This is absurd - why does how you earn wealth - through passive investment or active - matter at all? There’s no moral imperative that says earning wealth through sweat equity is somehow more noble or desirable.
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This is a key, uncomfortable point: Home values, which purportedly built the middle class, are predicated not on sweat equity or hard work but on luck. Home values are mostly about the value of land, not the structure itself, and the value of the land is largely driven by labor markets. Is someone who bought a home in San Francisco in 1978 smarter or more hardworking than someone trying to do so 50 years later? More important, is this kind of random luck, which compounds over time, the best way to organize society? The obvious answer to both of these questions is no.
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The first questions answer is “so what,” and the other question is “why not.” Investments aren’t meant to be egalitarian, fair, or reward the morality of labor. They reward people who allocate capital in a way that happens to increase in value over time. Will someone investing in SF real estate benefit as much as someone who did 50 years ago? Definitely they won’t in the next year if that’s their point. It took their entire lifetime to realize that investment return. They’re likely dead now. In 50 years will it be as good an investment? Who knows. If you knew for sure one way or the other, which they imply they do, you can in turn use that knowledge to improve your investment returns. But only, apparently, if you’re smarter than the author.
The problem with housing as an investment is that there's a limited amount of desirable land and if housing is an investment it quickly becomes unaffordable to buy housing in those areas. If we want to solve the housing affordability crisis we need to stop treating it as an investment that grows in value faster than inflation.
If it is an investment that grows in value faster than inflation why would we treat it any differently? Housing affordability issues aren’t because people treat housing as an investment. Someone owns the land the house is on whether it’s you or a landlord. The value of the land is a supply and demand issue.
Maybe the answer is to make it so employment can be had in many places and not just a few? Carry the remote work stuff further and people can work from less dense areas where land is more affordable?
The only other way I see to make housing not an investment would be nationalize all property and everyone rents from the government. We’ve tried that in parts of the world and it wasn’t awesome.
> If it is an investment that grows in value faster than inflation why would we treat it any differently?
I don't think it has to be. Housing and land aren't the same thing. Land can increase in value while the cost to live on it doesn't if we densify in the face of increased demand. Unfortunately local legislature are captured by homeowners who believe their house is an investment so laws that would fix the "housing as an investment" issue are impossible to implement.
Multi family properties can be owned as a condo and therefore as an investment. The idea that land appreciates but the house on it doesn’t is absurd, if you subdivide into condos the condos don’t own the land the condo association does. But the condos are subject to supply and demand and have a price, either as rent or as an investment as a condo owner. The utility of the land is what has value. That’s why when you look at land for sale it’s not all uniformly valuable. Land that can be used for multiparty housing is more valuable than your typical city single family home lot because it has more uses. A 5000 sqft lot can only host so many people even if it’s zoned for multiparty construction. A 20000 sqft plot can host a bunch of units and is more valuable per sqft as a result. Once it’s been developed into a multiparty development the cash streams on rent or the implied npv represented in the unit price are for the HOUSING not the land - the housing is the useful element. But if you don’t think housing should be an investment, I still don’t understand who you believe should own the housing. Whoever owns it necessarily has invested their capital in it and presumably to make a profit - either through rent, or appreciation, or both.
I think the density argument is specious. If you increase density prices may drop in the short term but as prices drop demand increases and supply gets exhausted and you’re back to rising prices, just with more people. To make housing affordable you need to do the opposite and decrease densities by making it unnecessary to live in a small number of extremely expensive urban areas and make it more attractive to distribute people to many different cities. Just cramping more people into small units in SF doesn’t solve jack.
> Just cramping more people into small units in SF doesn’t solve jack.
There aren't an unlimited number of people looking to pay $3k for a sf studio. As you build more you eventually run out of people willing to pay that much and prices necessarily decrease.
But once prices decrease people priced out come into the market. The prices won’t drop if there continues to be demand in excess of supply below the current market price. The $3k price you mention is equilibrium, if it drops then more people want units than exist as units because now it’s become affordable, so prices go back up to $3k.
Ultimately though, this is the affordable housing problem - the prices are so high all those who want to live in sf can’t afford to live in sf. You made my point for me in fact - even if you make high density housing you don’t make it affordable.
The only way to make it affordable is to make it unnecessary to live in SF by unlocking SF employment anywhere.
“”” This is a key, uncomfortable point: Home values, which purportedly built the middle class, are predicated not on sweat equity or hard work but on luck. Home values are mostly about the value of land, not the structure itself, and the value of the land is largely driven by labor markets. Is someone who bought a home in San Francisco in 1978 smarter or more hardworking than someone trying to do so 50 years later? More important, is this kind of random luck, which compounds over time, the best way to organize society? The obvious answer to both of these questions is no.
“””
The first questions answer is “so what,” and the other question is “why not.” Investments aren’t meant to be egalitarian, fair, or reward the morality of labor. They reward people who allocate capital in a way that happens to increase in value over time. Will someone investing in SF real estate benefit as much as someone who did 50 years ago? Definitely they won’t in the next year if that’s their point. It took their entire lifetime to realize that investment return. They’re likely dead now. In 50 years will it be as good an investment? Who knows. If you knew for sure one way or the other, which they imply they do, you can in turn use that knowledge to improve your investment returns. But only, apparently, if you’re smarter than the author.