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Britain's housing crisis is a human disaster (theguardian.com)
59 points by design-of-homes on March 15, 2015 | hide | past | favorite | 40 comments

The underlying belief is that the market will provide, if only it were properly stimulated and enticed, but it is one unsupported by evidence. At no time since the second world war has the private sector built at the rate now required, and usually it has fallen a long way short.

Worth noting for folks who think that supply is the only problem. Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response.

Certainly if you stopped building completely you'd eventually have a real problem, but the evidence is clear to me that you'll never reach the incredible supply levels that would cause prices to drop (why would builders do this anyway?).

There is also what Ebenezer Howard, the inventor of garden cities, called the “unearned increment”, which is the uplift in value when land becomes available for housing. It was the basis on which postwar new towns were built. Currently it is being squandered – when the government, for example, relaxes planning constraints on certain properties, or makes it easier to convert offices or shops into homes they drench the lucky owners of such places in cash, without asking for much in return.

Vancouver captures this. It goes toward community centres, the arts and increasingly housing. http://vancouver.ca/news-calendar/community-benefits-from-de...

Worth noting for folks who think that supply is the only problem. Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response.

Orangecat's comment is appropriate: https://news.ycombinator.com/item?id=9207631 but I'll note too that Vancouver, like other cities, is probably substantially still underbuilding the market—which high prices reflect. Houston, on the other hand, is not doing that: http://marginalrevolution.com/marginalrevolution/2015/03/hou... :

Unlike most other big cities in America, Houston has no zoning code, so it is quick to respond to demand for housing and office space. Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000.

Which is why so many people are moving to Texas. http://www.bizjournals.com/austin/news/2014/12/23/big-tex-in... is one link.

Although Houston doesn't have zoning, it does have development regulations in place that mimic the density restrictions of cities with zoning - lot sizes, parking minimums, etc. In effect the entire city is one big zone.


Vancouver may be underbuilding, but the point I am trying to make is that the amount you have to build to have a notable impact on price is probably a lot more than people think. I brought up Vancouver because I know that HN is very SF-oriented and there is extremely little development, and so people may be lured into thinking that's the only issue. In Vancouver I feel there's quite a bit of development, but the city faces the same issues. Similarly we see cities such as NYC and London where development is constant not being able to lower prices. It's not likely to be a problem that can be solved purely by the market providing supply. Supply is necessary but there are many other variables.

Houston's endless sprawl is not technically emulatable for many cities and the design of the city is undesirable to many. I'm not sure it's an example that people would choose to follow.

> the evidence is clear to me that you'll never reach the incredible supply levels that would cause prices to drop (why would builders do this anyway?).

It's the same as in any other market, people will carry on doing things while there is significant profit it in. A builder can only stop another builder by forming a cartel.

Also, bear in mind that just because house prices have gone up as decent numbers of buildings have been put in place, it doesn't mean they wouldn't have gone up more if supply had been even more constrained.

There probably is some self perpetuating element to house building - if prices are cheaper than they would otherwise be, more people would move to a city, so that means there is an effwct of supply creating more demand. But I think that occurs at the edges. Most people don't move city or in particular country for the house prices.

Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response.

The cause and effect probably goes the other way.

why would builders do this anyway?

Why do gas stations lower prices when oil falls? If they don't, their competitors will.

Yes the cause and effect goes the other way, I just mean to reinforce that the added supply didn't move the needle.

Certainly prices would be higher if the buildings hadn't been built, but one wonders just how many buildings does one have to build to get prices to drop? Possibly it's an unrealistically high number.

in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response.

My friends in Vancouver have told me that many of the modern buildings only have something like a 35% year-round occupancy rate, and that they're largely owned by foreigners as summer homes.

The Vancouver market is probably out of wack due to foreign money looking for a place to park.

I've a one bedroom in a flatshare in east london, its nothing special & costs north of £1k / month. If a political party outlined how they'd fix spiralling house prices they'd get my vote.

If a political party outlined how they'd fix spiralling house prices they'd get my vote.

It's really not that hard: remove height limits and parking minimums, per Yglesias in The Rent Is Too Damn High: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0.... Glaeser's The Triumph of the City is also good on this subject and discusses the UK more: http://www.amazon.com/Triumph-City-Greatest-Invention-Health.... This is a simple issue of supply and demand: rising demand in the face of limited supply means higher prices. Want lower prices? You need more housing or fewer people who want it. The former is easy to accomplish with century-old technologies, like steel and elevators.

What do you mean by 'parking minimums'?

FWIW, the London Plan currently contains restrictions on the maximum amount of parking provided:


  table A4.2 Maximum Residential Car Parking Standards
  Predominant housing type   4+ bed units   3 bed units   1–2 bed units
  Car parking provision      2–1.5 spaces   1.5 – 1 space 1 to less than 1
                             per unit       per unit      space per unit*

  * All developments in areas of good public transport accessibility and/or
  town centres should aim for less than 1 space per unit.

Parking minimums are fairly common in the US, and cause problems especially in cities because they take up so much land. Here is one random article about them, and how inconsistent they are: http://www.citylab.com/commute/2013/08/exposed-americas-tota...

Brazil has problems too - http://cities-today.com/2014/07/finished-brazils-largest-cit...

Um, here is the "outline":

A law that limits the rent increase to inflation + x.

Notes: Circumvention by "also buy this used kitchen for a ridiculous amount" would be illegal as well. Sucks for anyone trying to move into the city but doesn't force everyone who lives in the city to move out.

Sucks for anyone trying to move from one apartment to another. Sucks for anyone trying to move out from their parents' apartment. Sucks for anyone whose landlord invests as little as possible into maintaining the building.

(Obviously sucks for anyone who's invested in real estate but we don't care for these folks, do we?.. Well, it sucks for everyone else as well.)

No doubt there are downsides, however moving around, or leaving parents' apartment is aparently quite difficult anyway with the astronomical rents in London.

Regarding the investors, I am not sure how a reasonable rent increase along the inflation rate would suck; the fundamental building, maintenance and operating costs should also move with inflation. I have a little real estate myself and when I bought, my financial plan did not rely on a crazy rent spike 10 years down the road.

The current low interest rates push so much investment into real estate, while space for construction is limited in many places. How would you fix this situation?

Removing restrictions on building would go a long way towards solving the problem IMO. You'd get uglier cities maybe, with taller buildings in more expensive areas, less parks, etc., but you'd get cities where more people could live, in terms of the amount of apartments per square mile as well as price (as the two ought to go hand in hand at least somewhat.)

I think that today's restrictions on building in many places are absolutely draconian, to the point of a chronic shortfall in the number of apartments built not just in city centers but in entire cities. I think that to some extent this is explained by a collusion of builders, property owners and bribed government officials (so corruption), and to some extent it's explained by the government liking to restrict building to preserve open space or what-not and not liking to do the work needed to plan and execute urban expansion at a decent rate (so laziness).

What makes people try and move to the big cities in the first place? Is it high-paying jobs?

The jobs must go where these people live currently. Inconvenient for companies who like their offices in central (and expensive) locations, but doable.

Obviously also applicable to SF and Manhattan/Brooklyn.

It's interesting to compare this to other cities: a cursory glance at LA craigslist shows some apartments in nice areas that would easily cost twice as much in SF/Manhattan. Same with Chicago.

Is it really just population density? A cursory google search says that SF's population density is about 17,000 people per sq. mi, which is about the same as West Hollywood. Yet looking at apartments in West Hollywood, I see apartments much nicer than I would in SF for the price. Maybe I'm grossly oversimplifying though.

But then is the answer really just 'sprawl'? Are Chicago and LA only 'reasonably priced' because they're so expansive? Is that how our cities have to move lest they suffer some sort of housing implosion?

As it is, I don't understand how anyone earning minimum wage lives in SF/Manhattan - or why they'd even want to commute in to Manhattan to work for Chipotle if they don't.

The answer isn't just sprawl, it's "lots of housing", which can mean more tall apartment buildings on a little land instead of individual homes on a lot of land.

Unfortunately, San Francisco proper is very very hostile to real estate development for a variety of reasons and is trapped in a steadily worsening local maximum. A large part of that is policies like rent control, which bestows a sort of quasi-ownership of an apartment that may be even more effective than real ownership at spreading around the benefits of what the article calls a "tax by the haves on the have-nots, and by the old on the young."

Building out the suburbs could also be an answer if you could trust the region's government agencies to provide decent transit options, whether public transit or highways. You can't. At least if you're commuting to work in Manhattan you have a cheap $2.50 subway ride into town from many places that are much further away than you do in San Francisco.

"Another reason is that inflation in housing – so taboo when it comes to other commodities – has since the 1980s been celebrated by governments and encouraged by policies on taxation and borrowing."

Right. Rising house prices are just runaway inflation. If inflation indexes include housing (which, in the US, they did until the 1980s) inflation is much higher.

UK too: http://en.wikipedia.org/wiki/Retail_Price_Index

For most purposes, the UK now uses a measure (CPI) which excludes housing costs. However, RPI is still used when calculating changes to the state pension.

I'm always amazed to see the same people who place all sorts of statutory restrictions on new housing blame the free market when there's not enough housing.

Exactly! How can we say the free market isn't keeping up when it's hardly free? California has an insanely slow build rate because of how much red tape sits in front of it. This slow build rate leads to less housing which gives us high prices. And then people seem to think we somehow need even more red tape to save the day.

British isles urbanism is a joke

Terraced houses? In a place with high housing demand? Really?

You don't need to go to NYC heights, just look at what France and Germany do

They seem to hang on their historic buildings, with cramped accommodations that cost an arm an a leg to follow current regulations.

It's similar in Ireland, really.

"Terraced houses? In a place with high housing demand?"

What's wrong with terraced housing? It is more suitable for high-density developments than detached or semi-detached housing. A mixed development of houses and flats brings in a variety of different households and people. This makes a place much more attractive to live in than a place with only one type of dwelling. Well-planned terraced housing doesn't have to lead to sprawl.

In the UK, families with growing children have an aversion to flat living. It may be irrational, but this attitude hasn't changed in decades and is unlikely to change in the future.

> What's wrong with terraced housing?

It's less dense than apartments.

> In the UK, families with growing children have an aversion to flat living.

Maybe because of the abysmal quality and ridiculous size of most accommodations.

Brought to you by people that think carpet in a bathroom is acceptable.

We have separate taps for hot and cold water, and you think the carpet is the problem?

It makes a lot of sense having them separate. Tom Scott explains https://www.youtube.com/watch?v=HfHgUu_8KgA

Here in California showers and much other plumbing are required to have backflow valves so that hot and cold don't cross contaminate.

Not from a usability point of view.

Given how important water is, the consequences of contamination etc, safety was given first priority, then simplicity. How would you have done better?

Mixed taps are all over the US and many other places in the world and have been for a while and we have no water safety issues from this. Water safety has nothing to do with it:

"Most bathroom sinks in Britain still have separate hot and cold taps today, 60 years after Mr. Churchill’s conversion and decades after nearly all dual taps were scrapped in the U.S. and most vanished from continental Europe. For reasons of thrift, regulations and a stubborn attachment to tradition, the British have resisted the tide of plumbing history. Even when they renovate old homes, many choose two-tap systems, and builders often install them in new, low-end housing. Separate taps account for an estimated 40% of all bathroom-faucet sales in the U.K."

From: http://blogs.warwick.ac.uk/mhillebrandt/entry/british_peculi...

Thing is, if you own one of those houses, which is true for a lot of the older generation, it's pretty nice.

Of course, if you're not rich and trying to get on the housing ladder now, things are pretty difficult.

In Russia there is a popular family of conspiracy theories where UK is the driving force behind most events of the last 100 years, including rise and fall of the USSR.

If so, it doesn't look like UK is able to extract much for its own citizens from said world domination.

The UK middle and upper classes are doing fine (although the castle development sector has slumped this century). The UK poor on the other hand, yes, they fail to extract enough welfare in order to keep up with the new middle class of landlords.

I'm not sure i'd say the middle class is doing fine. The older part of the middle class is largely okay. The junior division, though - anyone who doesn't already have a house and a good pension - has a pretty bleak outlook. Unless they're making Google/stockbroker money, or live in the North.

The working class certainly have it much worse, though.

Having poor classes is a decision. Some countries choose to avoid keeping people poor.

So, taking the office of national (UK) statistics - in 2013 the growth rate of the population is 0.6%, on 64 million. Giving you 384,000 extra per year - about half of the growth is (births - deaths) and the other half is net migration [1].

Meanwhile from 1990 onwards we're seeing an average of less than 200,000 [2] - In the last few years the rates are the lowest for the time period on the graph (back to the 1970s).

[1] http://www.ons.gov.uk/ons/rel/pop-estimate/population-estima...

[2] http://www.bbc.co.uk/news/magazine-30776306

I think UK needs US style property taxes to discourage this 'housing as investment' behavior. Yes, UK has council tax but from what i understand its not that high.

In most US cities (except SF, LA, NYC) the ratio of average house price to median income is very reasonable (about 2.6). One main reason is the high property taxes which average about 1.5 to 2% of the house value. The tax also increase substantially for second homes. This discourages using a second house as investment/store of value.

"When asked about the poor, the Market Economy raised one finger of the Invisible Hand and whispered.. fk the poor" youtube.com/watch?v=eBuC_0-d-9Y

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