
Ask HN: Disrupt Housing? - mpg33
This may be a dumb question but why is housing so expensive? Or I guess to rephrase that question more correctly why DOES IT HAVE TO BE so expensive??<p>Do you think in the near future with improved robotics, materials, building methods that an average size home might cost $25000 instead of $250000?
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brudgers
Several issues drive typical home prices. Among them are increases in buyer
expectations and the cost of entitlement.

Before modern development regulations, the infrastructure costs of greenfield
development such as roads, schools, parks, and emergency services could be
passed on existing residents. There were few or no environmental regulations
to deal with either.

As these costs are tied to entitlement upfront development costs rise, and
thus the development of higher market segment products makes more economic
sense - one feature of real-estate development is that it takes about the same
amount of time money and effort to do a small budget project as a large budget
one.

To see how far consumer expectations have changed imagine the 800 square foot
Levittown floor plans being marketed for growing families today.
<http://tigger.uic.edu/~pbhales/Levittown/building.html>

Of course the other piece of the puzzle is that housing in the US has been
disrupted several times over the past 150 years, from balloon framing with
dimensional lumber (factory production), the development of the mobile home
(again, factory production), to modern large subdivision development such as
the aforementioned Levittown (economies of scale using mobile production crews
performing repetitive work).

The problem with robotic production is that the capital investment is high,
the demand for the product cyclical, and the end product is not transportable
in an assembled state (except for mobile or modular housing).

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genwin
"Supply and demand" is the obvious answer, but it doesn't answer the follow-up
questions: what's fueling the demand, or lowering the supply? The answer to
those is: easy borrowing, and foreclosure stickiness. Actually, easy borrowing
_fueled_ the demand in the past, and the bubble is still deflating, slowly
because of foreclosure stickiness. If people had to pay cash for houses I'm
confident house prices would be half or less of what they are today, in most
areas. If banks got rid of their non-performing mortgage loans in short order,
I'm confident that would cut house prices in half in most areas.

House prices are also a hot political issue; namely, each generation wants
future generations to pay excessively for their houses when they retire, so
they support the gov't borrowing heavily to fuel house prices. (Of course they
want future generations to pay for the gov't debt too.)

Improved robotics, materials and whatnot will have limited effect on house
prices. A lot of the savings would be absorbed as greater profit for
construction and renovation. You see this happening in the pre-fab industry.
For the next decade at least, nothing beats buying an existing house,
financially. Most houses in the US are selling for less than replacement cost.

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lutusp
> This may be a dumb question but why is housing so expensive? Or I guess to
> rephrase that question more correctly why DOES IT HAVE TO BE so expensive??

That's easy to answer -- housing is expensive because in an open market,
prices rise in response to demand. More demand, higher price. Less demand,
lower price.

> Do you think in the near future with improved robotics, materials, building
> methods that an average size home might cost $25000 instead of $250000?

Possible but not likely. The cost of a house includes the cost of the land the
house sits on, and persistent rumors have it that they're not making any more
land.

To see the sense of this, compare the cost of a house, with land, versus a
similarly equipped mobile home, with wheels. The mobile home costs less
because it has no land to call its own.

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venturebros
"why DOES IT HAVE TO BE so expensive"

It doesn't have to be. I live in a large city and all of these new apartment
constructions are popping up.

The thing about new apartment constructions is that they come with
gyms,parking spaces, roof top decks w/ bbq grills,movie theaters,etc. All
things that I and many others don't need.Yet my option is pay for it or pay
half and move into a 100yr old building with "vintage old world charm".

It would be nice to see a trend of new modern buildings with out the frills so
people have some place affordable.

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impendia
Lowering house prices in Silicon Valley by 70% would be trivial: Let
developers build what they want to build, where they want to build it.

Those with $1MM+ houses, however, oppose this for obvious reasons.

~~~
seachanged
Yes, sewage treatment and treated water supplies are completely optional for
successful development, and unnecessarily increase the price of the house that
is serviced by them.

You can provide you own protection, so you don't need the police (I'm actually
half-serious on that), and firefighting is just a scam. Why, I bet that you
could find an insurance company that would insure your house without it being
protected by a fire district. Heck, you don't need homeowners insurance at
all! Just buy your cheap house outright, and there's no need!

And zoning laws? Who needs them! People can live just as comfortably downwind
of a sewage treatment plant or an oil refinery as they can by a lake! It's a
scam, front to back!

And to answer the poster's original question, why is housing so expensive,
read Adam Smith's "The Wealth of Nations." Even if you just pick it apart, and
read the chapters you want, it's a fascinating description of .. well, the
wealth of nations. Rents are part of that equation, and he covers it.

------
ippisl
One factor that increases housing prices is that people are competing on
houses near good schools, because of the importance of education.

But education might become less dependent on geography(by using remote ed
tech) or in some scenarios(better AI) much less important, which will
indirectly reduce housing costs.

Another option is a growing availability of remote jobs and better remote
social lives( remote telepresence and video conferencing, access to great and
varied food through sous-vide, generally better digital experiences) might
also decrease the demand for city life.

~~~
tokenadult
_One factor that increases housing prices is that people are competing on
houses near good schools, because of the importance of education._

It's interesting that people who are in the business of selling houses and
lots will tell buyers that they are selling a place "in a good school
district" even in states like Minnesota, where there is statewide public
school open enrollment, so that anyone can live anywhere in the state and send
their children to schools anywhere in the state.

[http://education.state.mn.us/MDE/StuSuc/EnrollChoice/index.h...](http://education.state.mn.us/MDE/StuSuc/EnrollChoice/index.html)

In my public school district, which aggressively seeks open-enrollment
students, there are students enrolled with residence addresses in the
territories of FORTY-ONE other public school districts. We happen to be
homeschoolers who live in this school district for other reasons, but it
amazes me how many families think they have to live in this school district to
have their children in the schools here, when the law has been otherwise in
Minnesota for more than twenty years now.

Agreed that decoupling work choices from residence address constraints will
help change the market for housing. Having public school open enrollment in
all states, with public school funding rules more like Minnesota's

<http://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf>

might also help rationalize the housing market, but the example here shows
that will be a slow process as families readjust their habits in shopping for
housing.

~~~
michael_miller
Open enrollment doesn't mean that your child will have the same experience as
living in the district of the school. For example, your kid would likely be
unable to walk to school, and would have a hard time hanging out with friends
from school. School is important from a social perspective too.

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autophil
Yes, yes and YES. I think there's huge possibilities here, but the challenge
isn't in designing or construction, but of re-education. Some people think
owning a traditional home (and cars etc) will make them happy.

We know that's not the case. Materials possessions and keeping up with the
neighbours does not make people happy. That reality needs to be more widely
accepted for a true disruption in the housing market.

My .02.

~~~
mpg33
I agree. If people changed the way they looked at what housing traditionally
is I think it would allow for some new and innovative ideas.

~~~
genwin
It would take more than half the people changing. I'd love to buy a lot in my
city and put a yurt on it, but the city / voters won't let me live in a yurt.

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gexla
Supply and demand. A house which is 60 years old and has changed hands many
times doesn't cost X because the owners are still paying off the materials.
It's because demand is driving up the cost. Even with cheap materials, the
land the house sits on may still be scarce (depending on the location.)

~~~
mpg33
So in a sense housing will always be expensive because of scarcity of land and
demand for housing?

~~~
gexla
Again, it depends on demand vs supply. Land in the middle of nowhere in Alaska
is abundant with little demand, so land there isn't considered scarce. In
Manhattan, New York, demand causes increased living space to be created by
building upwards. In San Francisco, city restrictions on building heights
limit supply (can't stack as high vertically as you can in Manhatten.)

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adrianmn
When it comes to real estate the 3 most important things are location,
location, location. Most city centers do not have options to allow more
housing as they are fully built.

The improved materials already reduce the house building costs compared to
10-20 years ago but this mostly applies for rural areas....

~~~
mpg33
So what about increasing supply by building more?

~~~
adrianmn
most of the highly desirable areas are either fully built or land costs a
fortune.

this is exactly the problem for housing prices: supply can't increase while
more and more people want to live there(world population keeps growing and
migration is at peak levels)

opposed to that there are countries, cities or neighbourhoods where you can
buy property cheaper than the price of building it

~~~
GFischer
For example: a lot of Detroit, Michigan.

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nfriedly
Not exactly the direction your question was heading, but check out
<http://shelterpub.com/> \- they have a few books about building your own
house (for considerably less money than buying one.) You still have to get the
land somehow though.

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mpg33
Interesting TED talk on Automated Construction

[http://www.youtube.com/watch?v=JdbJP8Gxqog&feature=playe...](http://www.youtube.com/watch?v=JdbJP8Gxqog&feature=player_embedded#)!

