I will walk through why rents are what is making housing unaffordable, not interest rates. And, I might complain a bit at the end about how attribution error makes unstable mortgage markets more popular than they should be. It’s the rents, not the rates.
I think the causality runs from bad land-use regulations to bad lending policies. Several generations of Americans, including bankers, have held onto the madness that a single family house shall always appreciate in value at a rate that exceeds inflation. The structural damage done by large lot, single family zoning in the ring suburbs of closed access cities is too profound to be solved with better lending policies. However, I do support policies that increases housing abundance of any type--which has always been one of your consistent points. If we build more rental units, the impact is positive across the spectrum.
Cogent analysis. I often times think most discourse in the US begins and ends with our Puritanical beliefs. The front-loaded cash crunch problem of straight-line payments seems to fit the bill nicely.
Our work isn’t done with the current structure of the 30 year mortgage. Glad to see there’s some thought going in to it.
Of course, all of this gets less painful if we just break the restrictive zoning cabal.
Spot on. Unzone property, let it rip.
This problem of unaffordable housing in developing nations is spreading. Canadian social media is aflame with angry people talking about rents, house prices, and that they will never be able to buy a home in Canada, or even afford rent, on middle class incomes.
I am getting the sense unless developed nations place a priority on robust housing construction, then housing markets go screwy. Of course, in Singapore 80% of housing is public housing, but most people say they have good government (and model citizens too).
As always, Japan is the exception. After rents, the average resident of Sapporo Japan is much better off than US residents in housing restricted cities, or almost anyone in Canada.
But if you chart per capita income, it does not look that way.
An interesting reversal of 'common knowledge' that it is the illiquidity and front-loading of cost that drives cost up. Still, as you mention, a major part of the solution is build more & remove veto power from the stasis/NIMBY/BANNANA crowd.
I'd be interested in how we could from new financing products that enable people to access housing and it's value in a way that doesn't create more NIMBYs yet also creates stable, invested communities.
Maybe like a rent-to-own model, but you 'own' a stake in the community, getting some dividend value that aligns your incentives with density? Local tax-rebate or something.
Also, ownership into the health of the town and not the specific non-fungible plot of land you have might help with the 'this tower will create shade over my carrots' complaint. If you view might be blocked, but that new tower juices your owner's dividend, maybe it isn't worth your Tuesday afternoon to protest at city hall.