Comment by estearum
2 days ago
This is extremely silly.
Prices are high because we don't build enough houses which is mostly because it's really expensive to build houses, then the houses we have built are all owned by empty nesters and people with 1 - 3 investment properties.
Everything else you're describing is completely ridiculous.
> which is mostly because it's really expensive to build houses,
Assuming you're referring to the typical high CoL areas, the shortage has very little to do with the expense of building. The zoning laws don't permit sufficient supply in those areas. And that's quite unlikely to change (at least quickly) because anyone pushing such reform would be obliterating the average Joe's net worth.
This what Obama calls the false choice dichotomy -- "Damned if you do, damned if you don't." In your scenario, if we build more homes, then existing home owners are "obliterated". This is untrue. We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
That doesn't really make sense. The problem we're trying to solve is that housing is too expensive. If we do things that end up lowering the cost of housing, then the saleable value of "average Joe's" house will also go down. You can't say that newly-built housing will be (for example) 20% less expensive, but existing housing will keep its value; that's just not how the housing market works.
I'm not sure if "obliterated" is the right word to use, but if making housing affordable means a 20% drop in home prices (which is perhaps not even enough in some places), average Joe existing homeowner is going to run into financial trouble once that happens.
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
If that's the case, then all that new housing will also cost more or less exactly the same as the existing housing stock costs, and the problem will not have been solved yet.
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What I'm describing is a systemic dysfunction due to financial incentives.
The "crisis" is specifically the high cost of housing. So if whatever you do doesn't lower the price then by definition you've failed to solve the problem.
It's certainly a dichotomy but I don't see how it's false?
> We can easily build twice as much in high cost areas (with the strongest job markets) with little impact on existing home owners.
It's certainly possible to encounter nonlinear behavior. If some aspect has saturated then we might build quite a bit without seeing any substantial price movement. But eventually prices would start to decline.
> anyone pushing such reform would be obliterating the average Joe's net worth.
Only in a purely illusory sense. Suppose you have all your net worth tied up in a house. If your house magically vanished, you'd have nothing but your job.
The price of houses falls to $500 and you potentially go bankrupt. Then, you buy a house for $500.
You, personally, are now better off than you were before. Some examples:
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1. You have $200,000 of equity in a $700,000 house. After the price drop, your net worth in dollars has improved by $300,000. Your net worth in "stuff" has risen dramatically; you kept your job, and now you have 100% of a house instead of having 30% of a house.
2. You have $700,000 of equity in a $700,000 house. After the price drop, your net worth in dollars is down by $699,500. Your net worth in stuff is unchanged. Assuming you always need to live in a house, this will never have any negative impact on you. You retain the option to live in the house you have (which leaves your life unchanged), and you also retain the option to sell your house and use the proceeds to buy another house (and this option looks a lot better than it used to; given the crash in prices, you can probably afford a much nicer house).
3. You have $200,000 of equity in a $700,000 house. You also have $15,000 of "equity" (resale value) in a car that you owe no money on and bought for $50,000. After the price crash, you lose your house and your car, and then you buy another house for $500.
Replacing your car will cost you $50,000. You are in a similar position to the guy in example (1), but $50,000 poorer. So now we ask: was it better to be $500,000 in the hole on your house before, or to be $50,000 in the hole on your car now?
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There isn't a way for the average Joe not to come out ahead. There is a way for someone else to lose out on the price crash: if you had more than one house before, you lost everything on the houses you weren't living in. But that's got nothing to do with the average Joe.
You would still need to pay the bank the full 700k even if it's only worth 300k now. This might mean that you still owe 400k on a 300k asset. In this way you can be underwater while still being a 30% owner.
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That is an excellent way of putting it. However I fear that it will be nigh impossible to convince the average Joe that the numbers going down was actually good for him.
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In areas with low CoL the cost of building houses and the cost of selling a house has a massive impact on the number and type of homes that get built. If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions. There's very strong incentives for builders to take the path of least resistance and highest margin.
> If it's not profitable for a builder to build a home they simply won't,
Agreed. They will generally build as tall and as dense as they are permitted to because (within reason) it reduces unit cost. Obviously there are limits to that. No one wants to build a high rise in the middle of nowhere.
But within high CoL areas they are generally severely limited on both of those aspects. That's due to zoning laws.
Of course that's not the whole story. Infrastructure has to be upgraded to keep pace with growth. But that's on the local government to plan and execute properly. Right now they largely just say "no".
The profit margin has to be significantly higher than simply plopping that cash straight into an index fund. The risk of a project failure is simply too high.
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> If it's not profitable for a builder to build a home they simply won't, whether it's because of bureaucratic red tap or economic conditions.
Right, and that bureaucratic red tape is one of the things that makes the cost of building higher. If the builder expects they won't be able to break ground for two or three years because dealing with the planning commission takes forever, or because they'll have to deal with environmental lawsuits before they can build, then they will need to target higher-end buyers (by building a higher-end property) in order to make a profit. And if they can't do that... right, they simply won't.
The zoning laws are far from the only tool used by municipalities to dramatically reduce supply. Permitting, requiring expensive changes at various points in the process, local building boards requiring extraneous modifications and often forcing scope reductions, affordable housing requirements, etc all make building more expensive. Often by a very large amount.
These processes are intentionally labyrinthine
I don't believe this has much impact on the current situation (relative to zoning) but would be interested to learn otherwise. Can you provide verifiable examples for any of it?
Eh, reforms are starting to happen, like here in Oregon.
https://bendbulletin.com/2025/12/13/middle-housing-slowly-de...
Or this:
https://bendyimby.com/2025/06/12/detached-townhomes-come-to-...
And it continues:
https://www.sightline.org/2025/06/04/oregons-zoning-reforms-...
It generally does not drop values, just allows for cheaper options.
> It generally does not drop values, just allows for cheaper options.
That can only be true if you suppose that the current values aren't driven by supply and demand. How do you propose to explain that?
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Not true.
Cost of living is high because local incomes are high which increases the price of land and labor which increases the price of building.
Restrictive zoning is bad for lots of reasons, but solving it does not solve affordability.
https://www.nber.org/papers/w33694
that's a great paper, but did you read it? I don't see the authors reaching this conclusion. in fact, they seem pretty emphatic that restrictive zoning is a major driver of supply bottlenecks.
"We don't build enough houses" does not explain the massive spike in prices we have seen in the last 5 years.
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