

The “Housing Affordability Crisis” - stathack
http://blog.kwelia.com/2014/03/27/the-housing-affordability-crisis-affordable-low-income-rentals-without-federal-assistance/

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ChuckFrank
This is a defining problem of our current urban generation.

It's fascinating to read about the Next City study that "concludes that poor
housing affordability in Philadelphia is a symptom of low income rather than
of insufficient rental supply."

Having studied this in depth, specifically in regards to China's Ghost Town
problems where they increased housing supply by many folds - Here's the
current VICE documentary on it.

[http://www.youtube.com/watch?v=trs_udhjWqc](http://www.youtube.com/watch?v=trs_udhjWqc)

The problem is not one of supply divorced from affordability. There needs to
be both sufficient supply (ie. Not SF / LA) and there needs to be sufficient
affordability (ie. Not China). Yet with these two constraints people seem to
sit around wringing their hands unable to do anything. It's almost as if,
politically, people are incapacitated by this problem. To which I always
respond - look at Ford. The Pre-Ford cars had the same problem, lack of supply
and lack of affordability. And Ford changed the equation with the Model T, by
making an affordable, readily available car - thereby jump-starting the car
economy worldwide.

We CAN do the same thing with housing. By eliminating the speculative
incentives on housing (as is done in Germany) through capital gains taxation,
and through multiple non-residence ownership taxation, we can address some of
the market structures that diminish affordability. And on the other side we
can create growth opportunities, through zoning primarily - such as a
reduction in the required number of parking spaces per residence unit - and
through a reduction in average square footage (which has been growing in
America over the last 30 years) --

[http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf](http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf)

And while this is just a start. This can be done. We don't even need the
'political will' to do it. We just need to do it. With just a few slight
changes in the way we manage our housing inventory, both financially, and with
regards to zoning and planning, we could radically alter the availability of
affordable (NOT low income! or qualified housing) Over night.

~~~
breischl
>>through multiple non-residence ownership taxation

Can you clarify what you mean by this? It sounds like basically a "landlord
tax."

>>reduction in the required number of parking spaces per residence unit

Certainly that would reduce costs in some cases, though it could be
problematic in others. eg, many neighborhoods near me already have a shortage
of parking (street parking is constantly full), and the zoning only calls for
1 spot per unit. Reducing that would just lead to more problems, and probably
parking tickets for residents.

>>reduction in average square footage

That would certainly help, particularly in areas where the land is expensive.

~~~
rprospero
I interpreted the "multiple non-residence ownership taxation" as more of a
non-landlord tax.

I met a fellow back around 2002 who owned twenty houses out in Arizona. He had
never actually seen any of them - he just owned them as an investment. Also,
since being a landlord was too much hassle and legal liability, he wasn't
renting them out. The houses just sat vacant and he intended to make his money
on housing prices outpacing inflation.

The theory behind the tax is that having large numbers of houses sitting
around empty is a poor use of resources. By increasing the property tax on
unoccupied houses, the owner is encouraged to rent out the units, increasing
the overall housing supply and thereby decreasing rents.

~~~
breischl
Ah, so a "housing speculator tax" or an "unused residence tax." That makes a
lot more sense than a landlord tax.

edit: Occurs to me that this would help deal with bank-owned properties that
can sometimes sit vacant for quite a while. OTOH, that very thing might make
it harder to get a mortgage - lenders would be scared they'd end up owning
some unsaleable property in downtown Detroit, and paying elevated taxes on it
to boot.

~~~
ChuckFrank
Correct. Vacancies that accrue speculative value, or vacancies that are
covered by rental insurance destroy the housing supply chain. Rentals on the
other hand are amazing. They are a great way for people to start on their way
to home ownership, and they are great for labor mobility. Robust rental
markets should be supported by the type of residences allowed by planning -
granny units, alley units, secondary units, etc. Plus smaller rental units as
well.

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zaroth
This seems like very circular logic. There are not many single-family units
available to rent to ELI (Extremely Low Income) renters for <= 30% of their
income. Right, if there were then you wouldn't call it _ELI_.

To look at it another way... Plot the price of every rental, sorted by price,
X axis is percentile, Y axis is price. ELI is defined as the Xth percentile
price times 3.

You want more cheap housing? State it another way, you want to encourage
investment in cheap housing. Land is scarce, housing has lots of fixed costs,
renting is a massive risk to the landlord.

One interesting catch-22 is the stronger the renter protection laws, the more
risk to investors who would build and rent these units.

There are a lot of ways to make this area less risky for investment. Better
legal frameworks to deal with problem renters. Better tools to select reliable
ELI renters. Better legal framework for using these tools to screen renters.
Better tax incentives for renting to ELI tenants (subsidies).

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jjindev
In many older parts of California you can rent an apartment over a garage.
Great system. Revenue for the home owner, good environment for the renter,
distributed rentals. Of course that was then, right? When people talk about
rentals versus homes now they have a mental image shaped by very strong
zoning. That is the apartment strip, this is the single home suburb.

Compare to Japan, Tokyo in particular, with tiny homes and tiny apartments
pushed into every nook and cranny.

Why do our costs keep rising? Because we have structured it that way, for the
apartment owner and for uniform suburban living.

------
facepalm
Rents higher than 30% of income seem pretty normal to me (living in Germany).
Makes me wonder: aren't rents prone to rise to the level that people can bear?
If people can bear 30%, rents will rise to that level in attractive locations.

That's part of what makes the game rigged against common people.

~~~
ceras
> Makes me wonder: aren't rents prone to rise to the level that people can
> bear? If people can bear 30%, rents will rise to that level in attractive
> locations.

In econ this reasoning is related to the diamond-water paradox:
[http://en.wikipedia.org/wiki/Paradox_of_value](http://en.wikipedia.org/wiki/Paradox_of_value)

The gist of it is that it's only accurate to assume so when supply is very
low. But like water, despite being crucial if housing supply is high enough it
should decrease in price until it approaches the marginal cost of production.
In this case, it's almost always laws and regulation that prevent he supply
from increasing; this in part because (a) most voters (in the US) are home
owners who have a vested interest in increasing home value, and (b) people are
resistant to change and don't want new housing developments in their towns.

