseliger.wordpress.com/2013/04/08/connecting-the-dot... .
Regular people move from SF and places like it to the sunbelt, where development is easy and real estate prices more reasonable, and the people who have the money and/or need to be in SF stay/move there.
The Gated City - Ryan Avent (on how restrictive zoning and NIMBY policy has ruined San Francisco, Washington D.C. and other American cities)
http://www.amazon.com/Gated-City-Kindle-Single-ebook/dp/B005...
The Rent Is Too Damn High - Matt Yglesias, (Similar to the Gated City in content)
http://www.amazon.com/The-Rent-Damn-High-ebook/dp/B0078XGJXO...
Triumph of the City - Edward Glaeser (on how cities are better than suburbs for their inhabitants, how cities foster innovation, how slums are not as terrible a thing as they seem, etc.)
http://www.amazon.com/Triumph-City-Greatest-Invention-Health...
The High Cost of Free Parking - Don Shoup (on how free parking (and free roads) distorts the market, causing an excess of driving and distorts the construction of cities. It also goes into other market distortions such as mandatory garage spaces, which end up as car subsidies, which ruin the layout of cities in the long run.)
Also, the short book The Rent Is Too Damn High: http://www.amazon.com/The-Rent-Damn-High-ebook/dp/B0078XGJXO
These are all very solvable problems, it's just very difficult to change the status quo.
http://www.amazon.com/The-Rent-Damn-High-ebook/dp/B0078XGJXO
After reading his book, I am convinced that overpriced rent is a massively important problem that makes countless aspects of society worse.
I've read that people spend roughly 1/3 of income on housing, 1/3 on food and 1/3 on everything else. The long term trend in the U.S. has been to greatly reduce the % of our income we spend on food (due to agricultural and tech innovation). We need to do the same for housing prices over the next 20 years. A small space to live for one person in NY or SF should simply not cost ~30% of your annual income! The materials are very cheap to build a square box! And there is lots of vertical room in our nicest cities to build square boxes. The issue is solely constrained supply due to building regulations (many at the local level).
For tech leaders in SF, this seems like it should be the next big political fight (after immigration).
If only the NIMBY bastards in the bay area would allow more construction to happen, this could all be alleviated. Construction would not only ease rents at all levels, but also create a lot of jobs that go to the working classes.
http://www.amazon.com/The-Rent-Damn-High-ebook/dp/B0078XGJXO...
Basically, prices are so high because that is where building supply is constrained.
This book http://www.amazon.com/Gated-City-Kindle-Single-ebook/dp/B005... explains the nationwide economic consequences of constraining housing supply (and thus rising prices) in the most economically productive areas.
This is a problem with zoning: https://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B..., not with "corporate jobs." If we fix zoning, costs will go down. Los Angeles is instructive. In 1960, it was zoned for 10 million people: https://la.curbed.com/2015/4/8/9972362/everything-wrong-with.... Today, it is zoned for 4.3 million. Has our technology gotten worse since 1960? Have we forgotten how to build multi-story structures?
No: we've just made it illegal to build enough housing.
Seattle is also instructive. About two-thirds of the city is zoned for single-family housing only: https://www.theurbanist.org/2017/10/23/the-path-to-eliminate.... Allow missing middle housing, and prices will stabilize: http://missingmiddlehousing.com.