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Comment by iJohnDoe | Hacker News Reader

Great, you can work from. So you take your California money to middle of nowhere and buy a home for cheap. Renovate it and now it’s awesome.

However, that local, who isn’t making California money, that is working a local job and making local money and is hoping to move up in housing for their family is priced out because housing pricing has doubled or even tripled.

People that wanted to retire to rural or remote areas where pricing is traditionally cheaper are now fucked over.

Sure, the owner didn’t need to price their home higher. Sure, whatever the market will bear. It still doesn’t mean it sucks less for the couple with a baby on the way hoping to buy a home in their home town that is now double and triple the cost.

No, I haven’t been personally affected by this. I’m just worried what is happening and will happen around the US in the coming years.

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I used to believe this “wealthy Californians fleeing” narrative and… I’m just not sure I buy it any more.

135,000 more people left California than moved in last year. Even if they overwhelmingly moved to only ten other states, that’s just 13,500 extra ex-Californians in each one of those unlucky states. And not all of them are going to be wealthy, surely some non-negligible portion will be less well off. Maybe they’ll be wealthier on average, but it’s not 100% tech millionaires.

Somehow this is supposed to be responsible for skyrocketing prices in Austin, Portland, Atlanta, Denver, Boulder, Seattle, Aspen, Jackson, Tahoe, and hundreds of other cities, towns, and locales across the country. All the while the price of housing in California suburbs is going up too!

At the same time, interest rates are plummeting. For a given house sale price, this can dramatically affect the affordability of monthly payments: refinancing last year from 4.325% to 3.375% cut my payment by a full 20%. Sub-3% loans aren’t too hard to find right now. In a competitive market like housing, this has the extremely well-known effect of causing sticker prices to rise. Put another way, if you can afford $1,500/mo payments and the rate drops such that you would only need to pay $1,150/mo, the market will quickly react to increase prices to keep the overall monthly payment the same.

This isn’t a novel mechanism. It’s part of the reason housing has been such a wildly successful Investment vehicle over the last few decades. Interest rates fell, prices went up accordingly.

Are emigrating Californians responsible for some of these price increases? Sure, both generally and probably in some specific markets, I totally buy it. But everywhere simultaneously? I’m skeptical it’s responsible for as much of an effect size as people appear to believe.

I think you are overestimating sales in rural areas and the number of houses. Here’s an article from Vermont where housing prices have soared during the pandemic and there’s a market shortage.

https://vtdigger.org/2021/04/19/home-sales-to-out-of-state-b...

>The tax department logged 3,795 sales to out-of-state buyers in 2020, compared to 2,750 in 2019. That represents about 27 percent of all residential sales in 2020, according to Deputy Tax Commissioner Rebecca Sameroff.

>The value of that real estate increased even more: $1.43 billion in residential real estate was sold to out-of-staters in 2020, a 79% increase over the $799 million sold the year before.

135,000 Californians could consume the real estate market of Vermont many times over.

> 135,000 more people left California than moved in last year.

If two rich Californians move out of the state and one poor starry-eyed college graduate moves in, the view that only one net-person moved out is too simplified.

> wealthy Californians fleeing

There are more than Californians and I think this story applies to all “rich states moving to lower tax states.”

There were many states [0] with net migration loss and while California alone isn’t enough, you have to lump in NY, IL, NJ, CT, MA, MD you get significant numbers and that’s year after year.

[0] https://taxfoundation.org/state-migration-trends/

Once again we see narratives handily out-competing actual facts and real figures for mindshare.

Never underestimate the power of a good narrative.

1. Housing cannot be both affordable and a good investment.

2. This is how gentrification works. Many of these folks are coming because they’ve been priced out of wherever they’re coming from.

3. Housing can’t be both a right and subject to free-ish market mechanisms.

>2. This is how gentrification works. Many of these folks are coming because they’ve been priced out of wherever they’re coming from.

Yep. If you want to blame someone, blame local governments in California and their chronic refusal to build adequate housing, citing dubious progressive buzzwords to push policies whose outcomes always curiously seem to further enrich property owners and screw over everyone else.

California had a population of 10m in 1950, and 40m today. So presumably some housing was built. In that period California added the GDP of a mid sized European economy. Such a disaster.

Here's a chart showing California housing production. It's a pretty big failure over the past 15 years or so:

https://bendyimby.com/2018/11/03/california/

Plenty of houses in Detroit.

This isn’t really the root of the problem through. The government can’t get more housing through because the voters don’t want it, the voters don’t want it because the traffic is already bad enough and there is nowhere to build more roads, and they don’t consider taking the bus or funding more public transit. And even if you climb that hump you become New York City or Shanghai, both of which are plenty dense with public transit but still not affordable at all.

Seriously, without Singapore-style public housing, you just aren’t going to solve this problem in any reasonable way. But that would ruin housing as a good investment outside of a small niche market at the super high end.

Californians did themselves no favors by shooting themselves in the foot with Prop 13. Normally localities would fund more services for growing populations by reaping the benefits of higher assessments.

> Housing cannot be both affordable and a good investment.

It certainly can be.

However, the combination of 0% Fed Interest Rate and low property tax rates kills the "affordable" side of that equation.

The 0% Fed Interest Rate means people can go way higher in mortgaging the hell out of themselves than if the rate was say 5%.

As for the property tax, raising the property tax rate limits the price of a home because even if someone could swing the down payment on a McMansion, the annual property tax payment would start biting into how good an investment it is. So, the developers would start building houses that assess at where the majority of buyers sit.

Of course, the same people who complain about getting gentrified also generally oppose raising property taxes even slightly. Oh well.

> 1. Housing cannot be both affordable and a good investment.

One is technically wrong. It can't be both a good investment and remain affordable. It can be both affordable and a good investment in the present, with prices rising over time generating a good return and making it increasingly unaffordable.

Sure. But that was 70 years ago in USA. The affordable housing ship has all but sailed for our generation.

Except apparently in tiny towns where we’re now ruining it for the locals.

In fairness, These aren't really tiny towns and haven't been for a generation. It's classic sunbelt boom-sprawl-puke. (Never mind Colorado isn't actually sunny at all.)

Colorado is reasonably sunny, just not in the winter when the sun sets before you've finished your first cup of coffee (I kid, it's at 4:30-5pm in the winter). At least here in Colorado Springs the sun set at 7:40pm today with our latest sunset being around 8:30pm in a couple months.

"... Over time" is usually implied in most policy proposals.

1. What's your point?

3. Sure it can. You can have a market governed by supply and demand. Lots of demand? Price increases. Price increases? Incentivises supply. More supply? That's great, it addresses the scarcity and prices will follow-suit.

Poor people priced out who have a right to housing? A rental cap is an intervention that directly impedes the free movement of the price up to a hard cap.

But a housing subsidy for low-income individuals, i.e. more money to spend on housing, does not change the fact that the market is still governed by supply and demand.

Housing prices with rent subsidies can still go up and down depending on demand. But the government taxes the rich, and redistributes money to the poor, allowing their purchasing power in the housing marketplace to be more equal than solely based on their own income.

This, combined with proper zoning laws (set more at a federal level to override local NIMBY powers) and limited red-tape, to allow construction levels to respond to increased prices and actually generate adequate supply, is a market-based system where the poor are getting their right to housing.

What's the alternative?

Besides, there's more housing than ever. The right to housing cannot be spoken about without also saying 'in particular places'. The average household size (people per house) has dropped every decade for a century, and the average home size has increased every decade for a century. The square foot per person has been growing and growing. Whatever housing crisis people talk about, they tend to completely ignore location. Yet you'll find plenty of people who speak about a right to affordable housing in NY or SV when it's a place where incomes are at the top 0.1% worldwide and there's easily 10x as many people (in the country, and 1000x worldwide) who want to live in such cities at an affordable price than there are homes to live. It's impossible to provide a right to housing to all in those locations with any policy anyone on any part of the political spectrum can think of.

Thanks, can be repeated enough. Cars and single family home sububanization are perhaps America's greatest 20th century self-inflicted wound.

I guess so. All time greatest will be Columbus's discovery of America.

That one wasn't "self-inflicted".

> However, that local, who isn’t making California money, that is working a local job and making local money and is hoping to move up in housing for their family is priced out because housing pricing has doubled or even tripled.

In your story you missed to mention the local homeowner who unexpectedly got a California price for her old house, the proceeds from which she can now use to send her grandchild to college and pay her medical bills.

Wouldn't be remotely a problem if they just built housing to meet the demand. Go take a look at property values in Bozeman and then look at the empty land all around it. There's plenty of room, but the zoning laws destroy supply and enrich current home owners.

That local may well have a better paying job because more people are moving into the area.

Also, it's the US mountain west. There is a lot of space there to build more houses.

Housing isn't a zero sum game unless you have poor zoning.

Is there though? Arable land is at a premium in the mountain west, because of all those mountains. And it’s not just land, but water is lacking...build a bunch of houses and then what will they drink? And infrastructure, if you build without building roads and schools...well, they do that in China and Russia and it doesn’t always come eventually.

It is easy to say the problem is that we just aren’t building enough in those places, but it really isn’t that simple.

Water for residents is a drop in the bucket compared to farming. A single farmer selling out their plot to a suburban housing development will more than provide the water excess required to support the houses.

The problem is strictly the water rights being a political labyrinth (water rights don’t easily transfer from farm to residential).

Let's check in on the Bozeman population density: 2,448.94 people per square mile

Let's check on how San Francisco is doing: 18,790.74 people per square mile.

Okay, no worries, Bozeman can keep its current foot print and 8X its population comfortably.

It’s like my entire comment was ignored :). You need more than just density to increase the size of a community.

My mom and step dad built a house in Helena, which isn’t that far away. Pretty expensive place to live, infrastructure wasn’t great, housing was expensive (this is back in the 90s). The house turned out to be economically non viable for reasons unrelated to demand.

It's like your comment was completely void of any kind of validity and it was easy to immediately look for evidence to the contrary of one of your major points.

I'm sure it would be trivial to counter the point around water. Just consider any of the metropolises in the Middle East.

In terms of infrastructure, that can be built as well. See literally any other city larger than Bozeman.

Yes. Trivial.

“ It has been estimated that between 1975 and 2000 a total of more than US$100bn has been invested in water supply and sanitation, and that a further US$130bn will be needed between 2002 and 2022, corresponding to US$6.5 billion per year or more than US$200 per capita and year.[2] This level of investment in water per capita is among the highest in the world, higher than in the US, the UK or Germany, due to the high cost of desalination and the need to transport water over long distances. It corresponds to about 1.5% of GDP.”

https://en.m.wikipedia.org/wiki/Water_supply_and_sanitation_...

I mean, yeah clearly? Your own source for what is nearly the worst case in the world is ongoing investment of “US$200 per capita and year”. Look at how much the home values have increased! Do you really think that’s not trivially extractable from property taxes?? That’s IF it’s as bad as building megacities in the middle of literal deserts which obviously a place like Bozeman is NOT.

You’re throwing your hands up exasperated at the costs of building water infra when the peak is somewhere around 1.5% of GDP but then you have housing costs that are rising dramatically faster than wages and everyone’s like “whelp, nothing to done here.”

Over the course of 10 or 20 years, you can build out the infrastructure to support the previous boom (well, it’s harder in Montana since they are more anti-tax). But in the course of 1 or 2 years? And if that boom turns into a bust before you can get the infrastructure projects going?

Urban planning is useful for a reason. Building housing is far from effective on its own, and not all areas can support the same densities (in the Middle East, they have to be really careful about where they grow). And even if you “win”, the result is a more livable city that attracts even more people, leading to price increases nonetheless.

> And even if you “win”, the result is a more livable city that attracts even more people, leading to price increases nonetheless.

Your statement boils down to "supply can never outstrip demand" which is trivially falsifiable in its own right. No matter how livable a city becomes, at some point, you can have built more than the housing demanded by people. There are a finite number of humans and the proportion of them who both CAN and WANT to live in these cities is almost certainly manageable.

But don't take my word for it, look at the actuality of Tokyo (which for multiple reasons has a far more difficult challenge than Bozeman or any of these other mountain towns): https://marketurbanismreport.com/blog/tokyos-affordable-hous...

>the result is a more livable city that attracts even more people

That doesn't sound so bad. What's the alternative?

Yes, unless you are looking for low cost housing.

How do you lower the cost of housing in desirable places? Make them less desirable? Prevent people from moving there? Build more housing?

> How do you lower the cost of housing in desirable place

If there is fixed and relatively small unmet demand, you can build to accommodate it.

Otherwise, you can just make it less desirable. If you mistake a case where the earlier condition doesn’t apply for one where it does and start chasing it with runaway density, you’ll probably achieve this accidentally, so, one way or another, “build more” works

You don’t, you can’t build your way out of these kinds of problems, not without some sort of government intervention (like Singapore as mentioned before).

Yes, you can. Tokyo and Houston are perfect counterexamples.

Obviously government is required for the planning and zoning reform aspects but the idea that any solution to housing price issues isn't building more is non-sensical. Singapore's solution is just building HBDs!

Houston is definitely a great example of how you can’t just build blindly and not expect your traffic and quality of life to suck. But to its credit, Houston creates an equilibrium of being just pleasant and unpleasant enough to not be great but not horrible place to live.

Tokyo housing is expensive for its size. You can just get small apartments there that are affordable. Also, Japanese housing depreciates, which takes away a lot of speculative pressure.

Dublinben: "How do you lower the cost of housing in desirable places?"

You: "You don’t, you can’t build your way out of these kinds of problems"

Me: "Yes, you can. Tokyo and Houston are perfect counterexamples."

You: Does a combination of moving the goal posts on Houston to being about Houston's lack of livability and not prices as well as decides that somehow Tokyo's housing prices declining is a counterargument to building being a solution to high prices?

Tokyo is quite affordable in terms of rent and prices haven't been increasing anywhere as dramatically in other similarly classed world cities. If this source is to be believed, it's 48% cheaper than SF: https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD000000000049...

I'll again point here, but there are plenty of other resources that will Tokyo's success at combating high housing prices: https://marketurbanismreport.com/blog/tokyos-affordable-hous...

Or here: https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3...

Look at Bozeman on Google Maps with the satellite view. There are mountains to the NE, E, and South.

Many of these desirable mountain locations like Vail are in mountain valleys where there is a limited amount of land to build on.

It's always some rich fellow from these towns or some crunchy dude from the coastal towns who has this opinion.

Dude, there are a plethora of non-descript towns in America. My friend got married in one. They don't have cell reception. They talk on walkie talkies.

If you take the California money for your house, you can just retire there by buying and building enough homes for you and your friends.

This is always some imaginary pipe dream from the coastal elites. Life in the middle isn't idyllic. You guys always put up some imaginary plinth and then build this massive statue representing The Country Life So Beautiful and put a plaque on it and worship it like it was handed down by Moses.

But seriously. Life suuuuuucks there. These people will make it better.

So you can stay in California and hear the same complaints.

Where am I allowed to live everyone? Lol

Greg Brown sang about it in 1995: https://www.youtube.com/watch?v=SO2EuOLGJKM

The flipside is that while you’re “taking” a house in Colorado, you’re also “freeing up” a house in California.

You’re only looking at the displaced resident being priced out. But there are many people who desperately want to move to coastal California and currently can’t because of housing costs. The migration is balanced by someone new being “priced in” to San Francisco or Los Angeles. Maybe even someone who wants to get out of their small Rocky Mountain town.

Coastal California prices have gone up 20-30% in the past few months. These are people who were priced out of home buying there and renting, mountain towns are cheaper.

Every IPO and stock vest causes home prices to go higher in the Bay Area, there’s been a lot lately.

My understanding is that rents in San Francisco are down 20%+. LA is not as large a drop, but still down.

While the cost of home ownership may be up (most likely as you identify due to the wealth effect of equity grants), the actual cost to live in coastal California is sharply down.

Yeah this is true, it’s a good time to lock in rent control if you don’t want to own.

What is your solution? Have internal passports? Government owned housing? Price controls?

Raise interest rates and kill federal backed mortgages except for low income. Limit fed backed loans to 1 per household.

Tax housing income as normal income. Remove 1031b exchange. Remove depreciation of homes. Tax all housing sale gains.

Housing would then be affordable.

A simple option, most countries already have land tax. Just make this proportional and federal.

And by proportional I mean like income tax, so the first $1m is 0%, $1m - $3m is 1%, etc

Not sure the best numbers but should be something were most people dont pay, even can have an investment property to cover need for a rental market, but if you have significant holdings it kicks in, and people with residential empires should basically be untenable unless it is short term holding to renovate etc.

Also could apply top rates to residential property with corporate or foreign ownership so residential is for people to live in.

I upvoted you because while I might not agree with all of them, they are ideas that would certainly lower prices.

Still wouldn’t fix the housing problem in desirable places.

What do you mean!? The status quo is profitable, for the already or soon to be landlords.

Yes.

Grew up in rural nowhere Midwest. Home prices are still cheap. Desirable places are expensive and will only get more expensive.

America isn’t even 250 years old. That’s, what, five generations? Do remember that most American “settlement” of these areas was specifically designed to drive out the real locals, whose basic planning took on a seven-generation timescale.

With a lot of problems of this nature, especially social issues, the key is to “zoom out” to get a clearer, more sane picture of what’s going on. Humans were made to migrate, and these “locals” can adjust.

A generation is "generally considered to be about 20–30 years"

https://en.wikipedia.org/wiki/Generation

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