Housing and land is a non-transable good, and therefore there should be heavy state intervention on it, preferably by doing the same as Vienna, which is holding >40% of the renting stock and charging according to income, and renting to a representative distribution of tenants so to prevent guettos.
Rent is the main detractor of disposable income which hurts the rest of the economy, and property owners provide almost no value, but to provide access to housing for people who has no capital for it, which is service that could be perfectly provided by a state entity.
The current setup creates guettos by default, by siloing people with different monetary and social capital into different building and areas, hurting social mobility, which could be improved by the setup described above. Many attempts at public housing failed because they just tried to provide housing for low-income people in separated and/or undesirable areas, with a predictable outcome.
Housing =/= Land. But our policies which heavily kneecap our ability to build more [0] make it such that Housing starts behaving like Land.
The solution is to build more, and the success of Vienna does not come from public intervention but from the added supply. Tokyo is another city with famously cheap housing, and the secret is that they make it easy to build.
I personally think that achieving affordable housing prices via mainly government intervention is not a sustainable approach. You end up consuming both economic and political capital.
A more sustainable approach sets clear, transparent rules that specify under what conditions do you get to build by right. Then 90% gets satisfied by the market, the remaining 10% can be addressed by government investments, if needed.
The only sustainable way to get affordable housing is when the market price is affordable.
Land, on the other hand, is another story. There is strong economic evidence that many of the observations of Henry George [1] are spot on: Land rents tend to take a massive toll in the economy, cause inequality and misery, all without requiring their owners to provide any added value. The proposed solution, again with solid economic fundamentals, is to tax the unimproved value of land at 100%. Henry George further argues that the proceeds should be equally divided among citizens, a citizen dividend if you will.
[0] e.g. it takes 4 years on average to get a new building permit in SF, 90% of the city is zoned for single family housing, any neighbor etc.
I am obviously less informed on Manhattan shenanigans, but enough to know that there's plenty of obstacles to new construction in NYC and Manhattan proper.
I recall AOC lobbying for stopping an apartment complex in a formerly industrial area. And a articles on how certain areas of Manhattan don't allow towers. In fact, a quick look at the zoning map [0] has, eg, large areas zoned as "R8B contextual districts are designed to preserve the character and scale of taller rowhouse neighborhoods".
SF is the worst offender, but NYC is still pretty bad.
It can be doing so much better. I get a tad excited reading about 1,000ft supertall's being built, only to sigh when I see it will have a whopping 80 units. I've seen even more ridiculous stuff like a 10 story building with 4 units. There's been a ton of construction in NYC over the last 5 years alone but it seems to be mostly luxury and medium/low density. There are plenty of older buildings from the 20th century that are much denser but it seems that no one wants to build these anymore. (Or they can't, I'm not sure which).
More than 40% of the building square footage in Manhattan would be literally illegal to build today.[1] Developers would absolutely love to build huge skyscrapers housing thousands. However the city has zoning rules with onerous setbacks, height and density restrictions. The focus on ultra luxury development is a byproduct of heavy handed government regulation.
Exactly. Libertarians in here love to say it's a lack of supply and it's simple supply and demand and you look at what's being built and it's 1000ft tall buildings with a tiny number of luxury units.
In the 1990s, the US restricted the number of car imports from Japan. As a result, Toyota and Nissan had car quotas. They had luxury cars and mass-market cars. Which do you think they filled their quota with first? Obviously the higher-margin luxury cars. Clearly the problem is not a simple lack of supply, right? Toyota and Nissan just need to make more affordable cars? Or is it obvious that when you restrict supply in a market, only the highest-margin (luxury) goods get produced, until demand for them is met and manufacturers are forced to produce and sell lower-margin mass-market (more affordable) goods?
It's more dense than other cities, but there's still a few problems. There was a huge controversy when the city tried to upzone SoHo/NoHo.
Additionally, the other boroughs aren't super dense. For example, much of the land next to LIRR is pretty low density, and even SFH [0]. Some people in Manhattan would be okay living there, so that does lead to higher rents in Manhattan.
Manhattan is 25% less dense than it was in 1910. The densest census tract in Manhattan is four times denser than borough average. We could easily double the population of the island, even without getting into ultra tall skyscrapers or reclaiming more land.
I live in East Village right on the border with the LES. There's certainly development happening and new buildings coming up but when I walk around EV/LES it sometimes feels like I see more 2-3 story buildings than otherwise. There's literally no reason any of these buildings should be under 6 stories minimum. People think of Manhattan as being dense with a bunch of skyscrapers but I suspect in reality there's still a whole lot of units that could be added by simply building upwards.
I say 6 stories because you can reasonably have a 6-story walkup. Anything higher and you would need to add an elevator which could make things harder.
In my mind it is the same problem everywhere. Supply is too low and is kept low for many reasons. There is insane demand from around the world to live in Manhattan.
The solution of course is to build more, but it just happens that the private initiative always build under demand because it is inelastic and it's in their interest to keep the market as so.
Of course the Vienna success came from public intervention because otherwhise you'd have exactly the same situation of hundreds of other cities where rent is always a hefty amount of modal income and no matter how easy and cheap is to build it just happens those with access to capital never meet demand.
You need to build more, in many cite MUCH more, and you need vacant housing so floating population can come and go easily.
> The solution is to build more, and the success of Vienna does not come from public intervention but from the added supply. Tokyo is another city with famously cheap housing, and the secret is that they make it easy to build.
The other two secrets are tiny apartments (200-400 sqft), and an incredibly reliable public transportation system. Tokyo has a massive sprawl -- people can and do live far from their work. The average one-way commute time in the Tokyo metro area is almost an hour.
400sqft is about 37m2
That’s pretty much the smallest apartment you’ll find in Vienna, and only for individuals living alone. But yes they are smaller than houses but mostly bigger than Manhattan family apartments :)
Every family I know lives in about 80m2 to 120m2 and pays around 1000-2000 euros/month rent. Depending heavily on location and quality of course.
I think, fundamentally, the problem is that there is a highly speculative market (real-estate) attached to a basic needs market (housing).
I think of myself as right-of-center, but think George was more or less spot on w.r.t. land.
I wonder if there is a solution in banning rent itself? i.e. force owners to transfer a % of ownership equal to rental fees received from tenants and allow them to discount improvements against that.
Whether housing is rented or owned has no relation to its price. Making it illegal to speculate/profit from housing doesn't solve the underlying issue that is a massive (xx,000,000) unit shortage of housing in the United States.
Absolutely it has a relation to its price. A domicile's value in any setting is determined by it's speculative value + a discounted income model. This model wildly decreases the discounted income value without addressing the speculative value.
As far as I'm aware there are more housing units than people in the US. We do have an incentive structure that puts property owners' needs at odds w/ society's needs on multiple factors, and some of them (i.e. NIMBYism) can be addressed orthogonally to the intractability of housing as investment vs housing as housing.
> The only sustainable way to get affordable housing is when the market price is affordable.
And the only way to reduce the market price to affordable rates is to crack down on the demand - there is no reasonable way to expand the offer side in many cities any more since they don't have the space. And most demand is driven by the fact that rural areas have been left in a decrepit state for decades: highways, bridges and other infrastructure is crumbling, there is no public transport worth the name, forget about fast internet (or fast internet offered by a crap monopolist), employers have closed down or moved to urban areas, schools and medical services are constantly closing or underfunded...
To fix the urban rent explosion problem, we need to fix rural areas and make them livable again.
The problem is that Manhattan is the only truly dense area with good transit in a country of 330 million. Tokyo is much larger than Manhattan and is dense throughout. Other Japanese cities are dense too, so people have options when prices out.
Greater Tokyo Area? Tokyo Metropolis? Previous Tokyo City limits? New York City metro area? New York City? Manhattan? These can be 2 orders of magnitude apart in scale but they've all been talked about like it was the same location A and location B.
At the small scale Tokyo's densest ward is ~22,700/km^2 and Manhattan is ~28,800/km^2 with Manhattan being ~4x-5x the land area of the former (i.e. the core is a lot more dense). At the large scale the Greater Tokyo Area is ~2,900/km^2 and the New York Metropolitan Area is ~2,053/km^2 (i.e. the urban area around Tokyo is a lot more dense).
"Tokyo" is a good example that you can get affordable housing by focusing on how to spread the population over a large urban area but it's not a good example building more housing downtown is a scalable approach.
I'm not sure why you think Tokyo works, it wasn't long ago that it was multiple times the price of NYC. It might be affordable now but only because of a economic slump and Japan's falling population.
New York City already has a significantly higher population density than Tokyo (~11,300/km2 vs ~6,300/km). It's easier to develop more housing when you have more land.
You need to include Newark, Yonkers, Long Island, etc if you want to compare those figures.
Tokyo is 13400 sq km, NYC is 780 sq km. If I rounded Tokyo's land area to the same sig figs as I did for NYC, it would be lowered by half the total area that NYC takes up!
> You need to include Newark, Yonkers, Long Island, etc if you want to compare those figures.
That's just not an accurate comparison.
Live in NYC. Lived in Japan. The difference is transit. It is far easier to get to Saitama or Kawasaki or Yokohama or Chiba than it is to get to Long Island from NYC. You can do the former in an hour at rush hour. Try getting to downtown Manhattan from Bay Shore as a daily commute. You'll go mad.
The gray area of Tokyo on that map is pretty much all considered an exurb of Tokyo, more-or-less feasible for daily commute by rail. Most of the NYC region is inaccessible from Manhattan, except by car. Look at the Seibu Shinjuku line, or the Chuo line on the Tokyo map -- both offer express trains that will take you from the distant western exurbs, right into the middle of downtown Tokyo:
I understand, but that doesn't change my assertion that comparing Tokyo density to only-NYC density makes no sense, especially as an argument that there is no room for to build more. Hogwash! Half your NYC map is pure green, but even leaving that, most of the land area on that map that is housing is SFH.
There's plenty of room to grow up. Just because the reason we don't is shitty government organization and FPTP voting doesn't mean we can just ignore the vast swaths of low-density just outside Manhattan 's borders.
NYC rental vacancy is only a bit over 4% city wide. The national average is closer to 6%. It is very expensive to build in New York, and projects can be scuttled at any time due to angry neighbors or intervention by city council. The EIS process adds a ton of cost to new construction. As a result of this risk banks require high returns in NYC than in most places in order to secure loans. If you take a development loan the rental price for the units is written into the loan.
I think this a feature of accounting practices. Mark down rent means you mark down the asset value of the building on your balance sheet. This reduces the value of your business which means loans secured against the business are in jeopardy and it limits the potential to borrow more money. This is why commercial rents going down is a rare event. Fwiw i am not an accountant and could well be wrong.
IIRC Sometimes some of these units are tied to a mortgage. Renting it at a reasonable price could make the price of the unit to drop making the money lender wanting to renegotiate the mortgage contract.
There's a large (20,000+) volume of empty rent-stabilized units - in those cases, landlords say that a recent tenant protection law (HSTPA, 2019) makes it uneconomic for them to rent due to the expected difficulty of evicting non-paying tenants and the strict limitations on how much repair and investment work can be recouped from increasing rent.
My gut feeling is this doesn't entirely explain it, but any tenant is also more work than no tenant, so they may not want to do the work of signing a new lease and dealing with the work it will trigger for less than you're making per-head on your current tenants.
There's probably also a fear that if you let a new tenant in for lower rent, this might lower the rent other people expect and the problem starts snowballing.
Surely this works in a short timeframe where a landlord can make a tactical decision to let the property sit empty rather than rent it out for less than a threshold. Landlords can even collude on a minimal rent below which they will not rent. (Basically "hold the line"). But how is this sustainable in the long run? The money for the original mortgage has to come from some place. Not all landlords have an infinite supply of money to keep this practice going on for a few years. (There is no VC funding available for them).
With commercial units (eg - downtown San Francisco) it is even harder because with remote work, the jobs are never coming back to the city.
On mobile so don't have a ready link. Iirc a lot of commercial real estate can get into a death spiral if the loan they have which is based on a certain amount of income starts having less income. If I can find the explanation I will add it later.
> Naively, any rent is more than zero rent, so why let a unit sit empty?
There's a substantial cost in having a renter living there, both in dollars and risk. So if the rent isn't enough to cover those, it's cheaper to let it sit unused.
That does not make sense from a game-theoretic standpoint. You would be helping other landlords at your own expense. It would be better to let other landlords make that sacrifice and rent our your own properties for as much as you can get.
that's the thing. They are okay with helping other landlords because they themselves hold other multiple properties. There is more benefits by having the rates high than losing money on a few units.
It totally makes sense for the rental property owners.
Cannot speak for the poster, but the big current issue is that the value of residential units has gone from being strongly linked to wages to residences being an extremely valuable chip for playing financial games. Residences, especially inherently valuable ones like NYC apartments, have sufficient demand from financial game players that wage earners are barely able to keep up. Exactly how things break down is not clear, but there is this idea that demand for residences for financial purposes is competing aggressively with people who want homes.
This is a well studied idea, the percentage of units sitting empty is a round error in the total supply of housing. At the start of the pandemic there were a paltry 4000 vacant condos. For reference there are 2.3 million apartments in the city.
The vacancy rate of apartments is just at or under 4.5% which is considered a very tight rental market. I don't have the total condo numbers readily at hand.
Because I grew up in Brooklyn and Queens and saw what all of the new development did to the demand. The street that my grandmother used to rent an apartment for in the early 2000s for under $1k/month now only has units that go for $5K/month.
As a Californian, if the demand is there, it will eventually bid up trash fire apartments to 2k a month, even if they're still colocated with violence and bad schools, you don't need to induce any demand with development.
You have that backwards. Bloomberg rezoned the queens and brooklyn waterfront for his real estate investor buddies, which gentrified the shit out of these neighborhoods and brought in a ton of people that would have never dared to cross the east river.
Flashback to late 1970s driving through the Bronx with my family - an annual ritual as most of the extended family was still in the NYC area while we had moved to Rochester. We would pass blocks of empty high-rise apartments in the South Bronx.
As a middle-middle-class suburban kid, I just couldn't conceive of how the wealthiest city on earth could have sections that looked like a bombed-out and evacuated European city following World War II.
I asked my father what had happened here. He answer was "rent control".
Too bad there are "investment luxury hi-rises" popping up all over the skyline that are largely unpopulated. If that's what people want to build to park their billions, we have other problems to tend to first.
Seven buildings. That's not representative of...anything. It's not even worth talking about. And the effects are largely positive for the city, anyway. You've got a few big, empty buildings concentrated on one street where billionaires park their money, pay a bunch of property taxes, and use zero city services. That's an unqualified win.
No idea why you're being downvoted. This meme (rich people buying luxury condos, letting them sit vacant, and then profiting somehow) doesn't make any sense, and that article posted as evidence for it undermines it by depicting those units as being un-rentable due to oversupply in the market.
And in the meantime, they choose not to rent it why? The intuitive answer is: they're hard to rent, because there's way more luxury condos available to be rented than people who want to rent them, and it was a bad investment that the rich person will probably lose money on (if not in absolute dollars, then in comparison to some other property that is desirable to rent). But a lot of people in this thread seem to think it's intentional and rich people have some devious way of making more from a vacant condo than a rented one.
If I were faced with a situation where the taxes were sub-optimally low, then I would simply raise the taxes, instead of trying to remake the entire concept of private property.
There are insane tax breaks these luxury apartments get, too, on the order of a 90% discount. It's not like these properties are generating huge windfalls for city or state government.
Sure, but they don't cost the city anything, either. They sit empty and the city collects money. Meanwhile, the owners aren't even there and use zero city services. Should those taxes be higher? Fine with me! But these apartments are a low-salience/high-visibility distraction. They have hardly anything to do with the issues in the broader housing market.
"But the bust is upon us. Today, nearly half of the Manhattan luxury-condo units that have come onto the market in the past five years are still unsold, according to The New York Times."
Sorry, but I trust the Atlantic over you unless you got some facts.
Here's the quote from the NY Times article [0] your Atlantic article references:
> Nearly half of new condo units in Manhattan that came to market after 2015, or 3,695 of 7,727 apartments, remain unsold, according to a December analysis of both closed sales and contracts by Nancy Packes Data Services, a real estate consultancy and database provider.
So we're talking about 3,695 unsold apartments. There are 3.5 million housing units in New York City. So that's about a tenth of one percent .
The problem here isn't that the statistic is wrong; it's that anybody thinks 7k new units over a 5 year period in a metro area of 20 million people is anything more than a curiosity.
The hallmark of a conspiracy theory is that it offers a sensational explanation -- usually some foreign, outside force -- for a complex problem, absolves the believer of any culpability, and provides an easy, unsympathetic target on which to dump all their rage. "Foreign oligarchs are buying up all the real estate and locking the rest of us out and that's what's wrong with the housing market" is exactly that kind of theory. And 3500 unsold units over 5 years is emphatically not evidence of its veracity.
4% of apartments in nyc are vacant. You can claim that luxury units are more expensive because a block on the southern border is made up of half empty units owned by billionaires, but the rest of the city does not experience that phenomenon at all.
My two cents : I believe that if you increase supply and allow more affordable housing in a city, it will only marginally decrease prices but will mainly attract more people to this city.
I think the solution to housing cost is to make smaller cities, towns and the countryside more attractive by having higher local tax rates in cities. This source of income could be used to build better infrastructure in the rest of the country.
> I believe that if you increase supply and allow more affordable housing in a city, it will only marginally decrease prices but will mainly attract more people to this city.
I believe that allowing more units will lower prices, but what if it didn't? What if all that happened is that a whole bunch more people got to live where they want to live, productivity increased, and the largest cities got more dynamic and interesting? What if that's all that happened?
Prices are set at the margin, and demand is largely driven by employment.
> by having higher local tax rates in cities
You already pay taxes on par with Denmark if you live in NYC and have sufficient income to afford to live there without subsidized housing. Tax policy is an insane way to prop up little towns. Cities offer a lot of economic and environmental benefits, and are generally already generating more tax revenue than they receive in benefits.
Having higher local taxes in major cities would just expand the problem. The poor and middle class will get further pushed out, and the rich who can afford the tax and prefer living in the city will stay, in which case you just get SF all over again.
NYC has substantially higher taxes than most of its suburbs. It also has a much higher draw due to its dense population supporting fancy bars, arts, and other world class amenities. The network effects of living close to other interesting, cosmopolitan, or just niche social group people are also valuable.
At some point you run out of people that can move into the city... which might make the city huge, but eventually supply will outstrip demand.
Also no thanks to wealth redistribution. The rest of the country sucks outside the coasts sucks and its mostly because they have regressive politics. It's their own damn fault nobody wants to live there.
> All policies that attempt to address housing costs that don't increase supply are treating a symptom and not the underlying cause.
So are the ones that do increase supply, so long as they are not doing it in a way which deliberately undercuts the fact that there are positive feedback loops at work (and cutting those positive feedback loops means reducing quality of life and economic opportunity in ways no one wants.)
Among the thing that drives demand for housing is available work (demand for labor). Increasing housing supply so more of that demand is met increases demand for local services, and thereby available work, increasing demand for housing. That's not the only positive feedback loop involved, but it's one of them.
Increasing the supply alone does not counter the gentrification / ghetto effects the parent comment talked about, in fact it might amplify them.
A gross oversimplification, but if you somehow make ten thousand new apartments available in Manhattan at $1k/month, they will eventually fill up with low-income tenants, which will make them undesirable. Pressure on all the existing $5K properties will remain the same.
Are you suggesting that people paying $5k are doing that because of some inherent property of a $5k rental, and that they would not prefer to pay the year 2000 rent on the same unit, say $3000?
If people paying $5k would prefer to pay $3k for their units, why would this logic not also apply to people who are currently paying $3k?
If lower rents would make the city become undesirable, why did people want to move there in the year 2000, when rents were much lower?
The inherent property of a 5k rental he's referring to is that it costs 5k. Most people paying 5k for a studio just _don't want people around their houses_ specially if they are poorer than them. Otherwise they would be paying less than 3k for a room with a shared kitchen and bathroom or renting a bigger place with roommates.
Pressure would remain the same just as eating a single grape would not abate a person's hunger: NYC has millions of existing housing units. To make a significant dent in the rent would require building hundreds of thousands of new apartments.
Because low income anywhere (rental area or even just low income suburban areas) typically has a population that is less able to invest into their area (in time or money), and historically has shown that they seek an extractive relationship with their environment rather than invest in it.
Are you joking? Poor people are the exploitative ones? That's just entirely false
The entire basis of capitalism in the US is that the work of the poor is exploited by those with the capital to build factories and businesses which extract labor and resources from the poor people
That's why they can't invest. You have it entirely backwards
$1k/month rent isn't exactly low income material. As a high income SWE, I definitely feel like I'm sucking the city dry in a way. I'm not making $8 chopped cheeses. I'm not building parks. I'm not creating art. I'm just a consumer.
Having said that, what's even worse than me is "low income" consumers. A lot of affordable housing, especially HDFC apartments, end up in the hands of the children of the rich. Not only are they not producing anything of value, they're also costing us tax dollars.
High rent reduces demand and reflects an equilibrium between supply and demand. That, and people in Manhattan simply can afford to pay more, so are able to bid up the prices higher than tenants in other places.
So you're telling me that the government should build millions of new units in NYC, until they control 40% of the market? Am I understanding that correctly?
Seize the less developed parts, and build high-density affordable housing there. Yes, that’s the only action that’d have a chance at solving this issue.
Because the private market can't do it. When most cities in the US have 80%+ of its land zoned for single-family units, developers can not build anything other than expensive McMansions.
Don't forget parking minimums, rent control, environmental studies in excess of what is needed, and the endless town-halls full of people trying to veto change. All this just to build an apartment complex. You have to retain half the state bar to build anything around me and consequences are evident in the rent prices.
80% of Seattle is zoned for single family units. It's not exactly a suburban desert, but it could be much better. Unfortunately, even very limited legislation (HB 1782) allowing upzoning to duplexes/quadplexes ("missing middle" housing) within walking distance of public transit hubs failed earlier this year. NIMBYism abounds.
Ah, from your original comment, I thought you were advocating for seizure + rent control.
If you are instead suggesting some form of eminent domain of low density housing, and then building higher density housing in its stead, with a target of 40% of housing controlled by the state, I'm more inclined to think that would work.
To my mind though, I think targeting meeting current demand + demand growth (or some margin therein) would be the target, rather than what feels to me the arbitrary target of 40% (unless you have figures that show that's where demand+growth meets.)
Sure that’s the capitalist narrative explanation. The actual, human, explanation is that landlords see that they can get away with charging absurd rates because consumers are willing to make dumb decisions to get what they want, so they do it.
I’m sick of these economic abstractions that constantly try to explain away our problems, and take away the responsibility from the human actors that cause these effects. It’s not some abstract “supply and demand” that we should focus on—it is the landlords and renters and their decisions that are to blame. We need to introduce some agency and accountability back into our discussions of economics otherwise capitalism will continue to be an abstract machine in which horribly unethical actions are justified by removing human actors and human culpability from the equation. Belief in “the market” is not dissimilar to religious belief. Furthermore, analyses in capitalist terms often lead us to more problems. If the problem is “supply”, people will say “ok build more homes”, but that first of all never seems to actually work and secondly has a large number of additional negative effects such as increasing overcrowding and climate problems.This ridiculous tendency to not actually blame the people responsible for these negative conditions is ridiculous. It’s a large part of the reason we’re in this mess.
I mean sure, if you want to address it from the demand end of things that would work if there were a viable solution.
The hard fact is that people want to live in large cities.
Even if you were to legislate that all landlords had to provide housing at cost + 5%, there would still be a demand for more housing as people desperately bid to enter those areas. Further more, you'd see people never give up those rentals because there would be a mile long waiting list for every property that is under rent control.
I have a lot of sympathy for people disgusted by the greed landlords display, but at the end of the day, the issue here is that more people want to live in these places than there are homes for them. So the wealthy bid their way in and everyone else be damned or destitute in order to compete.
If you want radical policy, eminent domain low density housing in city limits and build apartment rises on them.
That’s fair, but I don’t see how it would prevent similar effects from eventually spidering out to those city limit properties once the demands propagate to those areas.
I think the solution will require a mix of infrastructure solutions (building more homes) and regulatory solutions. I’m not saying landlords can’t make money, but there should definitely be greater restrictions around how much they can raise rates (which did exist, but which NYC is steadily removing) and renters need to be afforded more rights and protections too.
First off, city limit property is already seeing this effect.
Tenant protections in the USA suck. Big Time.
However landlords raising rates are a great signal that your infrastructure is failing somewhere. This is useful because it means you can look for and address the problem.
Some locations are going to be incredibly desireable and thus expensive, and that's okay, as long as there are options available for everyone else who can't afford them.
And as far as regulation solutions, removing mixed zoning restrictions would be a massive step forward in allowing development of construction that could address some of these issues. Being able to live within a minutes walk of groceries, restaurants etc. is such a freeing experience that is taken from too many due to zoning restrictions. Regulatory reform could fix that.
There is no system that can work in large scale and depend on the good will of all (or the majority of) participants.
If your system only works when everyone cooperates, you don't need the system in the first place. Believing that we can all live in this utopian ideal is more religious than "believing in the market"
I’m not saying that. I’m saying it’s quite possible to introduce regulations into the existing system that force certain actors to behave. I’m not expecting anyone to behave without such restrictions, in fact this article is precisely the evidence that people will exploit others and the system when no such restrictions exist.
Many of these landlords are up charging on properties that have not been materially improved at all, because, as I said, people are making dumb decisions to live where they want to, so they can arbitrarily increase the price up to the limit of what someone will pay. This is great for landlords since they can double their money without doing any work.
Don’t get me wrong, I’m really frustrated by these incoming renters too. A lot of these people fled and abandoned the city like complete cowards when the pandemic hit and suddenly they want to return while they left the responsibility of keeping the city going on all the rest of us that are actual residents that stayed. These semi-nomadic people are just as bad as the landlords and want to live somewhere only so long as it benefits them—they have no allegiance to a community. This, in conjunction with land owners behavior creates disastrous effects for actual long-term residents who invest in the local communities and don’t run away the second things get hard.
>I’m saying it’s quite possible to introduce regulations into the existing system that force certain actors to behave.
Tell me how you want to reinvent taxes and rent control, without knowing that you want to reinvent taxes and rent control.
> I’m really frustrated by these incoming renters too.
You are passing judgment to all these different groups of people, without any shred of fundamental principle to justify why they need to act the way you want.
They don't owe anything to you or the city. Stop complaining like a spoiled child.
Of course not. And I don’t owe them anything either. By the same terms of your argument there’s no reason I should be satisfied with just letting them do what they want when it affects me directly since you’re stating that I should not try to do anything that affects them directly. I have my desires, which requires placing demands on their behavior since they are ignorant of the conditions of other human beings, act entirely selfishly and in a vacuum, and ruin things for the rest of us.
The fundamental principle is that people that are short-term renters disrupt communities in negative ways by having economic effects that harm long-term residents and ultimately break the existing community. I’m passing judgement on them because I witnessed the mass exodus that happened in 2020 and I witnessed all the struggle those who stayed had to endure and I witnessed the mass return of people that fled to “safer” spaces come back as though nothing happened and absolutely screw over everyone that stayed.
You must not have ever been subject to gentrification. You’ve got a real empathetic heart. I’m not “complaining” I’m trying to speak to the problem and suggest that existing solutions clearly are not enough. If anything is childish it’s your post, which tries to effectively say “we tried everything, there’s no possible other solution” and “in spite of the insane number of problems currently evident in our economics capitalism is fine and people should be able to manipulate the market without bound”. Your post has effectively no intellectual content. Being upset about something, evoking an opinion, and trying to advocate that we need a solution that will not only benefit myself but also the thousands of others affected by insane rent costs is not “acting like a spoiled child”, in my opinion. Do I have that solution? No, of course not. I’m not qualified. But if we restricted commentary on hacker news to professionally qualified individuals this thread would have close to 0 comments.
> just letting them do what they want when it affects me directly
Unless someone straight up breached their contract to evict and give "your" apartment to someone else, you were not affected "directly" by anything.
> I have my desires, which requires placing demands on their behavior
Desires? Is this really the word that you want to use? The more you write, the more you are displaying your sense of entitlement.
> (your post) which tries to effectively say “we tried everything, there’s no possible other solution”
There is absolutely no point where I said anything like that. Please stop assuming things. If you want to restart the conversation around that, by all means let's do it. But if you want to argue by baseless statements, I'm not your person.
EDIT: Ok, after the parent edit I am convinced you’re a little bit more reasonable, however, I can tell you’ve already made up your mind and are more interested in defending your position (which you haven’t actually ever elaborated) and making reductive claims about the character of your opponents (that they are just “complaining” or “entitled”) than actually having a discussion. You seem to want your interlocutor to follow all the polite rules of discussion while abandoning them all yourself.
My rent increased significantly for no reason other than a shift in market rates. I struggle to see how this does not count as being directly effected.
Yes. Desires. People have them. Usually they dictate behaviors. It’s why people move to New York. It’s why you’re quoting my comments and writing replies—you want to show me that you’re “smarter” and that my dissatisfactions are illegitimate and you think a great way to do so is to write targeted quips that take one or two lines of text out of context, but unfortunately you’re not succeeding. It’s clear you have no interest in actual persuasion or discussion—if you do, I highly recommend taking a few writing or debate classes, maybe brushing up on what it means to empathize, learn about logos/ethos/pathos, read some philosophy, things like that.
When this is your first statement following your attempted "apology", how can anyone be interested in continuing with the conversation?
> You seem to want your interlocutor to follow all the polite rules of discussion while abandoning them all yourself.
It's not about "politeness". It's about honesty. I'd rather have a honest-but-dry conversation than a pleasantly-dishonest one.
> your position (which you haven’t actually ever elaborated)
My position (if it couldn't even be called that) is that NYC is a victim of its own (relative) success compared to all the other cities in the US. The best way to get NYC to become more affordable would be to rescue other cities. There are just too many people with too much money chasing not enough houses in urban areas that are desirable, so of course the prices will go up in the places that are.
Rent control is not going to solve this. It's only going to create a privileged class that is going to cling on to their old leases. Landlords will have zero incentive to invest. Developers will have less incentive to build, and then only the existing stock will continue to be around.
It's supply that needs to be fixed. Also, it may seem counter-intuitive at first, but to fix cities in North America you need to get rid of suburbia.
Ok, we’ll now I feel that I was mistaken earlier, and want to offer an actual apology. I think our discussion got off on the wrong foot and some of the ad hominem involved annoyed me. I think this post (that I’m replying to) shows that I was wrong in my judgements, and I think your idea to rescues other cities is a good one.
I think NYC’s location is one of the difficulties involved with such a plan. NYC is partly desirable because its locality makes it an easy hub for travel to and from Europe. You can make other cities attractive by other means, but it will be hard to beat this and the entrenchment of current residents and businesses.
The idea of eliminating suburbs to fix supply is interesting. I do think that could be beneficial, but at the same time, that also would require regulations or policies that push development away from suburbs and into cities. Either way you’ll need some kind of regulatory intervention.
The question is whether or not supply increase is sufficient to alter the market, I’m skeptical of such a claim because new residential developments crop up in NYC all the time but it doesn’t seem to help drive down rates at all. Furthermore, NYC’s population for the decade had its peak in 2016, yet prices then were more affordable[1]. Maybe there’s data that shows there’s an extreme influx of individuals now and the population in NYC surpassed this number in 2022, but I’d be surprised if that were the case esp. when you factor in new building developments that occurred in the meantime. I don’t think it boils down to a simple supply problem. It may be due to the fact that brokerages are snatching up properties and charging more than individual landlords, it may be a side effect of inflation, it may be predatory profit seeking after the pandemic. I don’t know, but I don’t think merely throwing up a bunch of new buildings will necessarily fix things, and as I mentioned before, we need to consider the other negative consequences of such a plan (density, the consequent environmental impacts etc.)
> regulations or policies that push development away from suburbs and into cities.
I misspoke. By "getting rid of suburbia", I mean getting rid of American-style, car-centric suburban development. You'll absolutely want to have development in the suburbs.
And to do that, you don't need a lot of changes in regulations. Surely, you'll have to fight with NIMBYs, but these changes do not require massive regulations:
- Upzoning all R1 zones, and abolish Euclidian Zone. Just by getting rid of exclusive single-family zones that are so prevalent in the US, and start allowing multi-family townhouses, mixed-use areas, you could recover basically every city that is not part of coastal metro area: https://www.youtube.com/watch?v=bnKIVX968PQ
Let them charge what they want if it's theirs. Otherwise, your demands on what they charge amount to asserting that what is theirs isn't really. And, to put responsibility on the actor in question, you're asking that the lost potential value be stolen from the owner, for the benefit of non-owners. Can people own stuff, or not?
If you’re renting out basic needs like housing I’d argue the terms of ownership should change.
We all have dependencies on one another to get access to our basic needs. If your ISP, gas or whatever provider decided to suddenly charge you double for no apparent upgrades you would not be happy. You might have to option to go to another provider. If you didn’t, you’d have to move somewhere that has cheaper services. Moving is not zero cost. It both financially and emotionally affects people depending on how tied they are to their communities. The problem with rentals is that this is happening to long term residents that have no other option because the overall market price for the area is crazy. People are being removed from their communicates because there are no restrictions on landlords that make money will producing nothing the vast majority of the time. Capitalism is supposed to reward production, products. In most cases renting is a parasitic form of raising capital that doesn’t contribute to any material improvements, it just uses existing scarcity of resources of basic needs and exploits the fact to make capital without producing anything.
> (...) there should be heavy state intervention (...)
This has been tried so many times throughout different cultures and time periods, and by different means. It will not benefit whoever is actually living on the properties, but will detract from their situation.
Economics in One Lesson by Henry Hazlitt has several concrete examples of attempted interventions, and is written to give a basic intuition on why this happens (Spoiler: Opportunity costs).
The only permanent solution is just to build more buildings, or at a political level simply making it easier to build new buildings, which directly increases supply and thus causes the lowering of prices. This makes perfect sense when you think about it: There are not enough buildings, so we need to have more buildings.
It continues to be disappointing to see so many people turn to state power as a solution to the problem of scarcity. Scarcity is solved through production not political power.
Land Value Tax would decrease the cost of land as it makes land speculation less attractive. People won't be willing to bet on much on real estate if increased prices come with a tax penalty.
It's not without its flaws, but Singapore has an extremely effective public housing program run by the government's Housing & Development Board (HDB) where 89.9% of Singaporeans are homeowners.
The "just build more" supply argument doesn't hold water when you have an unlimited source of demand from institutional investors and speculators that use housing as a place to park their money.
It sounds like incentives in Manhattan are stacked in a way that 1000ft tall buildings with only 40 uber-luxury units are the only kind of buildings that can be profitably built.
Vienna was only able to pull that off after a devasting war left nearly everyone poor. It's not clear that the US could seize 40% of rentals in Manhattan without starting a revolution.
To your other points yes. Land Value Tax now! There's simply no good reason for why we're all taxed so heavily on our labor while land speculators get away for pennies.
have 2.25 million population before WW1 and then decline in population for almost 100 years? They still haven't recovered (1.89m). It may be an enormous mistake to read into their allocation policy because they've simply had a very easy time allocating so far.
St Louis population has declined for 70 years. It is very affordable. It's just not hard to accomplish affordability like that.
Vienna suffered and suffers housing price inflation like any other european city. In world wars not only people dies, but housing units are destroyed too.
Also, the point of the social housing in vienna is not only the dimension of it, but how they do it. The design, the demographics, etc.
There's a clear distinction between their program and the myriad of commieblocks in other countries that become low-income guettos to sink public money.
Public housing done right is more than just building dense, putting poor people in it and be done with it. That's a recipe for disaster.
> should be heavy state intervention on it, preferably by doing the same as Vienna, which is holding >40% of the renting stock and charging according to income
This is great policy if you want to make housing unaffordable. When supply is less than demand, prices go up. Those price increases incentivize builders to increase the housing stock (which subsequently lowers prices). Capping prices prevents the price mechanism from working, leaving a shortage of housing.
> Rent is the main detractor of disposable income which hurts the rest of the economy
I’m happy (perhaps not quite the right word…) to pay rent. I don’t want to own property. It’s a large, illiquid investment with high transaction fees, carry costs, and concentration risk. My landlord takes all the risk of owning the property (prices don’t always go up after all).
>Those price increases incentivize builders to increase the housing stock (which subsequently lowers prices).
This is not reality though. Here in the UK our housing is in major crisis because people simply cannot afford the insane price increases. Pretty much everyone I know shares their living situation, on their own they would not be able to afford basic amenities.
The guardian today published an article showing:
>Average monthly rental payments were now 40% higher than they were 10 years ago, while typical mortgage payments for the same properties were up 13%.
Landlords and property owners are hiking the prices way beyond reasonable value, in some parts of the country rent is up by over 20% in the last year alone. By your logic there should be an incentive for builders to increase the housing stock, but private enterprise aren't building anymore homes now than they were 10, 20, 30, 40, 50 years ago.
We do however have a situation where the average mortgage is about £900 per month, whereas the average rent has skyrocketed to £1600 per month (£1100 outside of London, £2200 in London). Available rental stock is down 25%, with demand up 5%. It's great for property speculators, buy-to-let landlords and property developers, people are offering above asking prices simply to secure a home.
>My landlord takes all the risk of owning the property (prices don’t always go up after all).
Sure there is risk, but when you charge 30% more than you repay for the mortgage, while at the same time property prices rise 75% in 10 years, it's safe to say that the cash cow is being thoroughly milked for every last drop and as a result many people are suffering.
Ultimately there shouldn't be 'risk', this mindset is a big problem. Homes are a fundamental, basic human need. Using them as an investment method, business model or means to hedge against inflation, is causing rampant speculation and quite honestly extorting people that have no other choice, exploiting vulnerable families that need a home. It should be an extremely tightly controlled market, with sufficient funding to ensure that quality & affordable housing is available for everyone.
> Here in the UK our housing is in major crisis because people simply cannot afford the insane price increases. Pretty much everyone I know shares their living situation, on their own they would not be able to afford basic amenities.
The housing in UK is in crisis because there have not been enough homes built. My rent has gone up too, but it's not because my landlord is greedy. The cost of maintaining the building has gone up thanks to inflation (plumbers/electricians/superintendent/etc.) all have to be paid higher wages. Replacing broken fixtures is more expensive. If the landlord has a floating rate mortgage, the cost of paying the mortgage went up. For commercial apartment rentals, those companies have debt that now needs to be rolled over at higher rates.
> By your logic there should be an incentive for builders to increase the housing stock, but private enterprise aren't building anymore homes now than they were 10, 20, 30, 40, 50 years ago.
So is it a problem that they aren't building more or not? If we agree that more housing needs to be built, then the proper incentives must be in place. And a proper incentive may actually be as simple as eliminating a disincentive (e.g. 4 years of environmental review prior to the project's approval).
> Available rental stock is down 25%, with demand up 5%. It's great for property speculators, buy-to-let landlords and property developers, people are offering above asking prices simply to secure a home.
It's great until it isn't. Interest rates are rising, and mortgages in the UK are much shorter term than in the US. That means the impact of rate hikes is more immediate on housing prices. And if available stock being down is a problem (which it is), the obvious solution is to produce more. Alternatively, I have a modest proposal [0] that would also solve the problem.
> Ultimately there shouldn't be 'risk', this mindset is a big problem.
Risk is omnipresent. If I purchase property, I have all sorts of risk. My building may burn down. My neighborhood may become undesirable to live in. I might not be able to take a job in a new location. I tried to pick examples that aren't about investment. These are risks that the landlord assumes for me.
>The housing in UK is in crisis because there have not been enough homes built.
>So is it a problem that they aren't building more or not? If we agree that more housing needs to be built, then the proper incentives must be in place. And a proper incentive may actually be as simple as eliminating a disincentive (e.g. 4 years of environmental review prior to the project's approval).
And this is a part of why it should be administered by governments and not just let loose to market forces. Homes can't just be built wherever, whenever. It should be meticulously planned and integrated with various public services. There's no real financial incentive to build 100,000 houses in the middle of nowhere, it needs to have schools, hospitals, infrastructure etc. A property developer would rather squash a bunch of apartments or buy some old stock, refit everything and charge a premium.
>It's great until it isn't. Interest rates are rising, and mortgages in the UK are much shorter term than in the US.
They actually suggested recently to offer multi-generational mortgages... That's how crazy the market is getting.
>These are risks that the landlord assumes for me.
Those are risks your landlord should have insurance for. In a world where property isn't such a commodity, those risks don't really have the same meaning or value.
We've largely left house building to the 'market forces' and it is failing us, that is the reality. What happened to the second largest construction firm in the UK? "The largest ever trading liquidation in the UK – which began in January 2018" - Carillion collapsed with £7 billion in liabilities.
"One of the UK's biggest landlords, owns over 1,000 properties, tried to ban 'coloured' people from renting because of the curry smell" - What happens to people that are 'undesirable' to landlords, they need a home too or should they simply be destitute or constantly bounced around the lowest standard of housing stock available?
Rent caps are probably not effective or radical enough to actually solve this crisis. I think if we really want to do something, it's going to hurt a lot of peoples 'net worth'.
> And this is a part of why it should be administered by governments and not just let loose to market forces... There's no real financial incentive to build 100,000 houses in the middle of nowhere
That's exactly what the Chinese government did, only at a larger scale. It hasn't worked out well.
> They actually suggested recently to offer multi-generational mortgages... That's how crazy the market is getting.
I saw that, it's absolutely wild.
> Those are risks your landlord should have insurance for. In a world where property isn't such a commodity, those risks don't really have the same meaning or value.
There are risks that can't be insured against. Suppose my employer relocates to another region, and I have the choice of following or finding a new job. If I own a house, I now have to sell it (incurring a 3-6% transaction cost and lots of headache). I can only sell it if there's a willing buyer, and there's no guarantee there will be any.
My rent is covering the building's mortgage, taxes, and maintenance, which I would be paying if I owned the property. It may be marginally higher than the cost of ownership, but I have a strong preference for flexibility. That flexibility is worth the liquidity premium to me.
> What happens to people that are 'undesirable' to landlords
In the US, there’s legislation that prohibits discrimination across a variety of protected classes (race, religion, sex, etc.) Does the UK have similar legislation? Putting aside ethics for a moment — discrimination is inefficient. It’s in everyone’s best interest to eliminate such behavior, whether through market forces or legislation.
You should have that flexibility. There should be enough housing stock that you can move to another city and not have to worry about struggling to find a place, arranging visits for them to be cancelled or leased before you can even view it. There are parts of the world where government rental housing schemes are extremely successful, it also typically caters for those that would be left with nothing if we didn't intervene with the market. Yes there are laws against discrimination, that landlord was overruled in high court. That does not stop it from happening, in many different forms - there is never ending prejudice and difficulty simply getting a home for young people, disabled, minority backgrounds, immigrants, welfare recipients. The landlords have all the power when it comes to deciding who they allow to rent, they do not have any obligation to tell you why you were refused. Even though the court says it's illegal for him not to rent to certain races, what is stopping him?
We live in a world where it is entirely feasible for every person to have good quality shelter, clean water, food and energy. For the most part, we allow market forces to control the access to goods and services. Wealth is being concentrated, property along with other vital services, are just another asset in the portfolio. It's missing humanity. We need homes, healthcare, water, food.. I think it's about time we prioritise this vs high profit, monetary gain, corporate excess and 'free markets' (they're never really free, always tipped in favour of the owners of capital).
It takes two parties to increase the price of a housing unit. If rents are up 20% that means people are willing to pay 20% more.
I don't know about the UK, but here in California, prices have skyrocketed, but so has the price of construction.
There are two reasons that has happened:
1) Shortage of construction workers. The ones that are here are either (well paid) first generation immigrants, make more than Silicon Valley windfall money because they speak fluent English and are competent, or are completely incompetent. We don't have enough of the first group, so be prepared to pay 2-3x the cost of materials to get anything done (with the second group acting as middle men, and the third group taking your money, only to have you pay someone else to fix it later).
2) Policies that discourage the building of new rental units:
2a) We have a vacant house on our property. A non-structural remodel for it would cost > $50K to get through permitting, and we're looking at >> $300 sq/ft for the actual remodel. If we did all that, we could either pay a special tax on vacation homes owned by individuals in unincorporated areas that the townies just passed (to help the housing crisis by somehow freeing up housing units in town, where the tax does not apply), or we could rent it out. If we rented it out to a problem tenant, we could literally never get rid of them (unless they decided to not pay rent, but even then, it's 5+ years of court battles). So the house stays vacant.
2b) We just built a house. It took almost a year to clear permitting, and $100K's of wasted nonsense work. Many developable plots in this area are purchased, planning bankrupts the new owners, and then they're sold to the next saps. According to the neighbors, getting permits to build a house around here in under 3 years is unheard of. The result? We have a house, but we are way, way, under water in terms of money put in vs. current valuation. At the lower valuations, the houses around here are not "affordable" by any means. However, if you look at what it would have cost us to develop this land anywhere else in the country, we would have paid way under market value.
Problem (1) could be fixed by encouraging contractors from out of the state to fly in to work here. Apparently, the state has erected licensing barriers to make this hard. I think a lot of money ($1B) is waiting to be taken off the table via arbitrage.
Problem (2) is consistently worsened by voters that think that capping housing costs, "protecting tenants" and other things that further constrict housing supply will somehow lower prices.
The easiest way out of this problem is (1) allow out-of-state firms to build housing and (2) fast-track all new housing permits, including financial liability if the planning commission creates unnecessary delays, unnecessary work, or approves / passes inspection on substandard work.
They should also replace the state wide mandate to reduce commuter miles (which is basically a mandate to increase congestion by tearing out roads) with a mandate to reduce the total carbon emissions per capita spent on transit (which would be a mandate to invest in public transit, bike lanes, and in reducing congestion).
None of those things are politically tenable, so I guess the millennials will just live in RVs or 4-to-a-bedroom until the voting population turns over.
There's good and bad regulation. Bureaucracy in the wrong place is a pain, but without crucial regulations I feel that private capital would be even more ruthless and we'd be left with badly built homes, in badly planned communities, lacking services and infrastructure, without much care for the environmental impact..
It's really hard to see a way out of this for me without extreme interference by government..
In practice badly built, badly planned, lacking infrastructure, etc. are just code phrases for being different from status quo and accommodating too many people. And it's nonsense that an urban apartment building could have an "environmental impact" offsetting the sprawl and vehicle-mileage costs of not building in cities.
Yet it isn't working in most european cities. Price increases and capital holders always build behind the offer/demand curve so they get a better yield from it. Also, rent is always high enough to milk as much as possible from modal income, as demand is pretty inelastic.
Also, read carefully, I don't want price control directly onto the private sector but the adminsitration controlling a big chunk of the offer.
It doesn't work like that, because not all property nor customer is even. A luxury apartment is not competing with a 2 bedroom public housing apartment. And there will be floating population, there will people moving in, there will be people with special needs that public housing doesn't cover, etc etc
Maybe such situation would actually push investors to be innovative with housing for once. If regulations allow that, of course, which is important too.
Question though... why, exactly does that have to be the case? Especially with something like housing where say there is mostly a fixed supply at any point and you can't just turn a machine on/off to produce more.
The only reason the prices go up is because of greed basically- because people say "hey I can just charge more and people will pay more!". And there in lies the bullshit of the free market once again. It always benefits the people with money, who can afford to pay that amount more "just to get what they want".
The last few years in particular have made me so tired of hearing about people talk about supply & demand like it is some unarguable hard scientific fact. It's not even close to that. It just represents how much people like to price gouge because "they can"
>Those price increases incentivize builders to increase the housing stock (which subsequently lowers prices). Capping prices prevents the price mechanism from working, leaving a shortage of housing.
And the following part of this is also just more bullshit. I'm not saying you are "wrong", but you say it as if that is how things have to work and there is no other alternative.
Every word of what you said is based on greed and squeezing the most you possibly can from people. Please realize that.
I largely agree, but if there is a scarce good (where there is less of it available than people want -- i.e. supply is less than demand) then we have to ration it /somehow/. The American way is by bidding up the price, so whoever is willing to pay the most money gets it. The Soviet way was by queuing, so whoever gets in line first gets it. We could also do it by lottery. We can come up with any number of schemes and most of them are "fairer" than market pricing, but they do all involve the "price" going up in some sense. Either you pay more in money, or in time, or in luck, but the price has increased because there are more people chasing the stuff than there is stuff to chase.
> Question though... why, exactly does that have to be the case? Especially with something like housing where say there is mostly a fixed supply at any point and you can't just turn a machine on/off to produce more.
Supply/demand is a basic tenet of economics. You can visualize the model with supply/demand graphs [0], which help make the model more intuitive.
The issue of the fixed supply is known as 'stickiness'. Most things in the economy lag policy, and data that we use to observe the economy also tends to lag. This is why it's really bad to have poorly designed policy; course correction is difficult, and people are hurt in the meantime.
> Every word of what you said is based on greed and squeezing the most you possibly can from people. Please realize that.
It could be fun to channel Gordon Gecko, but I disagree that this is about greed. I care about well designed economic policy because I care about people's well-being.
Well demand rising is an abstraction for relative balance between buyers and sellers of a good.
Say there’s one free apartment in NYC and two marginal buyers submit bids: Alice and Bob. If Alice offers $1000/month and Bob offers $1200/month, then Bob gets the lease. The marginal rent is $1200.
If another apartment is built then Alice leases it and the marginal rent is $1000. Similarly, if a new buyer Charlie enters the market and bids $1500 then $1500 is the marginal rent.
The number of people with apartments depends only on the number of apartments built. Which buyers get apartments depends on their relative ability to pay. The price depends on what the marginal apartment-buyer will pay. That is the lowest amount offered that still gets an apartment.
Scarcity really exists. Markets are one way of contending with scarcity; you could also use a lottery or a queue. But people who lose the lottery or get stuck in the queue are just as deprived as people who can't pay the market price. And there are exactly as many of them. Probably more, since there is no mechanism to bring more supply online when the queue is deep, while the market mechanism works to some extent, choked off as it is by government limits.
Fundamentally, the only way that more people can be satisfied with the housing they have access to is to produce more of the housing people want.
There is a machine... Of thousands of workers. If those people can't make more money, they have less incentive to recruit more and build more housing stock faster...
Such price signals are a basic element of the efficiency of the free market.
Activity guided by rational self-interest causes rapid improvement to the things that people value (_exchange_ value, not some other value for which people don't trade scarce things).
> Those price increases incentivize builders to increase the housing stock
Ahh yes, walking around in NY seeing building projects to increase the supply of housing in the 4th dimension where land is plentiful and the rivers are clean /s
There was just a pretty huge rezoning (with much NIMBY protest) of the Gowanus neighborhood of Brooklyn, close to Manhattan, which is currently mostly composed of empty lots and single-story warehouses/light manufacturing around the corner from desirable neighborhoods of $4m brownstones. Now developers will be allowed to build residential buildings up to 30 stories there. I live nearby and walking around in just the last few months the number of new projects starting has been kind of extraordinary. https://www.curbed.com/2021/11/brooklyn-gowanus-rezoning-dev...
> Ahh yes, walking around in NY seeing building projects to increase the supply of housing in the 4th dimension where land is plentiful and the rivers are clean /s
Have you tried obtaining building permits in NYC? My understanding is that it’s not easy. If you don’t allow builders to construct new housing then you won’t get new housing, regardless of price level.
Free market advocates always find the next culprit why the market can't deliver.
I can only speak of Berlin where land prices and construction prices have increased by demand so much, that new construction is coming in at 4x than 10 years ago (from 2k per sqm to 8k). I don't see how the market is really solving anything here.
> Free market advocates always find the next culprit why the market can't deliver.
I advocate for the free market because it's been the most reliable way of elevating humans from subsistence levels of consumption and improving their quality of life. It's been the driving force in elevating billions of people from poverty over recent decades. I'd wager that most people, free market advocates or otherwise, would consider that a good thing.
To be clear, there are cases where markets fail. In those cases, government intervention can actually produce more efficient outcomes. Consider the case of basic research. Private enterprises would have be foolish to pay for glowing worms and shrimp treadmills; there's just no clear payoff. But this seemingly silly research is critical to progress. For example, the research on glowing worms (GFP added to C. Elegans) ended up winning the Nobel Prize and is crucial for observing biological processes in living organisms.
> new construction is coming in at 4x than 10 years ago... I don't see how the market is really solving anything here.
It sounds like high prices incentivized builders to increase construction by 400% over 10 years? That seems like the price mechanism is driving an increase in housing supply, exactly as one would want when there's a shortage of housing.
As someone who once did basic research, I don't buy the government-funded basic research argument anymore. If we had negligible taxes, the hyper-rich would fund some basic research, and there would be some private research as well. It would not go away completely. People can cooperate without government. Why would anyone fund a church tithe voluntarily, since the market wouldn't predict such a thing? Yet people freely pay.
More importantly, try arguing that it is morally correct that a hard-working laborer ought to fund a Webb telescope by non-optional taxes, when he sees no direct value in it. Why even 1 penny? Because his betters in a grant agency know better what to do with the fruits of his labor than he does?
It was disgusting to witness Biden take a victory lap for the Webb telescope. It wasn't his money nor engineering and scientific effort, that's for certain.
Please, no utilitarian defenses of funding basic research by taxes. We need a moral defense. I don't see it at all. You can only defend it if you think people are too stupid to know their own interests.
> More importantly, try arguing that it is morally correct that a hard-working laborer ought to fund a Webb telescope by non-optional taxes, when he sees no direct value in it. Why even 1 penny? Because his betters in a grant agency know better what to do with the fruits of his labor than he does?
There is an optimal level of spending on basic research for society, and it's not 0. Was it a bad idea to launch unproven satellites into space in the 1970s? Your laborer didn't see the immediate benefit, but now that worker has GPS, which almost certainly improved the worker's life. In fact, the technologies enabled by GPS were unimaginable at the onset of the project. Should the project have been scrapped entirely?
It's impossible to say whether research will produce valuable results a priori. But it's not true that your laborer doesn't see benefit. The price we pay to live in organized society is taxation. Should that same laborer argue that he shouldn't pay taxes for highways built 400 miles away? Is it possible that this laborer may not know what's best 100% of the time?
It's obvious that in the absence of state funding there would be non-state funding. It won't be the same and it won't be zero. Why does the committee's judgement take precedent?
Also, some poorer people would pay to fund research in the absence of gov't funding. They actually already do, for disease research.
You can use utilitarian arguments to force people to do things that they otherwise would refuse. Isn't that a kissing cousin to indentured servitude?
Also, do you knot think I understand the riskiness of research? As if I haven't endured a few decades of poverty as a result?
> It's obvious that in the absence of state funding there would be non-state funding. It won't be the same and it won't be zero.
From an economic perspective, it's likely the level of funding would be less than the optimal level of funding. If the goal is to maximize public welfare, government funding is necessary.
> Why does the committee's judgement take precedent?
Ultimately someone needs to make decisions on resource allocation. Is a committee necessarily the best way? Maybe, maybe not. I'm not qualified to tell NIH how to operate.
> You can use utilitarian arguments to force people to do things that they otherwise would refuse
Agreed entirely, it's a very difficult issue to grapple with.
I'm a HUGE believer in reducing barriers to competition. I agree that high prices should lead to entrepreneurial increase of supply. However, I think it's massively, massively important to realize the successes of some planned economies. I'm not trying to use empty rhetoric in the following paragraph, I'm trying to identify the "free market"-iness of many of the most impactful "ways of elevating humans" in the past 500 years:
The "free market" did not establish the US interstate highway system and power grid, or lift 1.4 billion people in China out of poverty in a single generation. The free market did not establish railroads in the US (monopolistic robber-baron markets are not free markets). Free markets did not elevate Europeans from 1500-1950 (colonial slavery). Free markets did not sustain American agriculture for one hundred years after slavery was abolished (prison labor).
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The real point of this is: Maybe it's okay if we have a China-style or 1930-1950's USA-style planned economy to spark a domestic renaissance via:
- Massive housing initiative, starting with the base (bringing more people into trades, greatly expanding domestic material supply, and a fierce fight against NIMBY-ism). This will have to first cause a glut of material and labor, while keeping the excess labor happy (paid) and future material supply expanding (subsidies). Free market isn't great at pushing through local optimums...but cheaper supply should lead to increased utilization eventually!
- All new housing should be luxury. High efficiency, high comfort -- these will be what everyone is living in 20 years from now. It doesn't cost that much more to build but it makes a massive difference in QoL. Personally I dream of mid-rises and high-rises where people can practice tuba/piano/drums without bothering the surrounding units, or lift weights, or run a small woodshop. Have access to spaces where larger projects can be undertaken: DIY car repair, for example. This should greatly improve entrepreneurialism.
- Import/export/sales tax reform (regulatory compliance is incredibly hard and expensive, sales tax is super regressive and anti-entrepreneurial because it encourages vertical integration to avoid "sales" being taxed, VAT would be much more friendly to a true free market for niche value-adds to gain foothold).
- Massive education reform (pay teachers enough ($120k+) to have a surplus of expert labor migrate in from engineering / management / trades / science careers.
- Migrate manufacturing out of China and into disparate continents (South America, Africa, greater Asia). Domestic manufacturing would obviously be amazing but I think USA is too economically fragile to handle the increased costs of safety and environmental controls which the US people would rightly demand.
People are worried that if the housing market experiences a glut that people who saved all their money into their home as an investment will lose their retirement. However, I believe that as additional high-density units are built, the land those homeowners can sell will increase greatly in value -- because the house can be torn down and a mid-rise or skyscraper can be placed there instead, turning it from an unaffordable single-family "value" to a very affordable 10-50 family "value". That land would be worth way more if a midrise or highrise could be built on it.
The free market of WW2 paid for the interstate highway system? Every heavy industry was commandeered by the US government and strict salary controls were implemented by the government. Households had strict quotas for what they were allowed to purchase.
Or before that? When the civilian conservation corps employed huge amounts of Americans to build Mount Rushmore and the Hoover Dam?
The decades immediately leading up to the construction of the interstate highway USA was one of the least free our market has ever been.
That was a free market where the US was the last industrial power producing goods to be consumed by a completely destroyed world. If those are the circumstances you can provide as evidence the free market works as intended you may need something else
even in a "free" speech country like the USA. you would've been arrested for WrongThink / ThoughtCrime for putting out thoughts like this if this was 70 years ago.
Industrialization, constitutional democracy, science, regulation, and unions have raised standards of living for the majority of people. You forget history if you don't remember things like the Battle of Blair Mountain (first aerial bombardment on US soil) or the Triangle Shirtwaist factory, not to mention the incredible death and misery inflicted by that first capitalistic country Britain. The free market does not feel very free to the vast majority of people who have to deal with incredibly oppressive companies and plutocrats, and when laws and police are geared to oppressing the poor and the jobless.
Do not take me to advocate for centralized planning, but we do have to have democratic governmental intervention to prevent the free market from chewing us all up and spitting us out.
There’s plenty of land in nyc. There are areas of Manhattan that are entirely sub-5 story buildings. There are areas of queens that are mostly low density warehouses. Long Island City, which is more or less 2 stops on the train out of Manhattan, is extremely sparse.
Been this way in Vienna for many many decades and still it’s a very affordable city. So I dunno, I do believe this can go wrong if implemented incorrectly and has done in some cities, but it hasn’t here yet and looks fairly stable for the foreseeable too.
I think that’s more due to the relative attractiveness of the cities. London, NYC, Paris etc have become extremely expensive because they’re world cities, attracting huge amounts of people and jobs. That’s not really the case for Vienna, or Glasgow, or Riga etc
100 years ago there were 4 families in the now single apartment I live in. There was an extreme housing crisis and the current system started then as a direct response to that extreme overcrowding.
Bay Area could learn a lot from Vienna. Especially about building up.
Not sure exactly but the population has grown from 1.5 million in 2001 to 1.9 million in 2021
Some of that growth fit into existing stock but since the late 90s there has been a lot of new neighbourhoods built.
The city generally plans ahead, even building public transport like metro out before it is completely needed.
> Of course this does not work if building new housing is illegal, in which case you might as well have the rent control.
Or make it possible to build new housing. Rent control is a subsidy to existing residents to the detriment of people who would otherwise move to the area.
Why would housing become unaffordable if the state intervenes? The purpose is precisely to control affordability. Prices are controlled for social housing, and flexing supply allows you to influence the free market prices.
Supply is always less than demand in dense cities/countries, leaving it for the 'invisible hand' only ensures that the whole market is unaffordable and/or gentrified. Like what we are seeing in this news piece.
I don't know exactly how it works here in the Netherlands, but as far as I understand the government leases land to the constructors at its own pace, with strict quotas on social housing, to let vs to buy ratio, and free-market properties. It isn't perfect (massive bubble on the free market right now) but seems to work well enough.
>It isn't perfect (massive bubble on the free market right now) but seems to work well enough.
No it doesn't. We have massive wait lists for social housing, and being middle class arguably leaves you in a worse state due to social housing eligibility only applying to very low incomes, and anyone with an office job close to the city will easily earn too much for social housing, but not enough for private norms. Meanwhile those with social housing are incentivized to stay as the costs are far lower than private, and the repercussions are lacking.
The problem has been obvious for decades, yet the government felt zero incentive to do anything when it was possible. To top it off, there's a general reluctance to build due to emission limits. And our government is actively bending over to the farmers making things even worse.
The Netherlands is the perfect example of what not to do when trying to intervene.
This is what I remember when I lived in Utrecht a decade ago. It would only work for a subset of people. People who would get on the list for public housing once they moved there for college. And in some cases delay getting married so that their combined income wouldn't go over the threshold...
Utrecht is probably the worst offender of all. Huge demand, but most notably huge demand from people willing to work for low wages. I've noticed employers in Utrecht being extreme cheapskates despite the way higher CoL compared to even its immediate surroundings, and being a hub city in the heart of the country, far more pushing for hybrid.
I don't expect it to change either. Too many students still under the impression earning 2.5k-3.5k gross out of college is "great", despite that exact salary putting them in the uncanny valley of renting (no social housing, not enough too entice landlords). Unless you left your student time with a partner to share, which has become increasingly more rare.
> Supply is always less than demand in dense cities/countries, leaving it for the 'invisible hand' only ensures that the whole market is unaffordable and/or gentrified
Is that the case in Detroit? I’d wager there’s substantially more supply than demand.
> It isn't perfect (massive bubble right now) but seems to work well enough.
If there’s a massive bubble then it seems like that system didn’t control prices.
> If there’s a massive bubble then it seems like that system didn’t control prices.
The bubble mostly affects new home buyers, which are the ones who need the least protection.
Rent is inflation-adjusted and can't be raised at will, so there is a very long delay between market prices increasing and most tenants actually bearing the cost. Everyone living in social housing still has a home, and won't be evicted so that another person can come in to pay 2x the rent. Seems pretty good to me.
I don't know much about Detroit but it seems to demonstrate that the simple supply-demand model does not reflect reality. Prices should have dropped significantly, but instead it followed the same curve as the rest of the USA, with those $500 properties being a localized phenomenon.
> The bubble mostly affects new home buyers, which are the ones who need the least protection.
So now you (or more generally the government) get to decide who is more deserving of appropriately priced housing? Why do new home buyers need less protection?
> Rent is inflation-adjusted and can't be raised at will, so there is a very long delay between market prices increasing and most tenants actually bearing the cost.
This is precisely the problem with this policy. When price doesn’t feed through to the market, the market can’t adjust. People simultaneously argue that the free market doesn’t work while endorsing policies that prevent the market from working.
> it seems to demonstrate that the simple supply-demand model does not reflect reality
The population dropped from its peak by 1.2mm people. Prices subsequently fell so much that it was possible to buy houses for $500. That’s exactly what the supply/demand model would predict.
Those $500 homes are not inhabitable. As someone who was in Detroit less than 24 hours ago, I can tell you I was surprised at how expensive the housing was. Not that it was close to Bay Area prices, but I was expecting to see places I liked for 300-400k. The reality is more like 600k for less than 2,000 square feet.
> The reality is more like 600k for less than 2,000 square feet.
"In June 2022, Detroit home prices were up 32.3% compared to last year, selling for a median price of $99K. On average, homes in Detroit sell after 27 days on the market compared to 23 days last year. There were 463 homes sold in June this year, down from 512 last year."
You absolutely can get houses for 300-400K in Detroit. Where exactly were you looking at? Houses that you're describing are definitely possible in hot areas like Downtown and Downtown adjacent areas like Corktown, Indian Woods, and Midtown.
Agreed that you can find $300k houses (and cheaper). I was just surprised that the nicer areas were still pricy. I mean Indian Village, and the neighborhoods you mentioned, have some nice homes, but those neighborhoods feel like an oasis surrounded by areas that are dealing with very tough economic situations.
Again, I was just surprised at the price for places I liked. If I wanted to take a chance on a neighborhood that might turn around in the next few years I could find some deals (although a lot of those homes need a lot of work).
We're all very aware of how the economics should play out, but look around you, it's not working that way in a bunch of places. That's because houses are being used as investment vehicles, with rentals being thoroughly flogged because they know people have no choice but to pay. No amount of building will help if the value of the property is not intrinsically linked to the supply and demand of places to live for people who want to live there, but is instead linked or at least heavily influenced by what investors with increased buying capacity are willing to pay.
> No amount of building will help if the value of the property is not intrinsically linked to the supply and demand
Building new houses is intrinsically linked to supply. When you build a house, that increases the supply of housing. NIMBYs oppose new construction precisely to prevent the value of their properties from decreasing.
Sorry, of course that's correct. I was trying to articulate that the supply and demand, as a whole, is not currently a marketplace for people with housing to sell to those who want to be housed (in many places). It's a marketplace dominated by investors and landlords, and people who want to be housed are having to stretch their funds as far as they possibly can to keep up with the market currently being made by investors and landlords.
> people who want to be housed are having to stretch their funds as far as they possibly can to keep up with the market currently being made by investors and landlords.
I'm sympathetic to the difficulties people are facing right now, and I've seen the stories about housing being purchased by investors. The issue is that the data doesn't seem to indicate a structural change in ownership [0]. Home ownership appears to have peaked at 69.4% in 2004 and now sits at 65.4%, the same level as in 1980.
Unless of course your builders wise up and work together to produce the bare minimum of housing stock required in order to keep prices rising, as they don’t want to flood with stock and reduce demand.
Is housing unaffordable in Vienna? If so, your mechanism might explain it. If housing is not unaffordable in Vienna, your explanation seems likely to be missing something.
Housing is becoming unnafordable in Vienna again... because they didn't keep up with their program and now public offer is way behind of what should be.
Rents are already through the roof. If that hasn't incentivized builders to build enough housing to lower rents in places people want to live, why not go for the centralized solution?
CMV
The "let the free market take care of it; government intervention can only make it unaffordable" view is standing on extremely shaky legs today.
> The "let the free market take care of it; government intervention can only make it unaffordable" view is standing on extremely shaky legs today.
The term “NIMBY” is commonly used to describe people who prevent new construction of housing. They typically use legal maneuvers (like requiring years of environmental review) to do this. By allowing this to continue, government intervention supports unaffordable housing.
Yet somehow this doesn't seem to materialize in any meaningful way, the price of housing has only been going up exponentially and I'm sure builders are doing their best to build more but it's not getting any cheaper.
> Those price increases incentivize builders to increase the housing stock (which subsequently lowers prices). Capping prices prevents the price mechanism from working, leaving a shortage of housing.
The issue, empirically, is that (a) we don't see the right housing being built, and (b) we don't see quality housing being built. We see a lot of high-end luxury units being built, but what we need are more 1- and 2-bedroom units within 20 minutes (preferably, by affordable public transit) of where people work. We also see a lot of large (and therefore expensive) but cheaply built McMansions that'll be falling down in 20-40 years, so the long-term picture of the housing stock is not improved.
What we need is for the government to step in and build affordable housing as a floor at a controlled price ("commie blocks"). No one will be forced to live in one, of course, but they'll be an option; the rich can still buy property on the market if they're so inclined.
> My landlord takes all the risk of owning the property (prices don’t always go up after all).
If you own your house and control your geography (i.e., you'll never be forced to move due to economic inopportunity) then you have the truly risk-free position. Renters are at much higher risk (log transform, Kelly Criterion) than landlords, because real estate costs are such a high percentage of their
budgets.
The problem, of course, is that owning a house, while it gives you a zero beta to the housing market in theory, still does have the risks you described. For one thing, other people can do things that damage your house's value--both its subjective value as a place to live, and its objective market price--such as building highways and obstructing sun/view. The other issue is that, in today's hypercompetitive world where in decent employment every job search is national (and possibly international) it's impossible to control your geography... you could be laid off and forced to relocate to get your next position.
So, you're not wrong in general. I think it's a wise financial decision for a young person to keep renting one's place--as opposed to renting money to buy a place--but I also think it's inaccurate to imply that landlords are taking more risks than they really are. It really gets on my nerves when rich people and employers talk about how they're "taking all the risk" and therefore deserve more, when the truth is that the poor (involuntarily) take all the risk, because each $100 means so much more to them.
> and property owners provide almost no value, but to provide access to housing for people who has no capital for it, which is service that could be perfectly provided by a state entity.
Property of course requires maintenance and management, so the sleight of hand here is to define away all those aspects of ownership so that by definition all that's meant by "landlord" is "old guy who cashes checks."
But somebody has to maintain the property, somebody has to prioritize upgrades and improvements, somebody has to cut the grass, somebody has to pay the taxes, somebody has to -- yes -- collect and cash the checks. Somebody has to respond to tenant requests and emergencies. Somebody has to advertise the property when it's vacant. Someone conducts showings and screens tenants. And, maybe most important, somebody assumes the risk of a bad tenant or a down market or a declining neighborhood. And so on and so on.
Whether all this is done by the owner personally or hired out is irrelevant. There's no reason to believe government can perform these functions better than private owners in a market.
A simple proof that landlording is not free/easy money is to realize that millions of middle- and upper-middle class Americans who -- if not today, certainly 5 years ago before this most recent run-up in prices -- could, if they wanted to, afford to buy property and become landlords, but they mostly do not do it. And since nobody turns down free/easy money, landlording simply cannot be free/easy money. QED.
I've repeatedly been told by people who've done it (including my parents) never to become a landlord, because it's absolute hell and you'll end up making under minimum wage and tenants will fuck you over until you're even in the red and it's impossible & expensive to evict anyone even when they're not paying and causing more and more damage to the house with each passing day.
Then again, I've had others tell me it's awesome, you just have to pick your location carefully (one exclusively bought very close to nursing schools, which seemed to select for tenants who'd stick around at least a couple years and who'd pay their rent and not run a meth lab or smear shit on the walls or anything like that).
Yes, because one thing a landlord does is assume the risk of bad tenants and high-turnover. Good, stable, long-term tenants hate this -- "Why am I paying so much for rent, when my landlord doesn't seem to do anything?" -- but as long as you're a renter you're going to pay for this risk one way or another. And it's not at all clear that you can socialize this risk and still end up with units anybody in their right mind wants to live in. Yes, I know about Vienna. This ain't Vienna. There's very little evidence the U.S. is capable of doing it. Public housing here is inevitably a race to the bottom.
FWIW, I'm with you, I think rental income ("landlording") and airbnb-ing are both legitimate demand, and the system would work fairly if we didn't have artificial constraints on supply.
Insofar as landlords actively work to constraint supply to artificial inflate rents, it is immoral behavior (but 'muh' neighborhood) and we should not allow it.
Technically true. I owner-occupy a duplex, so I maintain exactly one rental unit. Unfortunately for me, I'm too high in conscientiousness to be a cutthroat landlord and I keep dumping money into improvements without raising rents, even though I could easily do nothing and raise my tenant's rent hundreds of dollar per month in this market. What I would like is for my work on this property to mean something and for all my competition to lose their shirts in a market that wasn't artificially supply-constrained.
Now that I've said some nice things about landlords, I'll say something less flattering: bad landlords find convenient cover in supply-constrained markets. Which, of course, is what we have. If you want to stick it to lazy, cheap, do-nothing landlords, then let somebody build a brand-new apt complex right next door to their crappy units and see how long they can get away with their insouciance in that kind of market.
If a landlord does not maintain the property, over the long run they will not be able to charge the same rent versus a similar, maintained unit.
I've used this to my advantage before. I moved into a building that needed a fresh coat of paint and had poor reviews of their maintenance and saved ~10-15% from market rent because I didn't care about appearances and am handy enough to fix a leaky faucet, etc. myself.
Sure they’ll lose relative to the place next door, but they’ll win relative to their same unit 10 years ago because the land underneath their building (and the amenities around it) have increased in value so dramatically.
Right, but who cares? Are we trying to soak rich people or are we trying to make sure there's an abundance of housing? Are we trying to help the poor? Or are we mostly concerned with knocking the rich down a peg?
Uhhh, I care that we create incentives that yield desired behavior: building high quality housing that supports growth and mitigates urban squalor.
The current state is the actual opposite of that incentive. You can just buy up a parking lot in downtown Manhattan, pay ~$0 taxes on it, and keep it off the market while people continue to struggle to find housing and prices continue to climb. Then when the land has appreciated (through no actions of your own, in fact in spite of your own actions) you can sell for millions of dollars of upside.
Maybe I don't do it because I find it morally questionable, not because I don't think it's free and easy money. I'll absolutely turn down free and easy money for something I think is wrong.
Maybe they realize that being a landlord is an economically and societally destructive measure that saps productive capital from working and middle class. It’s vampiric. And awful.
>Many attempts at public housing failed because they just tried to provide housing for low-income people in separated and/or undesirable areas, with a predictable outcome.
So the taxpayers should pay so the people with low income or no income can live iny Manhattan? Why not also provide them with expensive cars and exotic vacations?
> So the taxpayers should pay so the people with low income or no income can live iny Manhattan?
Yes. It's a city not a luxury resort. If people are to work all kinds of jobs at all levels of income there, then people at all income levels should be able to live there as well. This mechanism accounts for that.
> Why not also provide them with expensive cars and exotic vacations?
Maybe they should idk. Seems completely unrelated though and no one is arguing for that here so I don't know why you want to or why I should.
I know what manhattan is and I'm against it becoming a luxury development for only the rich, while the people who work to service them are bused in from far suburbs at tremendous personal cost.
So who should get to live there, ultimately? There's plenty of land in general, but land in Manhattan is sharply limited, so how do we decide who gets in, if it isn't going to be based on ability to pay?
Welcome to Galt’s Gulch, where only millionaires can afford to live! Every minimum-wage is being filled by someone who’s constantly exhausted from their four-hour commute from Poortown.
Rent is the main detractor of disposable income which hurts the rest of the economy, and property owners provide almost no value, but to provide access to housing for people who has no capital for it, which is service that could be perfectly provided by a state entity.
The current setup creates guettos by default, by siloing people with different monetary and social capital into different building and areas, hurting social mobility, which could be improved by the setup described above. Many attempts at public housing failed because they just tried to provide housing for low-income people in separated and/or undesirable areas, with a predictable outcome.
CMV