Comment by lurking_swe | Hacker News Reader

Comment by lurking_swe | Hacker News Reader

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free markets are just fine. The problem is the housing market in the US isn’t a proper free market AT ALL. The housing “market” here has a long history of problems.

- strict zoning laws (and nimby attitudes) prevent the free market from functioning as intended. Housing is expensive because we make it hard to build more housing.

- Read up on RealPage, software for landlords thats been accused of inflating rents. There’s a major lawsuit underway, focusing on the issues with its algorithmic pricing. Is that a free market? When the majority of landlords are (effectively) using the same 3rd party software to price-fix?

- the US had a few decades of very racist housing policy, which made it difficult for blacks to get housing. I say this as a white man that’s studied this. Fun fact - the US govt used to mark black neighborhoods as “high risk”, meaning banks wouldn’t loan money money to blacks for buying a house. At one point in US history it was also legal to have HOA’s with bylaws preventing blacks from buying property in the neighborhood. I could continue to list many examples of how blacks got screwed, but that’s not the point. The point is whites had a HUGE advantage for decades, even after slavery was abolished. The government made sure blacks couldn’t compete for the desirable homes, for decades. So whites got nice cheap housing. Today the children of those white families enjoy the benefits their parents received, via unethical housing policy. Me included. Is that how a free market is supposed to work? Temporarily reducing competition in desirable communities, letting whites buy, and then reverting the law decades later after prices doubled? Definition of pulling the ladder up behind you if you ask me.

I could go on, but i’ll spare you. :)

I have receipts:

https://www.justice.gov/archives/opa/pr/justice-department-s...

https://www.npr.org/2017/05/03/526655831/a-forgotten-history...

https://longislandadvocate.com/decades-after-redlining-l-i-s...

> strict zoning laws (and nimby attitudes) prevent the free market from functioning as intended. Housing is expensive because we make it hard to build more housing.

The fundamental thing is, housing is expensive because the space in the highly wanted urban areas is scarce. Plots suitable for development of any kind of (dense) housing are expensive, so that alone drives up unit prices massively. And once you have the plot of land, the cost of actually building a building are enormous - the higher you want to go, the more deep you have to go so that the building doesn't tip over like the Tower of Pisa, which is even more expensive when the building is in a region that is sensitive to earthquakes, doesn't have bedrock but sand, a bunch of subterranean tunnels or nearby buildings that might settle as a result of digging the hole for the foundations.

And that's just the cost that the developers have to bear. The local government and utilities have to expend a lot of money for all the infrastructure: roads, public transport, water/sewage, electricity (the electricity demand of even a "small" dense housing unit are pretty massive), internet, schools, higher education, general amenities (e.g. parks), planning for shopping and other venues... that's where all the NIMBYism is coming from because that shit ain't cheap.

Most of the country isn't Seattle or Hong Kong or SF, hemmed in on all sides by mountains and bays. In most of the country, the city could just choose to build more city. All it needs is infrastructure, rezoning, planning permission. And the ability to forgo treating single-family-home subdivisions as immortal, inviolate monuments to the American Way.

The megacity of >10M people is the basic functional economic unit in 2025, the minimum healthy employment market, the level at which we can provide a reasonable opportunity for productive jobs in a specialized role and a reasonable opportunity to hire someone in a specialized role*; Their largesse is taxed or remitted to cover the cities of ~1M, the cities of ~100k, and especially the towns of ~1k-10k.

...

*The example a number of economists like to bring up is: If I'm a skilled sushi chef, how long would it take to replace this employer with a better one? How long would it take them to replace me? A thriving economy is an economy that ensures lots of mutually beneficial employment arrangements, in which no one feels trapped, and in which bad management or bad work is punished with replacement, but also which has the slack to absorb random things like interpersonal conflicts or an employee that needs to move for family reasons.

If there are a hundred sushi places within commuting distance, probably at least one of them is hiring. If one chef gets hit by a bus, the business can be back in operation the next day by poaching an apprentice a few blocks away for higher pay. There is always reserve capacity waiting in the wings, as a megacity encourages economic resiliency.

If there are only two sushi places within commuting distance, and I sever my relationship with this one, the other one is probably not hiring, so I am a slave to their bad management and conversely they are a slave to my bad work because it would be so difficult to find another person like me. The quality of goods and services provided to the general consumer suffers significantly, the material precarity of my life suffers significantly. Things become brittle - if the business goes under for random reasons, odds are pretty good that my town becomes a town without sushi. Even if everything is working perfectly... what's my leverage as far as pay raises? What's their leverage as far as work output/quality? We're stuck with each other.

> The megacity of >10M people is the basic functional economic unit in 2025, the minimum healthy employment market, the level at which we can provide a reasonable opportunity for productive jobs in a specialized role and a reasonable opportunity to hire someone in a specialized role

Sorry, that's nonsense. Smaller cities like Nuremberg, Ingolstadt, Augsburg etc. are perfectly viable on their own. And frankly, I can't imagine that the numbers are that much different in America.

The key thing is, the rents and housing costs in general in hyper-urban areas need to be paid for by the inhabitants, which means that their labor costs have a certain floor (ignoring assistance programs). That in turn makes hyper-urban areas less competitive in a global market. You can't really compete with Romania for developers when German developers cost twice as much or more than Romanian developers (which are equally capable), and a lot of that price difference goes to the greedy German landlord caste.

Outside of a city the sushi chef could own the restaurant themselves, including the building itself free and clear. There's less resilience in the labor market, but more resilience from things like recessions cutting the restaurant's revenue (it's much easier to come up with property taxes than rent). There is a virtue in the more responsive economy where a downturn in the demand for sushi results in a portion of the restaurants closing, but there is also a virtue in the less responsive economy where the sushi chef stays being a sushi chef.

> And that's just the cost that the developers have to bear. The local government and utilities have to expend a lot of money for all the infrastructure: roads, public transport, water/sewage, electricity (the electricity demand of even a "small" dense housing unit are pretty massive), internet, schools, higher education, general amenities (e.g. parks), planning for shopping and other venues... that's where all the NIMBYism is coming from because that shit ain't cheap.

Shopping centers don’t need to be added in most cases. Existing shops can just get more business, no? And if new shopping centers are needed, _developers_ can bear the construction cost, not you the taxpayer. Don’t forget that more residents means more taxpayer money for the city long term.

If you want to talk “expensive”, i think suburbia is a better example. Most of suburbia has a negative ROI when you factor in roads and other utilities. And so few taxpayers, compared to a city. Suburbia has some pros though, i won’t deny that.

People don’t like change, period. It’s fine to admit it, really. But we can’t have no change AND housing for our young adults at the same time. US population is still growing last i checked.

> Existing shops can just get more business, no? And if new shopping centers are needed, _developers_ can bear the construction cost, not you the taxpayer.

Thing is, that's not enough. Developers won't touch that shit with a ten foot pole if they can avoid it, too much risk in shopping centers with the "mall death" plague, and too much work compared to just building crap houses out of broken wood and cardboard - look at CyFy on Youtube and the amount of piss poor workmanship he routinely documents. It's bad enough for a house worth half a million dollars, but an actual mall requires much more solid construction.

Besides, it's not just about shops, it's about creating "third spaces" in general where the cost is.

> But we can’t have no change AND housing for our young adults at the same time

Invest into at least semi-rural areas again? There's no hard requirement trying to force everyone to live in SF, LA, NYC or, here in Germany, the unholy quadruple of Munich, Berlin, Hamburg and Freakfurt. The government could at least try to get fast Internet access outside of the urban centers, that alone would go a long long way in helping out these areas.

> the US had a few decades of very racist housing policy….

The surprise on Bay Areans’ faces when I explain to them that this is why Blacks have such a low population presence and homeownership in the most wealth-producing region of the country.

When free-market housing have to compete with non-market housing (public or associative) in multiple segments (not only social housing), it works really well as a free market. For that, you need between 20 and 40% of the available housing to be non-market though.

i’d like to learn more about this specifically. Can you recommend reading material on this? Or do you have any specific countries or cities in mind?

Look at the Vienna model! https://www.theguardian.com/lifeandstyle/2024/jan/10/the-soc...

thank you, added to my reading list.

Singapore, especially, has very intentionally set many laws and regulations, specifically to promote the idea that their people have a place to live, with the vast majority of people living in government provided housing.

> with the vast majority of people living in government provided housing.

Citizens you mean. If you are an expat or migrant worker, your choices are a lot different. 3.64 million citizens in Singapore vs a population of 6 million.

That seems like a general thing, not specific to housing. Having the government provide some kind of basic service in all essential areas would do wonders to provide a baseline for the market. Private businesses usually complain about "unfair competition", but if you can't provide the service that is either better or cheaper than government does, why should we care about your business at all?

If you think American housing market is hard, try finding a place to live in Switzerland. Rent control means the rents aren’t bad, but each available place has 40 people waiting in line to take a look on the first day it’s available. Affordable but out of reach.

Free markets are great, for price discovery.

Thats about it.

Now, that goes a very long way in many many aspects of life, but not all of them.

The insistence on using markets as the only tool to determine everything is just as mistaken as throwing out free markets as a useful tool because it’s used in places it never should be.

The two main theorems of welfare economics show why free markets are great: a market equilibrium is pareto-optimal and vice versa.

The problem is that the conditions under which these theorems holds are completely unrealistic: perfect competition (which is predicated on decreasing economies of scale), so no monopolies, perfect information, no externalities, no public goods, etc.

Given that, it is imperative to regulate markets, and provide some goods through the public sector.

It seems plausable to me that those could be natural outcomes of markets. I.e. by encouraging competition they encourage legislative gamesmanship to give oneself a competitive edge.

I believe this is a no true scotsman fallacy, the very same that people make when claiming Stalin wasn't a communist.

I would posit that truly free markets only exist on paper, in the real world the people that acquire enough capital will always use said capital to distort markets in their favor. Why wouldn't you?

It is the inevitable outcome of the system.

i guess in my mind, the less a government meddles with the market, the better. Unless it’s with the intention of eliminating scams and enforcing fairness in the buying and selling process - regardless of race or your status.

But i do agree that in practice, we rarely see governments try a truly free market.

I believe corruption is an inherent feature of a system that lets individuals acquire outsized proportions of wealth.

Even if the market was initially completely free, as soon as anybody reaches the threshold of being able to bribe/lobby decision makers to tilt the market in their favor, that's what's gonna happen.

To me, a free market is at best an unstable temporary state - not something you can plan societies around.

The less the government meddles the better – except for at least two very deep classes of meddling? I mean I definitely agree that society should protect what you mention - so maybe the “free market” frame isn’t really useful enough.

I’m mainly against the term because it’s a banner idea of the neoliberal revolutionaries that got us into a lot of these messes, by crushing collective action and giving so much power to capital. Actually existing “free markets” are a big part of the positive feedback system of capital accumulation.

The meddling i suggest is merely to make the market fair. It removes bad actors that are intentionally trying to hurt true price discovery.

Someone selling a home with major issues, and trying to hide those issues for passing inspection, is clearly just a scammer.

So yes - i’m talking about a free market where there are honest actors. Not completely free. I do see the difference, but that’s splitting hairs imo.

It's only an inevitable outcome if you enable people to acquire enough capital to distort markets in their favor. But this is not something inherent in the notion of the free market itself - rather, it is driven by the property rights arrangement, which is actually somewhat orthogonal to free markets. Where government exists in the first place, its monopoly on violence essentially means that property rights are that which said government recognizes as such and uses force to protect, if necessary. It doesn't have to protect arbitrary accumulation of capital, though.

It's an outcome of the way money is structured.

Debtors borrow. They get money and spend it. The person holding the money gets paid to not return it (interest). It's like the system is maximally stupid and designed to exacerbate wealth inequality.

The fungibility argument is bullshit here and just serves to obscure. Let's say 10% of money holders refuse to return the money, then 10% of borrowers are screwed. The borrowers can play a game of musical chairs to "decide" who is going to get screwed, but it doesn't change that 10% get screwed.

Oh and the best part? You can't escape money, because it's like a public utility and even if you come up with an alternative, you'll still have to pay taxes, in money. Meaning that money is not just a monopoly, it's inescapable.

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