
Why California is so expensive: It’s not just the weather, it’s the regulation - jseliger
http://blogs.lse.ac.uk/usappblog/2016/07/07/why-california-is-so-expensive-its-not-just-the-weather-its-the-regulation/
======
mabbo
I don't get why this is surprising. The goal of nearly all of these
regulations is, effectively, to prevent housing from being built. They reduce
supply, while demand is increasing. This is basic economics.

Compare this to Toronto. Housing is getting more expensive here, yes, but not
at nearly the same rate. Demand is increasing because of high immigration, but
supply is being allowed to increase as well- and mostly in the _up_ direction.
There's a condo over on College street that just opened, 60 floors or more I
believe. An 80+ twin tower condo is I think now approved by the city over on
King. The main strip of North York must be averaging 25-30 stories tall, and
it's 15km from downtown!

If California wants to lower their housing prices, they need to have supply
match demand. To do that, they need 50 story buildings. A lot of them. And
they need to start soon, because they take years to build.

~~~
kbenson
> If California wants to lower their housing prices

That's the rub, after you've constrained supply and inflated prices, there's a
vested interest of those who've seen their values increase and those who
bought at high values to not let them drop.

This is especially important for those that bought at a high value, as if the
worth of their house drops, then they can find themselves in a position where
they owe much more than the house is worth. We've seen this situation before,
not too long ago. It's not pretty.

AFAICT, the trick is to manage growth effectively in an area through
restrictions and incentives so that you try to stabilize house prices as much
as possible (like the economy), such as tracking inflation and/or some other
indicators. If you enact regulations that suppress new housing when
demographics call for more of it, you need to offset that with incentives.

The worst thing that can happen is that a group will wrest disproportionate
control over housing policy for an extended period, and then the policies they
enact through self interest spiral out of control and make the situation worse
for everyone.

~~~
jdavis703
Why can't you just live in the house? I mean it sucks when your investment
doesn't work out, but at least you have a roof over your head. Isn't that all
you really need (unless you're some kind of real estate mogul, in which case
it's hard to feel bad since it's just business then).

~~~
eldavido
Because housing in California is just _different_ than the rest of the US;
there's really no other way to describe it (Illinois born and raised, now
living in SF).

A lot of CA people explicitly treat their home equity as their retirement
fund, planning to "cash it out" when they retire. Then there's the people with
loans they might be cashflow-negative on month-to-month (paying down a sliver
of principal), who are hoping to re-amortize into a new 30-year loan when
their value goes up, hopefully cutting some of their payments.

I'm 31. My household income is well over 200K and I have many friends in the
same boat, and none -- I really mean it -- zero -- of us own homes. The only
hope is to get into a "starter home" as some other commenters describe and
then hope to have enough equity that if you ever want to have a kid or live in
a non-shoebox, you'll be able to afford to make a big down payment on a new
place.

I hate this because it seems extremely financially imprudent, but
realistically, your options are to play the game or move. There just isn't
sanity in/around the Bay Area housing market.

~~~
galdosdi
This is why I don't understand (at a practical/economic level) the allure in
the tech world of moving to the Bay Area.

In NYC we complain like crazy about housing, but it's honestly fine compared
to what you describe. In NYC you can't have it all but you do get to pick any
two of: spacious, cheap, or short commute.

Apparently in the Bay Area it's pick any zero? Why do people keep going there?

~~~
dragonwriter
> Apparently in the Bay Area it's pick any zero?

No, its not. You can find spacious, reasonably cheap places within tolerable
-- though not short -- commutes of most Bay Area jobs.

I suspect that young, high-income tech workers very often (1) want short
commutes, and (2) want other aspects of the urban lifestyle of the core of the
Bay Area whether or not it comes with a short commute, which makes the
peripheral, long-commute places with such housing unattractive. (Plenty of
families where the adults work in the core areas of the Bay Area _do_ live in
those peripheries, though.)

> Why do people keep going there?

Because that's where the (tech, for instance) jobs are?

~~~
Retric
Short commutes are under 15 minutes, which is not uncommon in much of the US.
That's just not possible from cheap housing in the Bay Area.

------
dionidium
> In some California cities, the average four-bedroom, two-bathroom home would
> set you back over $2 million, while a similar home would cost less than
> $100,000 in many other US cities.

This is a little but misleading. You have to scroll _way_ down to get to any
city with an average under $100k for the described home and those are in
cities with vast, mostly-abandoned areas where (basically uninhabitable
versions of) such homes might cost as little as $10k. (Their averages are
brought way down by outliers, in other words.)

~~~
replicatorblog
You are right, the author was extreme, but not by that much. Look at Houston,
or Austin and you'll find lots of perfectly nice, new construction, 4b/2br in
the $250K range. I live an hour outside Boston where there is a similar
dynamic at play. My frustration is that large cities like Houston are able to
build inexpensively, while relatively small ones like Boston/SF are just
insane.

~~~
jonknee
> My frustration is that large cities like Houston are able to build
> inexpensively, while relatively small ones like Boston/SF are just insane.

Houston is a large city just because it's sprawlville (to a ridiculous degree,
city limits is an astounding 627 sq mi). It's not a fair comparison to an
urbanized city like Boston or SF (that both have 5+ times the density).

~~~
muzz
And sky-high property taxes in Texas also helps keep prices low.

------
british_india
Regulation does not come out of thin air--it comes in response to abuses. It's
intellectual twaddle to complain about the resulting regulation without
acknowledging its source--which is abuse of the commons.

~~~
cylinder
What if Californians just decided they want their communities to look the way
they do now?

Switzerland could make everything less expensive if they imported cheap labor
and cut the minimum wage. But they elect not to.

I guarantee that if you made California cheaper you'd attract more people and
then it'd just become more expensive again. There's not enough space there to
accommodate all the people in the country that would live there if they could
afford it.

~~~
pjlegato
That is almost what happened. During the 1970s and 1980s, Californians
collectively decided they didn't like the changes that were going on and that
they wanted their state to be frozen as it was circa 1965 forever, in both
physical and economic senses, so they enacted a bunch of regulations designed
to achieve that -- Prop 13 that froze property taxes, rent control in San
Francisco, stricter zoning laws that prevented almost any medium or high
density development in both the suburbs and in the urban cores.

These regulations had numerous unintended and unforeseen consequences,
however, which collectively had the effect of exacerbating rather than curing
all of the economic problems that were changing society in the 1970s.

~~~
1_2__3
If that were true I'd expect to see something of a continuous spectrum of suck
extending from the 1970's to today. But instead it's not like that at all -
the bay area is hugely prosperous and happy until the late 2000s when a
confluence of factors led incredibly rapidly to where we are today.

There is _some_ truth to what you're claiming, but I'm tired of this
"California just wanted to freeze itself in the 1960s and look how wrong they
were." In truth everything was going pretty good for everyone until the last
decade or two.

~~~
pjlegato
The various land regulations such as Prop 13 and rent control were _overtly_
billed as "ways to stave off all the social change that's been happening" when
they were debated and passed in the 70s and 80s. It's not a guess or some sort
of conspiracy theory. Review the newspaper polemics of the time. It was quite
openly the goal.

You can see exactly that continuous spectrum of decay in California in many
places. The state has become ever more polarized into rich and poor, with less
and less middle, during that entire time. This is partially a process that was
going on everywhere in the US, but all the extra regulation in California that
was designed to halt that process actually made it worse.

The California middle class has been massively eroding since the '70s. Before
that, you could drop out of high school and still get a job that would lead to
you owning a house within a few years. Now, owning a house is impossible for
almost everyone.

The land regulations that restricted supply have made long term housing prices
grow far faster than the national average:
[http://www.doctorhousingbubble.com/wp-
content/uploads/2015/0...](http://www.doctorhousingbubble.com/wp-
content/uploads/2015/08/US-San-Francisco-California-median-home-sales-
prices-1971-2015-05.png)

Huge tracts of formerly middle class suburbs near San Francisco and LA have
become massive ghettoes -- where you still have to pay half a million dollars
or more to buy a house next to thugs who openly sell crack 24 hours a day,
where people are shot a couple of times a month. Where else in the US do you
pay half a million dollars for a house in the ghetto?

The middle class jobs have mostly evaporated -- other than sinecures in
California's vast bureaucratic and public employee apparatus, in which case
you get a job for life with a powerful, politically-connected union to keep
you from ever being fired for any reason. Good luck getting one of those
unless you have a friend or relative who's already there.

Yes, things are great if you happen to be a high skilled tech worker in San
Francisco during the late 90s or from circa 2010 to present, but this is a
very small fraction of the population. Most Californians who don't have
advanced computer programming skills only got squeezed harder by that influx
of new money pushing up real estate prices still further.

And we haven't seen anything yet. Just wait till the "smart farm" trend really
kicks in: [http://www.economist.com/technology-
quarterly/2016-06-09/fac...](http://www.economist.com/technology-
quarterly/2016-06-09/factory-fresh)

Soon, very soon, robots will be picking all the produce in the Central Valley,
and there will be millions of newly unemployed low-skilled workers flooding
into San Francisco and LA looking for work.

------
mmanfrin
Using 'California' as a unit, and then selecting housing prices from the Bay
Area to illustrate. Okay. Because houses in Stockton are $2mil?

I don't dispute that there are some really stupid land-use regulations in
_certain cities_ , but to hand-wave all of California as suffering from the
yoke of regulation is to show a biased and superficial hand.

~~~
muzz
True, but cities have borders and if one constrains building, the builders can
just go outside that city's limits.

This is why I think that statewide factors are the dominant force here.

------
danhak
There are _plenty_ of places in California where you could buy a home for
$100K. The article does a very poor job of demonstrating a causal relationship
between "regulation"\--he doesn't even cite any specific ones--and basic
supply/demand dynamics that are common to major metro areas throughout the
world.

All he's got is a very hand-wavy argument and a chart that abruptly cuts off
circa 1994.

------
kqr2
Are there any examples of cities or states that have been able to successfully
transition from expensive to affordable housing in a non-castastrophic manner?

Even at a more local level ( [https://techcrunch.com/2014/04/14/sf-
housing/](https://techcrunch.com/2014/04/14/sf-housing/) ), the problem is
complex with many stakeholders. How do you get everyone to agree and try to
reach a better solution?

~~~
ktRolster
Governor Brown has a bill that will help a lot with thee problems:
[http://www.bizjournals.com/sanfrancisco/blog/real-
estate/201...](http://www.bizjournals.com/sanfrancisco/blog/real-
estate/2016/05/brown-affordable-housing-development-approval-ceqa.html)

~~~
1_2__3
> new projects with 20 percent affordable housing for tenants making no more
> than 80 percent of the area median income or projects with 10 percent
> affordable housing near transit would be exempt from most local reviews.

That sounds great, but think of it this way: a 200-unit luxury apartment
complex that includes a shithole in the back with 40 units that lack parking
and a separate access door would be exempt from local oversight. Does that
sound like a pattern for success to you?

~~~
warcher
More stock is more stock. The guys moving into the rich condos live somewhere
now, presumably somewhere worse, since they want to move. It's demonstrably
effective in freeing up lower income apartments. Perhaps these lower income
apartments are still going to be expensive, and available only to whatever you
define as the "wrong kind of people", but you gotta start someplace.

~~~
muzz
There was an article that something like 45% of new units are bought by
foreigners and people from other metros.

~~~
warcher
Sure, but that presupposes that they aren't buying units already. I don't
think that's likely.

------
grecy
I think this is true of everything in the Developed world, not just housing.

Healthcare, education, taxis, hotels, small engines. They're all insanely
expensive because of the massive amount of regulation that's been added to
them in the last 50 or so years. Of course, those regulations add safety and
control and structure, so I'm not saying they're all bad.

Just look at the houses or air quality or safety record in undeveloped
countries to see what happens without all those regulations.

I find it fascinating that apps like uber and air bnb are basically just
getting around all of the regulations and are in a sense going back in time to
the way things were (and still are in the undeveloped world.) i.e. if you want
to sleep somewhere, you just pay someone for a room in their house - never
mind if they have a "permit" \- same goes for an informal taxi in most of the
world.

It will be interesting to see what happens when people make apps/websites for
all the other areas of our world that have an enormous markup because of
regulations.

~~~
bubbleRefuge
In Latin America, there is lots of regulation. Just try opening a business.
Hiring an employee.

~~~
grecy
It depends if you do those things legally.

There are also tons of things you can do without regulation like picking
people up in your car/van or letting people sleep in a room in your house or
cooking them a meal.

------
muzz
No mention of Prop 13. A statewide market distortion that likely overshadows
the city-level regulations.

------
BurningFrog
If this is ever to be solved, it has to be on the state level. Individual
cities or counties are not going to nobly go against their interests and start
building more than they have to.

But a _lot_ of people have gotten _very_ rich off of this, so I don't know if
there is any political strength behind this. What happens to the Jerry Brown
proposal will be a good indicator.

~~~
thescriptkiddie
But building more housing isn't against any city's interests, more housing
means more tax revenue. The people who are likely to block this are the people
who have made "fortunes" by seeing the value of their homes rise. I would
argue that those people have more power statewide than they do in the denser
cities where few people own their own homes.

~~~
BurningFrog
After Prop 13, housing is a net loss. Or so I'm told.

I _think_ it's more of a NIMBY thing. People can agree that California needs
more housing, but fight to the death against it near their house.

------
Animats
The last California housing crash was in 2008. The next one may be starting.
There were lots of empty houses only 6 years ago.

Outside the coastal zone, there's not much state level regulation. The coastal
zone is regulated because there's a general consensus that California doesn't
want a wall of high-rises at the coast like Honolulu or Singapore.

San Francisco has substantial opposition to "Manhattanization", even though
things are going that way. Different communities on the SF peninsula are going
in different directions. Redwood City is building vertically - 8 to 15
stories, not skyscrapers, but many buildings are going up.

It's not clear that the Silicon Valley boom will continue much longer. Web has
been done. Apps have been done. IoT, if it happens, will come from places
where "things" are made. The Next Big Thing hasn't appeared yet.

------
maxharris
This post made me think of a little history.

There were plenty of problems in the 19th century, but the ideas of the era
did _not_ lead them to suppose that the first answer to any problems was red
tape.

The effects of this difference are huge. I know this isn't quite apples-to-
apples, but a rather stark comparison comes to mind: Using the comparatively
primitive technology of the 1880s, James J. Hill was able to build a
transcontinental railroad in a decade (using private finance). Here in
Seattle, the public transit authority says it's going to take two or three
decades to build a train that goes just six miles.

~~~
eldavido
My friends and I talk about this a lot.

We aren't living in the 1880s anymore. For one, we value life, health, and
safety much more than they did back then, with things like OSHA, much more
stringent labor laws (overtime, child labor), more types of insurance required
for employers including unemployment and various disability coverage,
environmental laws like CEQA/Clean Air Act, and tons of other stuff.

But I think the biggest change is ultimately cultural. We just don't value
growth today like we did back then. We want safe workplaces, and a clean
environment.

I also think there's a much greater tolerance for government bureaucracy today
then there was in the 1880s, including all kinds of permits that take weeks to
issue, multiple agencies overseeing everything at the state, local, and
federal level, and just in general a huge expansion in the size of government.
If you told someone from the 1880s that US government spending would rise to
some 40% of GDP over 120 years, they'd think you were totally insane.

I go back and forth on whether it's good or bad. It's a complicated question.
It takes forever to get anything done, and yet, young Chinese nationals are
coming to the US because their parents have utterly ruined their environment,
they don't trust the safety of their food supply, and factories with hundreds
of people in them burn down, killing everyone inside. I used to think the US
and Europe were radically different places, but I'm coming to see they're more
alike vs. different. It's really the US and China that are worlds apart.

~~~
maxharris
I think (but am not completely certain) that we needed a high-growth
environment to be rich enough to invent the technologies that give us safe
workplaces and a clean environment.

If that's true, I also wonder what safety and and living standard improvements
we might be giving up because we don't have high growth today.

~~~
wavefunction
>we might be giving up because we don't have high growth today

If by this you mean our descendents. It would be fair to note that life for
most was quite brutish and short in the "high-growth" period you're lauding.
Would you have been a collier or among the more fortunate, I wonder?

~~~
maxharris
It was brutish and short for most people because there wasn't much wealth of
any kind. How far would the combined fortunes of the industrialists gone in
raising the standard of living had they been confiscated and distributed to
everyone else? Not far at all, it turns out. 50 million people lived in the US
in 1880, and Vanderbilt's $232 million fortune would have netted each of the
the other 50,189,208 Americans around $4.62 each (around $114 in 2015
dollars). What they got in exchange from these captains of industry (steel,
rail, oil, and a future where their children went on to live better than they
did) was worth a heck of a lot more to their lives and livelihoods than a few
fistfuls of coins.

Even if you were Andrew Carnegie, you'd have no Xbox, no CT scanner, no
supercomputer in your pocket, no access to the Internet, no way to jump
between cities by air...

Back then, all people were so poor, not just in material goods or safety
technologies, but in _knowledge_. In the 19th century, they didn't know a damn
thing about what actually caused cancer, so people routinely did incredibly
stupid things (stupid to us, that is, with the knowledge we have today) when
making dyes and many other chemical processes.

Incredibly, the alternatives to all that were even worse. If you just sat at
home and did nothing, what would you have to do? Play cards and starve to
death? Books were still expensive, and remember what I said about all the
things that even Carnegie wouldn't have access to in his time?

Given all that, I'd rather start as a poor person today than be a rich person
in 1830.

------
ryanmarsh
SF et. al. aren't an oil boom town that'll crash in the next cycle. SF is the
Manhattan of tech and tech is where most economic growth will come from for
the foreseeable future.

Regulations don't help. NIMBYism doesn't help. But if you ended both I still
don't see how it would ever be as cheap as somewhere like Houston.

~~~
eldavido
On the other hand, oil boom towns don't _move_.

Anecdotally, a lot of people I know are leaving SF. I imagine the next 20-30
years will look like any other industry, where a clear center emerged, but
then it diffused outward into the broader economy as more and more industries
assimilated the new tech.

Now, you could make the argument that SF's core competence isn't so much a
technology as the process of innovation itself, but I'm not sure that's the
argument you're making. And I don't see any reason why a cheaper place with a
lot of smart people and money (to reference pg) couldn't be the next SV, like
say, Pittsburgh, or Seattle. Though I guess the social network, which is
really what holds this entire place together, does have some staying
power...maybe finance is the best example to prove your point?

~~~
orky56
We have yet to see a new SV emerge in another city. The capital from VCs is
still here. Unless something drastic changes, SV will remain firmly planted as
the world's tech hub.

------
option
People who own houses in CA and Bay Area in particular, especially those who
bought recently, why would they want housing prices to go down?

~~~
groby_b
Because we understand the problems of monoculture and non-diverse communities?
Because we know where income inequality leads? Because we'd rather see fellow
humans have a place to live in, instead of seeing our bank account grow?

Because for some of us, social responsibilities matter too, not just money?

~~~
xienze
> Because for some of us, social responsibilities matter too, not just money?

You'd be changing your tune if the $1M+ house you bought suddenly went
underwater to the tune of several hundred thousand dollars.

~~~
groby_b
I lost 50% on my house, and I'm still saying this, so no, I probably wouldn't.

I get that this is a huge burden. I don't suggest that's the magic fix, or
that this should happen across the board at such staggering numbers. I'd
prefer if it didn't happen to such an extent again to me, either.

I was merely answering the OPs question why anybody owning a house would want
them to go down at all.

We are currently on an unsustainable trajectory. They need to come down, and
they will, sooner or later. The only question is if we want to handle this in
a controlled way, or as a collapse, like last time 'round.

~~~
option
> "Because we know where income inequality leads?" \- income inequality is not
> the real problem. The _real_ problem is that lower end of the spectrum is
> too low and has been stagnating for too long. Whether fixing the _real_
> problem will lead to lowering income inequality or not is irrelevant. For
> case studies on "take money from rich and give to poor" visit any of the
> post-communist countries (I am actually from one).

> "We are currently on an unsustainable trajectory." \- Why? Which trajectory
> is sustainable?

> "The only question is if we want to handle this in a controlled way, or as a
> collapse, like last time 'round." \- Lol, there is no question about that.
> The real question is how?

~~~
groby_b
That's what "income inequality" is a shortcut for. I apologize, I of course
meant "the disturbing increase in income inequality". I didn't intend to
advocate for absolute income equality :)

Which trajectory is sustainable? One where housing prices don't significantly
outperform income growth, where the price range allows people of all ends of
the spectrum to find housing, and where the inventory isn't constrained as
much by regulations that only serve the purpose of "ensuring property values".

> Lol, there is no question about that. The real question is how?

I'm curious - if there's no question about that, your "why would they want
housing prices to go down" doesn't make sense. What do I miss?

I want them to go down now & controlled because I'd like a controlled descent.
It seems you agree on that :)

"How" is a surprisingly tricky question that, among other things, depends on
local economics. The solution for LA will look different than the solution for
SF. (And SF is in a _deep_ pickle. I'm glad the LA problems are not quite as
bad yet)

Affordable housing projects (and financing them) will play a key role. But
they're far from the only part - we'll also need to talk about densification,
fixing blighted neighborhoods, simplifying the permitting process.

There will need to be changes to the rent control system, meaningful fixes to
minimum wage, improved public transit, fixes to the nonsensical zoning
system... And Prop 13 needs to die a fiery death.

Many of these changes are going to be somewhat painful for existing
homeowners, but the inevitable collapse if we don't address this will be more
painful.

------
iceManChild
I completely agree that there is way too much regulation. But, the other part
of the equation is people are still willing to pay the resulting price in the
end. In the more "prime" communities like Palo Alto, Menlo Park, and Mountain
View they still seem happy to pay the extra cost to get permits to tear down a
60 year ranch style home and then petition a city council to put a custom
build in its place. Contractors advertise that they know the regulations and
how to work with officials to get their permits through and charge a premium.
The funny part is once construction is complete the new residence want to
prevent new construction in order to "preserve the neighborhood" they moved
into.

------
kevindong
Housing is expensive because demand is high while supply is low. Perhaps a
portion of the the difference in housing costs between certain areas in
California and certain areas in other states (i.e., the 4 br/2 bathroom
example) can be attributed to regulation, but the the vast majority of the
difference is attributed to the fact that there is high demand for that $2
million home whileas that $100k home is in Podunk, Fly-Over State, USA where
no wants to live.

In addition, at $100k, there _has_ to be something wrong with that home. My
old house's insurance bill claimed that it would cost in the mid-$200k range
to rebuild that exact same, 4 bedroom, 3.5 bathroom, ~4,000 sq. ft. home.

~~~
Empact
The natural way that markets behave is when prices are high, the price is an
incentive to create more supply, which then reduces the supply/demand
mismatch.

With reduced regulation, there would be much more housing supply in SF. E.g.
the city's footprint is slightly larger than Paris proper, which has 2.5x the
population thanks to a consistent building height of ~6 floors. Paris is
hardly a free-market bastion, or a place known for low quality of life, but SF
out-regulates Paris with its tyranny of the vocal minority and regulation by
bodies driven by perverse incentives.

Apart from directly adding supply, building up increases tax revenues and
local population which enables / justifies transit expansion, which then
increases the practically accessible pool of housing for anyone desiring to
live in the city.

So, in trying to understand your point: do you not believe that housing costs
would be lower if there was 3x the supply of housing, ala Paris, and a faster,
more comprehensive farther-reaching transit system?

------
bunkydoo
Very true in NYC also, everything is so tightly regulated that the spending
power of your dollar bottlenecks compared to other parts of the country

------
bcheung
Regulations, at least well intentioned regulations, exist to reduce risk to
society.

However, risk tolerance is rather subjective. It would be nice to allow people
to pay more for less risk and have things cheaper if they are comfortable with
more risk. Forcing everyone to the same lowest common denominator forces
people who can tolerate the extra risk to pay for more than they need.

Let people have more of a choice. Maybe it can be rated to a certain level of
safety with regards to different aspects (wind, fire, flood, accessibility,
etc).

When I was poor, I built my own place in a friend's warehouse for $3,600
(mostly lumber and drywall from Home Depot) and about 2 months of my own labor
with 1 other person helping. It was a small 2 story structure with 4 rooms. It
had electrical, Internet, and plumbing. It obviously wasn't to code but it was
completely functional and comfortable to live in. I read up on the different
codes and why they existed and chose to follow the ones that make sense from a
structural engineering / human safety standpoint, while ignoring other ones
that I thought wouldn't have any significant impact on me (handicap
accessibility, etc). I also wasn't concerned with how it looked. Exposed
drywall. Used melamine sheets as giant whiteboards for the interior walls
because they were more functional to me than traditional walls.

If I had to live according to the regulations, permits, etc, I would have been
homeless. But since I was willing to skirt the law and tolerate more risk I
was able to get by for dramatically cheaper.

I also had to spend time learning how to do framing and construction but
that's not really a big deal if you know how to read and can use the Internet.

Then there are those regulations that only exist to satisfy the wants of some
politician or their cronies. But that's a completely different issue.

------
ww520
Case in point. I've a remodel project last year. The city has a regulation to
require home owner to plant tree in front of the house for any permit based
remodel work. When asked how to the tree planted, they said asked the state
park service to get the permit and ttee requirement. But, but, I can pay a fee
to substitute the tree planting. wtf.

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bsder
It also hasn't helped that the Fed has held the interest rate so low for so
long in order to prop up the property bubble.

If the interest rate went up a couple of points, nobody could afford the
mortgage on a million dollar home. At that point, the market would start
moving in a different direction.

~~~
orky56
Those interest rates would also affect developers who are looking to build.
The net effect could be a lower supply that keeps demand constant.

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hardtke
Housing is also expensive because of the California building codes. These
include things like double pane windows, copper pipes and energy efficient
appliances. These raise the cost of new construction compared to other states,
but lead to long term lower home ownership costs and reduced energy
consumption. If we are serious about climate change we need to create such
regulations. Buyers will chose cheaper houses if given the choice.

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Spooky23
Housing prices are driven by average income, interest rates and population
growth. Period.

In a stable metro, the minimum price is a floor driven by the prevailing rent
as defined by social services for section 8. The median is driven by the
median two earner income. You can validate this by looking at small cities
with dominant employers like a state Capitol.

Everything else just changes the size, form and fitting of the housing unit.

~~~
astrodust
Plus speculation. If it was driven by just those factors Ireland wouldn't have
happened.

~~~
Spooky23
That's more about cheap rates and access to capital. Very little speculative
activity is financed by cash.

~~~
astrodust
It depends on your market. We're seeing a lot of Chinese capital (cash) being
dumped into real-estate since it's seen as a cheap investment that produces
good returns.

In this bubble that house is appreciating at 17% per year or more. If you're
leveraged you can get higher returns, but finding someone to loan you the
money may be difficult. If you've got cash, just dump it on properties and let
it appreciate.

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clarkmoody
Really interesting EconTalk from 2011 about cities, regulation, and growth:
[http://www.econtalk.org/archives/2011/10/avent_on_cities.htm...](http://www.econtalk.org/archives/2011/10/avent_on_cities.html)

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muzz
Figure 1 uses data that ends over 20 years ago?

