

Why Can't We Build an Affordable House? - robg
http://www.wilsoncenter.org/index.cfm?fuseaction=wq.essay&essay_id=476601

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pchristensen
I read so much about this during my Masters of Urban Planning and he's spot
on. Getting land approved for development is costly, time consuming, and
uncertain. This leads to lower supply, and since housing is fairly inelastic,
it has consumed an increasing share of domestic income.

Here are some more points:

\- building restrictions are overturned or overruled, but only after expensive
lawsuits. These are impossible for small builders to do but routine for large
builders. They are also better financed and more experienced than the
municipalities they are suing, so they eventually win after several years and
millions of dollars.

\- With or without a lawsuit, it's easier to build get bigger houses on bigger
lots approved. That's fine for the builder - all they need is an ROI - but it
eliminates the low-end option.

\- People move often so resale value is a very high priority, especially for
first time buyers. I live in the suburbs and would love to have a condo, but I
would never want to try to sell a condo in the suburbs so I bought a house
instead. Condos and townhouses are cheaper and would serve many people's needs
better, but these are marginal properties that will suffer most in a down
market.

\- External factors (proximity to transit, good public schools, proximity to
workplaces, etc) reduce total cost of living and increase home prices by
roughly the same amount. In Chicago suburbs, Naperville has excellent schools,
Aurora not so much. Identical houses across the school district boundary are
over $100K different. Being close enough to walk to transit saves (at least)
$40/mo on parking but more like $100 when you include gas,etc, which
corresponds to about $10-15K in house prices. But it saves time, which can be
valued _very_ highly, so a house 1/3 mile from a commuter rail station would
cost $75-150K more than a house a mile from the station. (probably a bigger
deal in Chicago/NYC/Boston more than anywhere else). Ditto if you don't need
private schools.

\- As supply goes down (or grows slowly), houses are competing for a smaller
slice of the upper end of buyers. If only the top 50% of potential buyers can
afford a house, the needs of the bottom 50% are ignored. If only the top 10%
can afford it, the bottom 90% are ignored. So if most potential buyers are
DINKs (dual income, no kids), then new construction will be 1-2BR
condos/townhomes, with very few 3BR. The 3BR units will be much more expensive
both because they are larger but also rarer. If most buyers are families, the
sizes might start at 3BR and go up and there probably won't be _any_ 1-2BR at
any price.

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praxis
We can build affordable housing. the right question to ask is: why is housing
unaffordable?

First: look at more economical design philosophies: Rob Roy of Sauna fame,
Lester Walker who wrote tiny houses, and somewhat less of Sarah Susanka. Oh,
and who can leave a pioneer hacker out: R. Buckminster Fuller - who thought of
practical solutions to house humanity and called our planet space ship earth.
Bucky was so innovative he was taken as a quack by many.

The main ideas are simple: maximize volume and reduce surface skin - this
makes for cheaper building and less heating/cooling energy. There are trade
offs between the sphere and livability - but cubes(with slanted roofs) beat
most conventional designs by far. Really think about the floorplan: rooms can
serve two purposes or more, get the plumbing reduced to the minimum, bathrooms
adjacent, and directly above on the next floor - these are worthwhile design
constraints. All the while aesthetics can be improved - which I see evidently
contributes greatly to quality of life. There is a science to living.

Then on to land. You know for all the worshiping architects and media give to
Frank Lloyd Wright they don't mention his hatred of cities, and his
explanations for why the rural life rules. I think there are strong media
influences to keep people in the cities - while it may not be good for the
majority it does keep more open land available to me. It's ridiculous to pay
more than half the building cost of a home to land prices. I understand people
need to work and that is an artificial draw of the city. But, maybe we need to
reorganize the way we live to make everything more efficient. The centralized
industrial economy where we need cities of work camps is passed. Most jobs can
allow people to telecommute, and we will find more physical and service jobs
done by increasingly intelligent machines.

Second: the system is designed to make us debt indentured servants. Mortgages
are often no more than the chains of slaves in their sheet rock cages. Look at
how the housing market is manipulated by lending: if the majority can borrow
more money to out bid for houses then the price of housing will go up. And
they have.

Third. Standardization. We build houses like custom artwork. I'm not saying we
need to live in prefab trailers, but we can economize buildings by far.

Think of your money in terms of sheets of plywood(currently under $20 a 4"x8"
section for CDX) and drywall($8) and realize what you could build. The average
taxpayer could build a house with money the government demands and uses to
prop up housing prices.

The bottom line is that there is no constraint on building things affordably
yourself unless it's imposed the government of the powerful in the form of
publicly acceptable zoning, banking, and miss-education in the public schools
- what would be a more valuable lesson than learning how to shelter yourself?
I'd much prefer kids learn that than fluff social studies and all the other
time wasting crap they feed them.

------
mdasen
There are a lot of reasons.

1\. Asthetics: While people are comfortable all looking alike with an iPod,
they don't want their homes to look alike. Such customization demands increase
the price dramatically.

2\. Land. People want to live in places already built-up. You aren't going to
be creating new housing in a desirable Boston neighborhood without knocking
something down first (assuming you could ever get permission to knock a
building in Boston). For this reason, most property purchases are trades of
currently erected buildings rather than construction of new buildings.

3\. Labor. On one side, it's hard to find skilled construction workers today.
The 20-somethings of today have been programmed that it's college or bust.
That has left a short supply of electricians, plumbers, carpenters, etc. As
such, wages are huge because property is valuable and people who want to build
can't find enough workers. On the other side, we're a lot safer in our
construction than we used to. Workplace injuries aren't as common and that's a
good thing.

4\. Regulations. There are a lot of them and they are meant to improve the
quality of houses, but they cost money.

5\. Improvements in Quality. Do you think you're going to build a house today
without cable and Cat-5 jacks everywhere? Of course not! Old homes have
similarly been retrofitted with such amenities. Double-paned windows are now
the norm in colder climates, dishwashers and garbage disposals, garage door
openers, etc. all add to the price of homes. Heck, even the number of
electrical outlets in new homes is quite different from homes built in the
70s.

5\. US tax laws. It makes sense to buy as much house as you possibly can
scrimp for due to US tax laws which treat home ownership as this panacea of
good citizenship. That drives prices sky high.

So, housing prices are a combination of factors.

~~~
cabalamat
Cat-5 jacks are a silly idea for proprty, since they will become obsolete when
the next network technology comes along.

~~~
mseebach
Obsoletion doesn't come from nowhere. What's the problem with current LAN-
cabling that warrants the coming of a new network technology? Yeah, wireless,
but it's still nice to have some places to easily plug in the access points.

Pairs of copper wire is, if anything, a proven technology. And it's not like
we're anywhere near pushing the limit of Ethernet technology for domestic
purposes.

Even if a new technology will come along, the fact that entire cites are wired
from top to bottom with cat-5, you're guaranteed that any new technology wil
be heavily biased towards backwards compability on the physical layer.

~~~
cabalamat
The house I live in was built 120 years ago. Wanna bet that Cat-5 will still
be around several decades from now?

~~~
icey
Yeah, why build a garage when we'll all be driving flying cars in 30 years,
right?

~~~
eru
To house your startup?

------
rsheridan6
Here's why we _wouldn't_ : cheap houses = poor neighbors = various social
pathologies and stigmas. You can get an affordable trailer now, but most
people don't if they can afford not to.

~~~
weegee
not necessarily true. there is a distinction to be made between cheap and
affordable. around where I live, there are no affordable houses being built
anywhere. every new home is at least $600k, far outside the wage of the
average resident. I can remember in the late 1980s you could buy a new home
for less than $100k. Good luck doing that now!! I find it incredible that
people can afford to buy, and live in, these huge homes. They pay hundreds a
month just for electricity. Astounding.

~~~
rsheridan6
I was thinking more in terms of a Bucky Fuller-style $10,000 house that would
be as good as a house that costs $100,000 to build. If you can't find anything
around $100,000 in your area, that probably is due to a land shortage.

There are actually still affordable new homes going up in areas with lots of
land and few regulations on construction. As you can see, you can easily find
a new home in the Houston area for little more than $100K:
[http://www.lennar.com/findhome/city.aspx?CITYID=HOU&_kk=...](http://www.lennar.com/findhome/city.aspx?CITYID=HOU&_kk=pearland%20house&_kt=cbf8ce79-ad19-4f87-9de2-a8ab420cb21c)

I'm sure you could buy an older house for much less.

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kaens
We can, there's just a lot of factors making it hard to gain market acceptance
(is that the appropriate term here?)

I would jump at the chance to live in something like a Dymaxion house* in a
walkable community.

*<http://en.wikipedia.org/wiki/Dymaxion_House>

EDIT: For more awesome houses, have a look at
<http://en.wikipedia.org/wiki/Autonomous_building>

~~~
LogicHoleFlaw
I think a lot of the market-acceptance factor is that many people, when they
hear the term "affordable housing", immediately think "double-wide."

~~~
kaens
I agree.

That, and when a lot of people think "I'm going to buy a house," they are
thinking of that one house that's in every single suburb. That one that is
functionally the same but might have a different room layout.

I think the trend may be shifting (part of me thinks that the trend will
_have_ to shift), and that would be good. I know that I, and most of the
people I know, would like to be living in a walkable community in housing that
is as sustainable as possible.

I mean, if I had the capital for it, I'd get on building an awesome little
town. I don't though, and probably won't for a while - maybe someday though.

------
josefresco
People didn't "buy houses they couldn't afford". They bought houses who's
value was 40-50% inflated and then had that value disappear, almost overnight.

I love how this 'crisis' is blamed on over-reaching Americans, but only one
side of the transaction. It takes two to tango, but don't forget the millions
of Americans who made billions selling homes at grossly inflated values.

~~~
anamax
> People didn't "buy houses they couldn't afford". They bought houses who's
> value was 40-50% inflated and then had that value disappear, almost
> overnight.

If they can't pay for their houses, they can't afford said houses, no matter
what said houses are worth or how said worth changes.

Mortgages aren't "called" when a house's value changes. Mortgages aren't
"called" when the lender goes bankrupt (someone else buys the mortgage). The
terms don't change when the house value changes.

They're losing their houses because they can't afford to pay for them.

~~~
lacker
It is technically true that the terms don't change when the house value
changes, but it is misleading to suggest that house value doesn't affect
affordability.

The distinguishing feature of most subprime loans is that the interest rate
changes after a few years. A typical subprime loan could be 3 years at 8%,
then 27 years at 12%. The assumption (made by bankers to justify the subprime
model) was that after paying lower prices for a few years, the borrower would
have some equity built up in the house, so they would be a better credit risk,
and they could refinance at that point for a lower rate.

But, when housing prices dropped, many of these houses were now worth less
than the outstanding amount on the mortgage, even after a few years of paying
down the loan. So the plan of refinancing after a few years didn't work any
more.

Basically, it is easier to afford a house if it maintains its value after you
buy it, because the equity gives you more flexibility in refinancing.

Sorry if this is too boring ;-) But if you are curious to read more about the
particular characteristics of subprime mortgages I recommend this paper -

[http://www.kc.frb.org/publicat/sympos/2008/Gorton.08.04.08.p...](http://www.kc.frb.org/publicat/sympos/2008/Gorton.08.04.08.pdf)

~~~
anamax
> The assumption (made by bankers to justify the subprime model) was that
> after paying lower prices for a few years, the borrower would have some
> equity built up in the house, so they would be a better credit risk, and
> they could refinance at that point for a lower rate.

No, that's not what happened. Folks got loans where they could afford the
teaser rate but not the regular rate. Even if they'd put down 20% and the
house didn't go down in value, they couldn't afford what they'd bought.

If housing prices had continued to appreciate, they could have done a cash-out
refinance and used that money to help them pay for the new loan, but that just
delays the inevitable. ($50k doesn't go very far when a payment that you can't
afford goes up by $1k/month.)

Or, they could have sold and taken the equity to buy something that they could
afford.

The only way that they could have kept those houses (without significantly
increasing their income) is if they'd been able to do no-cost refis with
teaser rates until they were paid off. Since many/most of those loans were
interest-only....

Note that most of the teaser-rate loans had prepayment penalties.

The amount of equity that one has in a house has very little effect on the
interest rate. The big driver is interest rates in general.

------
razzmataz
Ask city councils that set minimum square footage restrictions for new
housing.

~~~
qqq
And have 5000 regulations for safety, external prettiness, etc... Those may be
good things, but they cost money, and poor people aren't given the option to
choose which features they can live without.

~~~
DanielBMarkham
There was a study done back in the 80s, I think, about the cost of regulation
in housing. As I recall, regulation amounted to 35% of the cost of a house. I
would guess that the trend continued.

~~~
qqq
Wow that's terrible. And I think it did get worse:

[http://seattletimes.nwsource.com/html/businesstechnology/200...](http://seattletimes.nwsource.com/html/businesstechnology/2004181704_eicher14.html)

> Between 1989 and 2006, the median inflation-adjusted price of a Seattle
> house rose from $221,000 to $447,800. Fully $200,000 of that increase was
> the result of land-use regulations, says Theo Eicher — twice the financial
> impact that regulation has had on other major U.S. cities.

------
niels_olson
The whole article is based on the failed idea that the burbs are the way to
go. Many people who have read A Pattern Language understand that the
neighborhood is also key, though they often can't realize it alone, so they
instead build really fancy and eclectic single-family two-story homes, (how
novel /sarcasm).

I would be interested in connecting with more people who understand and want
to realize Christopher Alexander's ideas, and encourage anyone who reads
Hacker News to get A Pattern Language. It's not really made to be a straight
read. It's more like a library of architectural functions with comments on how
to apply them. Good to have at hand. The problem is that to fully realize what
is clearly a better solution than the burbs, you would need to collaborate
with dozens of other people, who all understand the ideas.

Here's a couple of starting points for those unfamiliar with the architectural
ideas:

<http://www.livingneighborhoods.org/>

<https://www.patternlanguage.com/>

~~~
gojomo
I can't resist posting some patterns observed by a neighbor at Alexander's
actual residence in Berkeley:

"Another Pattern Language: Real Life Patterns Chez Christopher Alexander"

<http://internettime.com/Learning/alexander.swf>

~~~
niels_olson
For some reason, I can't imagine he'd be terribly proud of that. Do you think
he's just really stupid? I wonder if maybe he's working on other stuff, or
found he couldn't afford everything he wanted on a professor's salary, or
maybe this is what the house looked like two weeks after he moved in? I'm not
an apologist for the guy, but that flashpaper is basically some guy trying to
gain some reputation by lampooning someone better known than himself, which
belies a moral corruption that far exceeds the unfortunate physical corruption
of Mr Alexander's house.

Have you read the book? Its merits are fairly self-evident if you read a few
pages, regardless of the author's choice of paint colors for his own house.

~~~
gojomo
I don't see the 'Another Pattern Language' presentation as any sort of serious
critique of Alexander's oeuvre. It's just a bit of humor generated by the
contrast between Alexander's professional image and personal circumstances.

I know the creator of the presentation, and do not see him as someone who
tears down the famous for cheap notoriety, as you accuse. He truly lives not
far from Alexander; his professional reputation as an
author/consultant/educator is secure; he hasn't promoted his wry little parody
widely.

I suspect neighbors did resent the 'curb appeal' of Alexander's property (and
still do if circumstances remain similar). The Berkeley hills are fairly
upscale real estate.

------
patrickg-zill
The argument is "land" combined with restrictions on converting other kinds of
land into residential homes.

However he does not follow through on the regulatory costs and sort of buries
them in the article.

------
netcan
_Side Note_ : This is an example of how war fuels economic growth through
technological innovation. The production line house produced by a war veteran
is an example of wealth creating technology.

------
icey
Well, if you look at it from a capitalist point of view, the real question is
"Why would we?".

------
teej
Land.

~~~
hugh
Well yes, that's what the article says, eventually, except you have to wade
through a whole bunch of BS about construction costs to get there.

It seems to be mostly wrong about _why_ land is more expensive than it's ever
been, blaming it on various policy initiatives. Really though, land is more
expensive than ever before because there are more people than ever before.
Also, because we're richer than ever before (in terms of the amount we have
left over after paying for groceries etc) and hence are willing to spend a
higher portion of our income to secure one of the limited number of blocks of
land which are in a convenient location.

------
pragmatic
Who says we can't?

~~~
pchristensen
It turns out that "Why can't we..." means "Why aren't we allowed to..."

------
cabalamat
Nimbys.

------
weegee
we can, we just don't want to build one smaller or less opulent than the
neighbors have. in fact we have to build bigger!

