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  #1  
Old Posted Mar 24, 2018, 9:27 PM
CaliNative CaliNative is offline
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Why is Housing so Unaffordable in so many cities?

Yes, demand exceeds supply. But why? Why isn't supply matching demand? Population growth? High land and commodity imput costs? Zoning laws and "NIMBYism" preventing higher density developments? Lack of construction workers? Wages not keeping up with housing costs? A problem with our potential construction workforce--drug abuse, laziness? Lack of government spending on public housing, or tax incentives to build affordable units?

Is there a quick way to reduce housing costs? Assembly line construction of modular housing units in factories? Tiny houses and apartments, under 500 sq. ft.? Higher density developments, including high rises? A return to "SRO"s--single room occupancy units, and rooming houses? Better transit networks, allowing people to move to distant exurbs with much cheaper housing? Government assistance for those in need willing to move to cheaper cities from expensive coastal cities? New government built affordable housing projects? All of the above? None of the above?

Ideas?

Last edited by CaliNative; Mar 24, 2018 at 9:46 PM.
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Old Posted Mar 24, 2018, 10:28 PM
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the world is run by not very nice people


i really dont know. elon musk wants to go to mars. that might be a good idea

Last edited by dubu; Mar 24, 2018 at 10:42 PM.
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  #3  
Old Posted Mar 24, 2018, 11:13 PM
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Originally Posted by CaliNative View Post
Yes, demand exceeds supply. But why? Why isn't supply matching demand? Population growth? High land and commodity imput costs? Zoning laws and "NIMBYism" preventing higher density developments? Lack of construction workers? Wages not keeping up with housing costs? A problem with our potential construction workforce--drug abuse, laziness? Lack of government spending on public housing, or tax incentives to build affordable units?
Yes, to all of this.

Another reason to add is that the government over-corrected with respect to financial regulations in that it's now virtually impossible to qualify for a mortgage without practically selling your first child. Even if you have a good-paying job and good credit, it is still required that you pay for expensive PMI if you want to get a zero-down payment loan or save 20% of the cost of a home for a down payment.

Because it's so difficult to get financing for a home now, the demand for starter homes that these type of buyers would normally purchase is completed zapped, thus homebuilders / developers don't even bother wasting their time / money building these type of entry-level / affordable homes.

Quote:
Is there a quick way to reduce housing costs?
Practically speaking? No.

A couple quick solutions would be for government to loosen up some on financial regulation tied to qualifications for a home mortgage, and for cities with strict zoning regulations to relax their building standards. But these solutions are very unlikely to be implemented on a large scale basis.
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Old Posted Mar 24, 2018, 11:27 PM
Northern Light Northern Light is offline
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Originally Posted by CaliNative View Post
Yes, demand exceeds supply. But why? Why isn't supply matching demand? Population growth? High land and commodity imput costs? Zoning laws and "NIMBYism" preventing higher density developments? Lack of construction workers? Wages not keeping up with housing costs? A problem with our potential construction workforce--drug abuse, laziness? Lack of government spending on public housing, or tax incentives to build affordable units?

Is there a quick way to reduce housing costs? Assembly line construction of modular housing units in factories? Tiny houses and apartments, under 500 sq. ft.? Higher density developments, including high rises? A return to "SRO"s--single room occupancy units, and rooming houses? Better transit networks, allowing people to move to distant exurbs with much cheaper housing? Government assistance for those in need willing to move to cheaper cities from expensive coastal cities? New government built affordable housing projects? All of the above? None of the above?

Ideas?
There are surely a variety of reasons, some market-specific, many more broadly applicable.

You touch on many, if not most.

Clearly, in general terms, demand is rising heavily in certain, highly popular markets, notably, in North America, SF, Seattle, DC, NY, Boston, Toronto and Vancouver; but many others as well though mostly in lesser intensity.

Before addressing supply, what's up w/demand?

A few things.

Obviously, a growing population writ large. The U.S. continues to grow by a few million each year. Canada by about 400,000.

Those new immigrants tend to disproportionately end up in those 'high-demand' markets, because they are the largest cities, the most likely to feature common linguistic and cultural communities, and the most likely to have the greatest range of employment opportunities.

That puts pressure on any city's market.

We are, however, also reaching a point in many centres where further urban sprawl no longer makes sense. Completely apart from whether one wants a back yard, or a suburban lifestyle as opposed to 'urban' living; commute times are increasingly unwieldy at the outer edge of urban markets.

No one, or very few people want to commute 2 hours to work.

As that limits sprawl, you're also seeing some general trends towards more urban living and employment. Part of that is merely cyclical, one generation loves carpets, the next wants hardwood floors; but part of that is also the lived experience of built-out suburbs that are higher in traffic w/longer commutes than a previous generation experienced, thus driving at least some shift towards more urban living.

In cities that are already built out and even moderately dense, that puts enormous pressure on the existing market, and forces prices upwards.

The next issue is low-cost credit. For a previous generation, buying a home meant facing Mortgage rates in or about 4-5% (with a brief stint in the late 70s/early 80s of 15%+ .

Typically down payments also had to be 10% plus.

Those obstacles reduced the number of buyers in the market somewhat and made them more price sensitive.

This restricted excess pricing to some degree.

In an age of sub-10% down and Mortgages at 3% people can afford to carry a larger purchase price, and do.

Beyond that, you have the change in social organization creating demand

By which I mean, delayed marriage/cohabitation, which creates a new need to house people in that post living with the parents stage of life, before any 'settling down'.

That's a market segment that used to live w/their folks until 20, 22, 24 and then move out to get a house as a couple.

Today, they may move out at 24, but they get 2 homes/condos/apartments for 5 or more years, before couplehood kicks in.

That speaks to the demand side of the equation.

The supply side, has a few issues of its own.

The first is the so-called declining middle class.

By which I mean the greater divergence in incomes between a lower-income group and the 'upper-middle'.

This creates a problem, in a few ways.

First, that upper-middle group, has seen income increase well above inflation over the last 20 years.

As such they can now afford to bid for houses to get exactly what they want (forces price up, froths the market); but they also, often own more than one home. Both homes purchased for speculative investment, and for rental income are increasingly common, particularly in the 'hot' markets.

That has the effect of withdrawing supply on the ownership side.

While alternatively, those whose relative economic situation is stagnant or deteriorating means people at that end can't keep w/the market at all.

In other words, affordability is relative.

But there's yet another issue, which is shortage of multi-residential rental housing to meet the needs of that group.

Here's the problem, if you had an apartment in SF 20 years ago in area 'x' that was renting for $800USD a month and was somewhat affordable to a middle-class person; that same spot, due to factors outlined above is now renting for $2,400USD a month.

That is closely associated w/the high cost of land, which means even if a developer were to come along and build new rental housing, they must recover the cost of the land.

They also have to do so while meeting more rigid building codes than a previous generation. From sprinklers, to accessibility requirements, to emergency power, to internal storage of waste, core costs are up well over 25% completely apart from land/labour costs.

Construction in highly urban areas is also more expensive to carry out than in green-field pastures.

This means brand new rental housing would be unlikely to come in at less than 20% ABOVE current average rents.

All the while, a significant chunk of those needing said rentals have depressed incomes, and could barely afford the inflation adjusted rent for the apartment described above.

That tends to stifle construction.

New rental housing could be built more cheaply in suburban areas; but then you get into NIMBY issues.

On top of that those areas are often less desirable to renters, so you get into questions of whether the ROI is there for a developer at the rent the market will bear.

Finally, you have two other issues, one is foreign money in major markets; particularly capital from China where newly affluent locals are looking for legal places to place some of there money outside the country. That often lends itself to real estate.

The other is the absence of the government from being a material player in either the rental or the ownership market, in ways they clearly were in the 20 years post WWII.

From low and no interest mortgages for returning veterans or those who built co-ops, to the direct construction of public housing, government was a material player for a time.

For the most part, in both the U.S. and Canada that began to change by the mid 70s, and was all but gone by late 80s.

The result, a constriction on supply, particularly for the low-end of market.

Or at least that might partially explain the situation, I think.

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  #5  
Old Posted Mar 24, 2018, 11:33 PM
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everyone on this forum is so smart. i just say simple answers. i still dont have hope for this world. we we only live here a short while though so thats good lol
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Old Posted Mar 25, 2018, 1:45 AM
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Yeah, I don't know much either, but what Northern Light posted makes sense. I see the affordability problem to be a disadvantage in the future growth of our cities.
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Old Posted Mar 25, 2018, 2:16 AM
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Most Americans want to live in a single-family house (or at least a close approximation thereof) but in some areas there isn't really enough available land for all of them. So, the price goes up. This is the case in areas like SF, LA, Seattle, Boston, etc.

Other areas, such as KC, have plenty of available land, and population isn't growing that fast. So, things are much cheaper here.

Housing is only unaffordable in some areas.
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  #8  
Old Posted Mar 25, 2018, 4:23 AM
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Quote:
Originally Posted by CaliNative View Post
demand exceeds supply. But why?
Zoning. Especially single-family zoning.

It's really not complicated at all. Cities have adopted laws--zoning--that make it illegal to build enough supply.

I'll show you. Here is a map of zoning in Washington, DC:



On that map, the various yellow and gold zones indicate places where it's only legal to build single-family homes or very small apartments. You can see that's the vast majority of the city, and of course it's mostly already built up to the max density allowed. The red is downtown and downtown-like places, which in DC have a strict height limit. The purple, orange, and teal zones are commercial areas where most of the city's infill growth takes place.

But look how little land there is that's in those purple/orange/teal development zones. And that giant splash of purple is a railyard that's effectively off-limits, so there's really even less than it looks like. The predictable result is that growth can only happen in a small number of places. This problem is not unique to DC; every US city (except famously affordable Houston) has a map that looks basically the same.

The base problem is that we've used single-family zoning to freeze the vast majority of our city land in amber. We placed "protecting single family neighborhoods from change" at the top of our priority list, and thus restricted growth to a handful of tiny parts of the city. By doing that, we've effectively made it impossible for the market to produce enough supply to meet demand. We could easily solve the problem. All we'd have to do is change zoning, to make it legal to build denser housing in those single-family-only zones. If we did that, the market would be able to take care of itself. All it would take is the stroke of a pen and some time.

But we don't do that, because who are the most powerful voters in any city? Existing residents of single-family zones, who overwhelmingly oppose change. So it's an easy technical problem to solve, but it's virtually impossible to solve politically.

This is why everyone in the housing world is talking about a big proposed bill in California that would strip a lot of zoning power away from cities and force them to accept denser development. The bill is intended fo attack this exact problem. Who knows if it will pass. It's also why Minneapolis is considering allowing apartments in single-family zones.
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Last edited by Cirrus; Mar 25, 2018 at 4:43 AM.
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  #9  
Old Posted Mar 25, 2018, 4:40 AM
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^^^ Hopefully a national law comes to fruition. But as you said, the politics right now are on the opposite spectrum.
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Old Posted Mar 25, 2018, 5:15 AM
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and quality, well-designed housing too. often there's plenty of cheap crap available...

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  #11  
Old Posted Mar 25, 2018, 3:46 PM
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if your perfectly healthy and you dont have any problems i dont see why most people would want to live in houses. i like going out and being around people and riding a train. though theres a lot of people that have problems in the us and they probably dont want to be seen by people.

maybe im just crazy and your right most people like having a yard. i think i am going crazy though
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Old Posted Mar 25, 2018, 5:23 PM
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Quote:
Originally Posted by CaliNative View Post
Yes, demand exceeds supply. But why? Why isn't supply matching demand? Population growth? High land and commodity imput costs? Zoning laws and "NIMBYism" preventing higher density developments? Lack of construction workers? Wages not keeping up with housing costs? A problem with our potential construction workforce--drug abuse, laziness? Lack of government spending on public housing, or tax incentives to build affordable units?

Is there a quick way to reduce housing costs? Assembly line construction of modular housing units in factories? Tiny houses and apartments, under 500 sq. ft.? Higher density developments, including high rises? A return to "SRO"s--single room occupancy units, and rooming houses? Better transit networks, allowing people to move to distant exurbs with much cheaper housing? Government assistance for those in need willing to move to cheaper cities from expensive coastal cities? New government built affordable housing projects? All of the above? None of the above?

Ideas?
There was an article in WSJ (link is behind a paywall, so not posted) that looks at housing affordability. There are a number of factors, not just mortgage/income verification requirements from Dodd-Frank, but land costs/construction labor costs, as well as a shift in people's willingness to drive til you qualify. The end result, for homebuilders, is to move to the high-end, where their profits are the best. And a single-family home mindset. The private market is no longer capable of delivering solutions. Government built housing would still be limited by the costs of land and labor.

Here in SF, community impact fees at $120K to the cost of any housing unit. This, unfortunately, is the result of Prop 13, where cities/counties are limited in assessing property taxes.
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Old Posted Mar 25, 2018, 5:54 PM
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"Unaffordable" to whom? It's obviously "affordable" to the people who live there and maybe they disagree with the trade-offs required to change the city in ways that might allow more people to afford it.
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Old Posted Mar 25, 2018, 6:00 PM
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Originally Posted by coyotetrickster View Post
Here in SF, community impact fees at $120K to the cost of any housing unit. This, unfortunately, is the result of Prop 13, where cities/counties are limited in assessing property taxes.
In SF, now, there is a requirement that something like 30% of new projects be "affordable". Somebody has to pay for the difference between the cost to build these units and what they can be sold/rented for. That "somebody" is market rate buyers in the same buildings so the market price of units is being jacked up for 70% of buyers in order to give the 30%, who are a lucky subgroup of those who want such units, a break.

I disagree with your analysis that Prop. 13 property tax limitations are responsible for impact fees. I am quite sure the "progressives" running San Francisco would milk the development cow dry with or without an apparent reason. But in terms of pure dollars and sense the effort to require that a lucky few get housing subsidies at the expense of everybody else may be as responsible for raising the market prices of homes as anything to do with Prop. 13 which probably keeps housing costs affordable for more people than the "affordability" mandates--just different people (people who've lived in the city for many years rather than newcomers).
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Old Posted Mar 25, 2018, 6:20 PM
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It's also market-rate renters in other buildings...market rates are limited by the market's ability to supply new units. In a growing city, construction is the pressure valve. It's nice when the pressure valve kicks in at lower price points but that's impossible in SF.

On the broader topic: Development costs have many factors.

Land is a big one, heavily influenced by zoning...if there's too little developable land, prices for mixed-use sites can get into the six figures per unit just for land, which then has to be financed, which can add five-figure amounts.

Housing will always be expensive because of sanitation, fire safety, and other factors. But we add a square footage premium. If you can't afford the required square footage, off to the gutter we say. We should change that...let singles have the option to choose dorm-sized homes, with the bathroom down the hall in some cases. Let families have the option for kids to have smaller alcoves instead of a bedroom or nothing. Families live in 500 square feet in much of the world, and at least having that option in this country would save a lot of people economically.

People will complain that that's not American. Laws won't (and don't) allow it. ....And that's why some people can't live in some cities, others are on the streets, and many people are barely scratching by.
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Old Posted Mar 25, 2018, 6:50 PM
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If peoeple want more housing affordability in their cities, they should just import some chicago gangbangers.

My home on the "safe" northside of chicago would only be worth about 1/4 of its value if it was located 6 miles SW of here in a neighborhood like ausitin.

The catch? In a neighborhood like austin some of your neighbors will routinely and casually shoot guns at each other out in the streets on a daily basis.

As long as chicago has its legions of idiot gangbangers, this town will never have an affordable housing problem.
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Old Posted Mar 25, 2018, 6:59 PM
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Old Posted Mar 25, 2018, 7:57 PM
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This whole country as a whole is just inefficient. Over the last couple of months, I've been doing some traveling job wise. To places like PA, Maryland, Connecticut, parts of South NJ, Upstate NY, and Delaware.

Its sickening quite frankly how this country looks from an efficiency standpoint and I kinda knew that already, but traveling a lot, especially off the beaten track, you notice the same trend.

Nothing but endless roads, especially those county roads, where there are houses every once in a while. Side roads with few houses, dug into the forest or fields. And I'm thinking that every house has to be connected with power, water, sewer... and it all adds up. Factor that in with the size of each metro, and the associated sprawl with it. Whether its a core city of 100k all the way up to a million +.

The sprawl is ridiculous. Just mindless sprawl, and strip malls, and over sized roads leading to sparse places with random houses and development complexes.

It all kinda looks the same too. Imagine the billions, if not close to a $trillion that is spend maintaining this horrid planning. ALL TRANSLATING TO HIGHER COSTS OVERALL.

Just fyi, but Florida and North Carolina are great examples of terrible planning and quite frankly, vomit inducing inefficiency.

Sorry, but had to get that off my chest...
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Old Posted Mar 26, 2018, 8:11 AM
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Originally Posted by mhays View Post
It's also market-rate renters in other buildings...market rates are limited by the market's ability to supply new units. In a growing city, construction is the pressure valve. It's nice when the pressure valve kicks in at lower price points but that's impossible in SF.

On the broader topic: Development costs have many factors.

Land is a big one, heavily influenced by zoning...if there's too little developable land, prices for mixed-use sites can get into the six figures per unit just for land, which then has to be financed, which can add five-figure amounts.

Housing will always be expensive because of sanitation, fire safety, and other factors. But we add a square footage premium. If you can't afford the required square footage, off to the gutter we say. We should change that...let singles have the option to choose dorm-sized homes, with the bathroom down the hall in some cases. Let families have the option for kids to have smaller alcoves instead of a bedroom or nothing. Families live in 500 square feet in much of the world, and at least having that option in this country would save a lot of people economically. Mini-units of under 500 sq. ft. could accomodate a small BR/shower + a tiny kitchen area. Would be worth the added rent.

People will complain that that's not American. Laws won't (and don't) allow it. ....And that's why some people can't live in some cities, others are on the streets, and many people are barely scratching by.
I recently read, or heard on T.V. that "dorm-type housing" with the proverbial "bathroom & shower down the hall"you refer to is actually a growing trend, not just for college students but as a way to increase rental affordability in cities. Basically an updated version of the old single room occupancy or "SRO" type housing. Of course zoning laws are a challenge. If they could just squeeze a little bathroom & shower into the room, that would make it more popular. Shared bathrooms & showers are not ideal.
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  #20  
Old Posted Mar 26, 2018, 8:16 AM
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"Unaffordable" to whom? It's obviously "affordable" to the people who live there and maybe they disagree with the trade-offs required to change the city in ways that might allow more people to afford it.
The displacement of middle and lower income people from S.F., L.A., Seattle, Portland etc. is a problem that needs a solution. Higher density developments and more affordable "microunits" near transit & employment is one. Housing people is more important than "inconveniencing" a few residents. Change is part of life.

Last edited by CaliNative; Mar 26, 2018 at 8:34 AM.
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