Comment by moneycantbuy
1 day ago
Gary's Economics claims wealth inequality is at the root of housing unaffordability. Basically as wealth concentration grows, the ultra-rich bid up the assets. See the price of gold doubling in the past few years. Government stimulus is also captured by the richest. It's also a global phenomenon, i.e., every major city is now unaffordable for most people.
There's some truth in that, and I support the idea of shifting the tax burden from work to wealth. But I also think this is too simplistic. Remember that Gary was a financial trader, so he has a zero sum game perspective.
The UK had a decades long phase where they built a ton of affordable housing (council housing). This program was largely dismantled under Thatcher. Also over time, building regulations became more restrictive in the wrong ways, which makes supply more expensive.
Regulation plays a large role. But the right keyword is "reform". The right outcomes don't just happen magically if you deregulate.
There are places where housing got drastically increased in recent years, like in Paris under Hidalgo (7000 units/year).
Every metal, and really every commodity, has has recent price hikes above the official BLS CPI numbers.
That says far more about official inflation numbers than it does commodity markets.
This! Since our money is being inflated away, hard assets like precious metals, bitcoin, and real estate get bid up because those with cash bleed out purchasing power.
I like to call that "inflation".
You have the causality backward - housing explains ~100% of the variation of inequality. If you liberalized zoning, excess inequality would more or less disappear: https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r...
Where I live, housing cost is directly proportional to school district quality - and local school funding (vs. state-level funding) is a significant cause of inequality.
Rapid growth of cheaper housing in a town is a financial challenge for the town because it creates a larger student base without creating a meaningfully larger tax base. In towns with a commercial tax base, the costs increase more than the tax base; in towns without a commercial tax base, taxes typically increase on the oldest / most established residents - which drives fixed-income people from the homes and towns they supported for decades.
In my suburban area, there are two main arguments to anti-growth zoning: (1) people don't want the density increase; they built lives in a less-dense area by choice and want to see that choice preserved. (2) There are legitimate school funding issues and tax base issues that encourage controlling the rate of growth.
I'm dubious of _any_ argument that finds a singular cause for housing prices. It's an extremely tangled and complex issue that touches on taxation, local control vs. state control, education, property rights, politics, a cyclical capital-intensive industry, immigration and labor supply, interest rates...
Personally, I vote for denser housing and more liberal residential zoning. But I also understand and respect the opinions of my neighbors who disagree. Looser zoning gives control of land-use to capital and takes that control away from the people who built and sustained the town for, sometimes, generations.
I know very little about economics so I can only parrot what I've heard from others but the consensus from everyone I've personally heard talk about Gary - not just Abundists - is that he's a crank when it comes to economics.
Really? I've never heard that. He seems reasonable to me. Can you provide a link where someone dismisses him as a "crank"?
I'd be interested to see whose opinion this is.
a quick google for 'garys economics critique' throws up a good few places to get started :) - I would summarise here, but I'm no expert and am just digging into this myself.
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This doesn't make sense. Each wealthy family can only live in one house at a time. Yes, they might have multiple homes, but a billionaire having a luxury vacation home in Lake Tahoe or a penthouse in Manhattan are not the reason housing is unaffordable. The type of home a billionaire would buy would never be affordable anyway.
You assume they are buying homes to live in. I don't think that's a reasonable assumption. Maybe they buy real estate because it's a useful part of a portfolio. They can rent it or just sit on it and sell it later.
Renting it still increases the housing supply, someone can live there.
I doubt there is any significant amount of housing that is just bought and left vacant. Why would you do that? It’s a stupid and expensive place to park money. You have to pay taxes, possibly condo/co-op/HOA fees, pay someone to do maintenance and keep out squatters, pay transaction costs both buying and selling, it can’t be sold quickly.
Why would you do all that instead of just buying treasuries or some other liquid instrument that actually earns money?
There may be some of this from foreign investors that don’t have easy access to financial markets, but again, some Russian oligarch buying a $50M penthouse in Manhattan is not the reason an average 3 bed 2 bath suburban home is $700k. They are not remotely in the same market.
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Bill Gates owns 275,000 acres in the USA. I doubt he's even gazed upon half of it. The billionaires aren't buying homes to live in like us proles, they're buying lots of finite land and water rights and such.
That is about .01% of the US land area, and I’m guessing it’s not downtown in major cities or other places that people want to live. It’s probably mostly undeveloped wilderness for conservation, right? That has zero effect on home prices.
There is no shortage of land in the US. There are huge, huge empty spaces. There is only a shortage of housing in places where people want to live because local governments won’t let anyone build new housing.
Edit: Looked this up, and Bill Gates owns farmland, which is producing food, so this also wouldn't be available for people to live on anyway.