One of the supply-skeptic positions I see is that housing isn’t really that much of an issue. It’s just that the economy is broken. Capitalism is creating income inequality, and so, of course the “have nots” can’t afford housing. That’s just one of many symptoms of the broader problem.
Kevin, I'm curious why rent inflation hits lower income folks harder than higher income. Is that because zoning restrictions are binding more tightly on higher density housing? Or is it because higher income folks have more options for reducing their real housing consumption, so that nominal consumption rises by less than for lower income folks who are already in the lowest tier housing available and so the only way for them to reduce real consumption is to start moving multiple families into single-family units or something?
When it comes to housing in the United States, the best advice I can give young people is: "Get a time machine and go back to the 20th century---pick a decade that meets your aspirations for housing type and quality."
BTW, Brian Potter had a good essay on the cost factors of building a new house. He posted an interesting graph of land cost as a percentage of sale price for a new single family home. Since the 90's it's bounced around between 20% and 30%---which actually seems pretty reasonable. I'll guess that homebuilders look for sites that pencil out to this range. What skews this ratio of course, is crazy places like San Francisco, L.A., Boston suburbs where land value is screaming for density interventions that are prohibited by regulations.
Somehow, orthodox macroeconomists keep saying US living standards are higher than ever.
Anyone who grew up in L.A. or NYC a few decades back knows that is not true.
(Let alone what happened to the Rust Belt and Detroit).
The big fixes are 1. Build waaayyyy more housing 2. Upgrade infrastructure on time and on budget.
The inability of political systems to deliver on these basics is helping to undermine public confidence in everything---government, media, free markets, private enterprise. Not good. Societies need some sort of glue and confidence to hold together. Even nationalism is a positive if it does not become excessive (imperialism etc).
Side thought: Safe streets and secure borders are probably minimum requirements as well.
In short, we probably all want to live in Switzerland or Luxembourg.
"RBA Governor Says International Border Closure Could Fuel Surge in Wages
Australia could face a surge in wages growth and inflation if the closure of the country's international borders to foreign workers continues for some time, Reserve Bank of Australia Gov. Philip Lowe said Thursday.
In a speech to economists, Mr. Lowe said the most significant challenge to labor supply in the country was the closed border, which has normally been a major source of skilled workers for the economy over many decades."
---30---
So...open borders to reduce wages, but under-build housing to skyrocket rents....
People in Canada are steaming btw. Two generations ago, a great place for an average middle class dude (with warm clothes). Now, unaffordable. That is progress? The orthodox macroeconomists will croon Canadians are better off than ever.
Kevin, I'm curious why rent inflation hits lower income folks harder than higher income. Is that because zoning restrictions are binding more tightly on higher density housing? Or is it because higher income folks have more options for reducing their real housing consumption, so that nominal consumption rises by less than for lower income folks who are already in the lowest tier housing available and so the only way for them to reduce real consumption is to start moving multiple families into single-family units or something?
When it comes to housing in the United States, the best advice I can give young people is: "Get a time machine and go back to the 20th century---pick a decade that meets your aspirations for housing type and quality."
BTW, Brian Potter had a good essay on the cost factors of building a new house. He posted an interesting graph of land cost as a percentage of sale price for a new single family home. Since the 90's it's bounced around between 20% and 30%---which actually seems pretty reasonable. I'll guess that homebuilders look for sites that pencil out to this range. What skews this ratio of course, is crazy places like San Francisco, L.A., Boston suburbs where land value is screaming for density interventions that are prohibited by regulations.
Right.
Somehow, orthodox macroeconomists keep saying US living standards are higher than ever.
Anyone who grew up in L.A. or NYC a few decades back knows that is not true.
(Let alone what happened to the Rust Belt and Detroit).
The big fixes are 1. Build waaayyyy more housing 2. Upgrade infrastructure on time and on budget.
The inability of political systems to deliver on these basics is helping to undermine public confidence in everything---government, media, free markets, private enterprise. Not good. Societies need some sort of glue and confidence to hold together. Even nationalism is a positive if it does not become excessive (imperialism etc).
Side thought: Safe streets and secure borders are probably minimum requirements as well.
In short, we probably all want to live in Switzerland or Luxembourg.
"RBA Governor Says International Border Closure Could Fuel Surge in Wages
Australia could face a surge in wages growth and inflation if the closure of the country's international borders to foreign workers continues for some time, Reserve Bank of Australia Gov. Philip Lowe said Thursday.
In a speech to economists, Mr. Lowe said the most significant challenge to labor supply in the country was the closed border, which has normally been a major source of skilled workers for the economy over many decades."
---30---
So...open borders to reduce wages, but under-build housing to skyrocket rents....
People in Canada are steaming btw. Two generations ago, a great place for an average middle class dude (with warm clothes). Now, unaffordable. That is progress? The orthodox macroeconomists will croon Canadians are better off than ever.
Something not right with the profession.
Side note: Safe streets would be a plus.