How Reverse Game Theory Could Solve the Housing Shortage
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Rent is falling all over the Southeast where housing has been built in droves, and actually in greater quantities than new demand. The only solution is just flooding the market with housing.
Also I have limited sympathy for people who move to high COL areas and then are upset by housing prices.
*Move to a high CoL area to get a high paying job, and then are upset by housing prices.
Many people would be overall better off with a lower paying job in a lower CoL area
A nurse or line technician might have a hard time getting work in Belleville. But there is plenty of opportunity in Pittsburgh.
But alas, the extra $25K for working in NYC might totally blind them to the full picture.
There's no one silver bullet, it will have to be a multi-front push:
1. Just build more
2. Zone for multi-family housing
3. Get rid of minimum parking and minimum lot size requirements
4. Allow mixed-user residential and commercial buildings
5. Shift property tax towards taxing the land and exempting buildings from tax, to force speculators to sell vacant land and derilect buildings for development
6. When things start moving, invest in walkability and public transit to support dense urban cores. Cars are great for low-density, but paying for miles of road and polluted air in dense city cores is silly behavior
Most people don't want to live in dense urban cores, so #5 and #6 can easily backfire and stunt progress on #1.
Just let people decide what to build where, both as individuals and communities. If dense urban cores truly are the "better" way of living, it will prove itself soon enough without the urbanists trying to force everyone down their path to their own detriment.
Specifically, most government planners seem to assume increased density is a universal good, which is not the case in reality, so I'm saying that those planners should not compel everyone to live in a dense urban core.
80% of the US population would disagree. It really seems like you’re applying what you like to the entire population and then assuming that anything else is rubbish.
Having grown up in a rural community, and small towns, I never really want to go back. Dense urban areas are wonderful, I find huge amounts of joy in multiculturalism. The plethora of ideas, language, food, and art is inspiring. I will never get that anywhere except dense urban areas.
Demand vs supply is the crux of the affordability crisis, and the points outlined in the post you’re replying to are all valid and great ways to help increase supply.
And FWIW—- you’re absolutely welcome to enjoy and appreciate sparsely populated areas, but I really think you need to understand the vast majority of people disagree with you. Not because they’re “stuck” in some dense urban area but because they want to be there.
I live by choice in what would be considered an urban area by the US Census, but is far from a dense urban core (by the character of the neighborhood, it's only a few miles away by distance). Either you don't understand what the Census data is saying or you're misrepresenting what myself and others are saying here.
> Having grown up in a rural community, and small towns, I never really want to go back. Dense urban areas are wonderful, I find huge amounts of joy in multiculturalism. The plethora of ideas, language, food, and art is inspiring. I will never get that anywhere except dense urban areas.
Good for you. My point, which seems to be lost on most urbanists, is that not everyone feels that way, or wants to live in that environment (consider me part of the second group, as I enjoy having access to quality food, art, entertainment, etc. but also enjoy having a yard for my kids to play in and enough distance between myself and my neighbors to have privacy and peace at home).
If someone has no interest in being inspired by multicultural food and would rather eat at a familiar restaurant in a small town, I feel no need to compel them to experience it.
> Demand vs supply is the crux of the affordability crisis, and the points outlined in the post you’re replying to are all valid and great ways to help increase supply.
Some are more valid than others. Building is good, compelling communities to increase density against their will is not.
> And FWIW—- you’re absolutely welcome to enjoy and appreciate sparsely populated areas, but I really think you need to understand the vast majority of people disagree with you. Not because they’re “stuck” in some dense urban area but because they want to be there.
There's a large gulf of housing stock and communities between "sparsely populated areas" and "dense urban areas" commonly called "the suburbs", where most people in the US live.
And I don't think the people who live in dense urban areas are stuck there. I just don't think the echo chamber of city planners, YIMBY advocates, and leftist politicians, all of whom believe that more density across every metropolitan area is the "correct" path forward, should have the final say on what communities are allowed to build or not build.
the place where there is leverage is in taking high-demand areas historically zoned for single-unit and opening them up to the market to build higher density housing.
And if the current residents don't want to open up, then what?
And they are not the only opportunity to increase density or satisfy demand, just the most politically convenient one for the party in power in almost every case.
An interesting group of people they are, the super-rich leftists. The way they weaponize the environment to prevent others having what they want... really makes you wonder.
It's some jerk who makes $200k who can afford the house but can't afford to not care what their neighbors do that drives all this at scale.
He's the one trying to scheme up some way to get the government to use other people's tax dollars to threaten them if they try and do something he doesn't like, because that's his only lever to pull. And there's enough of these jerks the government(s) pander to them. The result is everything gets stifled and red-taped. Can't run a bar here. Can't have an apartment building there. Can't have too little parking, but if you have too many cars you're running a junkyard, and on and on and on and on. It's these people in aggregate that result in the existing body of regulation of which there always seem to be a few lines that can block any given development.
And then they have the gall to turn around and whine about the sum total of all this. Not enough housing, not enough amenities, what does get built is ungodly expensive.
"man, this park sure is dirty" <throws cigarette butt on ground> "I wonder how it got that way".
Also, the super-rich leftists are the people who funded the politicians in CA who have banned nuclear power in the state, and also various kinds of mining in the state.
This might help: https://news.ycombinator.com/item?id=47159430
I don't think that the urbanist movement can succeed if it is driven by policy wonks who want to throw out the rulebook and impose reforms from the ivory tower without a real small-d democratic political strategy. Many of us are used to fighting the political battle against climate change by being Absolutely Correct and expecting that Science with her indefatigable armies of Reality will guard the flanks. A fully economic fight like this one just doesn't have the same kind of inevitability. Every step forward on the ground weakens the sense of urgency in the legislature, leading to an equilibrium trap without a vigorous political movement that can hold momentum.
Nerds do not usually want to do politics, but in housing you have to do politics.
It's not a coincidence that the "housing crisis" continues unabated in places like NYC that are losing population, yet appears to be solved in areas in the south that are absorbing those people.
https://www.sfgate.com/bayarea/article/Human-waste-shuts-dow...
Not really. NYC population still hasn't fully recovered to the pre-covid peak: https://fred.stlouisfed.org/series/NYPOP
NYC is losing it's share of the global finance jobs as firms shift staffing to other, more desirable locations: https://pix11.com/news/local-news/nyc-job-market-loses-thous...
NYC rent being unaffordable is due to legislation that keeps apartments off of the market due to not being financially viable to repair to habitable standards in addition to legislation overly empowering local groups to block new construction.
It's not hard at all to compare property prices in NYC to Alabama using a cost of living index (and to some extent a quality of life index, though these are fairly subjective).
People are voting with their feet every day, and they largely aren't moving because they are looking for a decrease in their standard of living.
Many, many, many people think NYC, SF, Vancouver etc. are shitholes. The good news is that people are currently allowed to choose where their surroundings look like, though many politicians and bureaucrats seem hell-bent on changing that. And now we're back at the start of this discussion...
Asymptotically what you said might be true, but before it gets there years might pass as they did in China. It's not clear how long this madness would last if not for COVID.
I don't think the Chinese real estate market will ever truly "recover" to the Tulip Mania levels it hit before. Especially with a declining population.
That is what, 15 years and counting of waiting for the market to return to affordability despite using more concrete every 2-3 years throughout this time than the US did in the entire 20th century?
To quote Kimberly Wilkins: ain't nobody got time for that
Now, inevitably, the pendulum went the other direction - people lost money and companies went bankrupt.
You can't play fast and loose like that with such a basic need as housing.
https://en.macromicro.me/series/5433/china-housing-price-to-...
Considering the absolute number houses in China were not affordable at any point in recent history.
2010 is often cited as a reference point, most likely because it's when the Chinese stock market started experiencing a slump despite the initial post-2008 recovery, so investments shifted into real estate:
https://www.macrotrends.net/2592/shanghai-composite-index-ch...
Even setting that aside, homes per capita is not indicative of supply and demand - if everyone in SF wants to live in a house alone, it really won't matter that SF has slightly more homes per capita.
But I don't think it is a left/right issue. In certain regions it may be the left, in others the right, but generally it is subset of both that have investment in artificial scarcity. It's just the justifications that change depending on ideology.
In my experience the bulders and tradesmen who are more right-wing have more to gain from allowing more and faster construction and are more interested in removing laws and restrictions.
A lot of this comes from the attitude in the 60s and 70s where the liberal strategy was to sue the government to stop them from destroying the environment. People from that era saw the smog and the flammable rivers and are generally against development , even though today’s development processes are starkly different from back then.
The answer is always the same tho: make it easy to build housing, and build more housing. Keep building housing until there's a glut of supply.
- More environmental regulations that can be used by NIMBY.
- Attempts to solve the using various forms of rent control, which make it worse.
- Related: conservatives favor less regulation, which leads to more construction.
- Liberals hate for (or at least distrust of) landlords. Some of this is well-deserved but I've seen liberals oppose good policies because it will "help landlords".
Lastly, home owners--including liberals--like to see the value of their property go up and tend to favor policies that make it so. It would be nice if we could get people to stop looking at their homes as financial investments.
At some point you have to look at the actual results of policy.
Fixed it for you.
At the same time, apologists for rentiers will do anything except taxing unimproved land value (which among other virtues, functions as a vacancy tax to reduce unproductive speculation, and incentivize development).
The blunt reality is a zero-sum tension: homeowners and landlords want number go up, new buyers and renters want number go down.
The government represents existing property owners, so they are effectively a handout to themselves for creating and/or sustaining a desirable area. I don't see why things would be any other way.
> At the same time, apologists for rentiers will do anything except taxing unimproved land value (which among other virtues, functions as a vacancy tax to reduce unproductive speculation, and incentivize development).
LVT is a terrible idea. There's a reason why leftists support it, which is that it centralizes control over property values (and therefore control over said property) in the hands of the state.
If you want development, you don't need to incentivize it. You need to just stop getting in the way of it.
I run in some far-left circles, and trust me, they don't :) Georgism is the neglected middle child of political economy: libertarians see it as an abrogation of sacred property rights, socialists see it as too liberal (a dirty word in that ecosystem).
> it centralizes control over property values (and therefore control over said property) in the hands of the state.
The state is already in control of property, in both its creation of the legal constructs, and providing the security backstop for its protection. Whatever one's views of which property constructs are just and/or efficient: the realpolitik of property is that an individual's property right is a secondary one: if the thugs with guns decide to take it, with or without a legal fig leaf, the property claim vanishes in a puff of smoke.
And the thing is, governments already assess property values for tax purposes, relative to nearby "comps", only for property tax (improvements + land value), as opposed to unimproved land value alone. There is certainly a risk of perverse incentive, but (a) if locally adjudicated, the price is somewhat disciplined by owners voting with their feet, and (b) there is a lot of good work being done to improve these calculations algorithmically: https://www.fortressofdoors.com/mass-appraisal-for-the-masse...
I certainly don't claim "a single tax on unimproved land value" is perfect; but it doesn't have to be, just a lesser evil compared to existing income tax on labor, and existing property taxes (a tax on labor with extra steps). And one essential crux of the Georgist argument is: those who work for a living already pay the tax, only to private rent-seekers rather than states and municipalities. (Even owners end up paying indirectly, where the opportunity cost of renting is priced into the purchase cost, aka "imputed rents", which for mortgage buyers is looks at lot like the bank being your landlord.)
> If you want development, you don't need to incentivize it.
Or perhaps: we remove the disincentive of taxing improvements. :) Even a revenue-neutral LVT (raise unimproved value by enough to compensate loss of taxing improvements) would shift the incentive landscape, where the numbers now might make sense to build a high-rise on top of what used to be a parking lot, because it doesn't incur new tax liability.
House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.
Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.
High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?
Cue the downvotes.
> And why would development companies build so much housing that the value started to drop?
Because they have very healthy margins currently, and would probably continue to build if their margins drop from around 20% to around 15%. At some point it would become an issue, but we haven't seen that in the areas where building is keeping up with demand or even exceeding it slightly.
> Are you sure "housing has been built in droves" is what brought the price of rent down?
Yes. What else could it possibly be?
> House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.
That, plus the many, many artificial restrictions on increasing supply, which actually are the issue. Hint: "speculators" are a tiny portion of the market and aren't leaving homes unoccupied for extended periods of time, and "massive" immigration is also a very small portion of the increased demand for housing. Also, if you want to understand the alternative to population growth, see the Rust Belt in the 1980s.
> Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.
This already happens. It's ineffective.
> High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?
Because its literally how they make money, and new participants in the market are not barred from entry?
Definitely true, but much harder to do in areas that are already built up and near jobs vs. building in empty desert for retirees.
What the government is saying by allowing these rights to be sold, is that the place to which they are transferred to has arbitrarily restrictive zoning. In my mind, the value of transferrable development rights should be zero. Zoning should actually have some hard principle behind it that isn't bendable by allowing the non-development of some other desirable piece of land. Either a building is too tall for the neighborhood or it isn't. It should be "too tall unless you pay a farmer 10 miles away".
Why is uneven, concentrated development some kind of public good?
How does this position unroll? How does the farm eventually get developed in 50 years? Do they have to buy TDR from someone else? Does an "equivalent" TDR have to be demolished?
Because of agglomeration and the incredible desirability of mixed-use walkable neighborhoods (see rents in walkable neighborhoods of NYC + SF + Boston for proof). This farmland is only desirable and sought out by developers because of zoning restrictions elsewhere.
>How does this position unroll? How does the farm eventually get developed in 50 years? Do they have to buy TDR from someone else? Does an "equivalent" TDR have to be demolished?
These are all great questions which reveal that TDRs are not a very forward-looking policy solution to the housing crisis. Maybe planners believe there will be more appetite for taller buildings in the future, or that land prices will rise enough that the owners' support for zoning reform will overcome opposition. It does seem absurd, and more like a way to bribe property owners so that local politicians can avoid making public decisions in meetings that 90% of NIMBY cranks disagree with.
If you can get a payout for "selling" something without having to actually sell any part of your property that you intend on using, and nothing will change in your neighborhood, why wouldn't you sell it? And if property owners and residents in a neighborhood are crying to anyone who will listen that the world will end if four-story buildings give way to six-story buildings, you now have a big incentive to show up to those same land use meetings and push back.
The whole first part of the article tries to highlight the success of the 1972-era zoning policy, but ends up making the opposite point, whereas agricultural land is preventing enough housing being built in the north of Montgomery County, whereas Virginia has successfully incorporated density (and more jobs as a result).
Not sure if that was author's intention, or how game theory is even relevant here. It's just zoning and housing policy and understanding of the zero-sum dynamic for desirable land. Some other examples from the article don't make much sense either (except Houston).
Source: DMV native for 20+ years, also an economist (by education, not profession).
I suspect the publication paid the author to write a very particular opinion, because the article reads more like a NIMBY-defending piece.
All they do is elect Republican governors who kill our transit projects.
The only way to know what your incentives will do is let them play out. Now, you can make educated guesses on what will happen, but much like computer security, people find surprising ways to break things.
We must have sensible laws and process from those who are unhoused. Is it financial, medical, psychological, addiction, abuse, etc? Each of these has a different solution; and the law needs to have enough teeth to enforce those solutions.
It's a gradient of solutions. If you fall out of a bracket, there should be a more affordable bracket that is humane. The threat of living on the street doesn't help anything. Plus, in California alone, enough has been spent to solve the problem tenfold. I suspect devious forces at work behind that....
So we've controlled our population inputs / outputs from one vector, we've put a cap on homelessness, we now need....... affordable, mass, fast public transit.
Look, we all can't live in NY or by the beach or in all the fun places. Uprooting the entire economic system is a no go with too many unforeseen consequences. Supply is only way to possibly lower the costs in desirable places, but you are competing against the world.
The bare-minimum is that from anywhere in the country you live. You are not far from fast transportation. Bullet trains and things of that sort. That means you can actually develop farther and farther out, but still have those people participate in the main hub's economy.
If you sort those things out, you will allow people to decentralize and will force commercial entities to do the same. This will put immediate pressure on the already over-stressed commercial real estate market. Once that relents, we may see the cost for housing come down everywhere.
But yes, if you change incentives, you can change behavior. And if you can find a way to create and enforce incentives that push toward an outcome you want, then you get more of that outcome. This is a good lesson to remind people of: incentives matter. So often---especially in discussion of public policy---we see conflation of stated desires with incentives, and of incentives with "cash paid to someone". The former is fallacy, and the latter myopic.
Maybe instead of going around our elbow to get to our asshole we should just call a spade a spade and make rent 'optimization' illegal. Then once people can actually afford a home we'll have a better picture of how many should be built. Because ultimately? People just want to be able to live without the stress of bills and the looming worry of maintaining a roof over their heads.
I don't see how this creates a sustainable dynamic, rather than merely making a more comfortable journey to that same financialization attractor (ie Moloch). It's easy to feel good about this church (or that farmland) was given a cash infusion and could keep on running its same cute bespoke non-IREAM (inflation rules everything around me) operation, but what happens when that bolus of cash has been inevitably spent and they need another one?
It feels like this is the fundamental problem with every heady touting of market-based reforms. Of course the initial trend is consensual and both parties benefit (positive sum) - otherwise it wouldn't happen! But then as the feedback loops from market optimization set in over the longer term, those positive qualities gradually disappear in favor of a dystopian nonconsensual dynamic.
(FWIW I'm personally undecided whether the root problem here is that capital inevitably coalesces and therefore government intervention is required to keep it distributed, or whether the agglomerating dynamic stems from the centralized money-printing fountain that flows to the politically connected. But there is enough dumb money sloshing around these days that the distinction is probably moot)
Selfish influencers are trying to get housing built in “cool” spots, (because they don’t make enough money) rather than wait their turn or make other neighborhoods cool. Ignore them and their campaigns to ruin everything.