But those cities are where "the 1%" live or own property, so they're the beneficiaries of the price inflation, which is precisely the issue. A rich person bought a house in SF for $500K and now it's worth $5M, a middle income person bought a house in Detroit for $200K and now it's worth $200K, a lower income person rented an apartment in SF and saw the increase as an increase in rent rather than an increase in home value.

> Further, my feeling is that real estate appreciation is an effect, not a cause. Consider the 2008 event ("circumstance?" "shenanigan?"): it was purely driven by the financial industry. It had, really, nothing to do with real estate at its core; it was caused by bad financial behavior, and the failure of the real estate market was simply how it was translated out of the finance world into the rest of the economy.

It's more like a mechanism rather than a cause or effect. You make money cheap so people borrow and bid up housing costs. This enriches the existing owners who bought before prices increased, which increases wealth inequality because they were already the ones with the most money.

The problem now is that you can't roll back the clock because transactions have already happened. Richard bought a house for $80K and sold it to Michael for $800K, because Michael needed a place to live and the bank was willing to loan him the money. If you now raise interest rates, the housing prices start to come back down, but Richard already has his $720K profit and the loss accrues to Michael who still has the $800K mortgage, and may now have to start paying higher interest on it in addition to the loss in home value.

As a result the possible solutions start to look weird. Like causing general inflation on purpose to devalue everyone's mortgage debt and allow the price of everything else (including wages) to rise to meet the cost of housing without reducing nominal housing costs which would put too many people underwater on their mortgages, and employing policies like relaxing zoning restrictions to ensure that nominal housing prices don't rise with everything else.

Buying real estate cheap and selling it for great profit, as a rule, only works once. If you use the proceeds to buy back into the same market, you're buying expensive property; you only actually see the profit if you move to East Bumford and buy cheap property that isn't appreciating. Further $750k or even several million isn't enough to get into the 1%. But skimming a few percent in fees off of millions of transactions is nigh unlimited money.

The answer is primary that regulation by local governments prevents them from doing that thereby keeping real estate prices high.

So, the question is really, "if it isn't real-estate developers trying to keep rents high, who has the money and therefore power to convince the government to adopt regulations preventing apartments?"

But you're conflating the two types of places: most places aren't "high" demand, and those that do have super inflated costs also have processes by which developers are regularly stopped. California in particular has this problem.

In fact reading your post really made it clear to me the dichotomy between places that welcome new people and have governments that try to serve the people (by letting developers build), and places that try to enrich current residents by blocking out newcomers and thereby forcing demand to be far higher than supply.

If you ignore "those cities not a part of a larger city's metropolitan area," it's (6,000/km^2) between New York City (10,000/km^2) and Boston (5,000/km^2). It's approximately the same density as Queens.

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

It's much less than Paris (21,000/km^2), Athens, Barcelona, and a bunch of other European cities. More than Dublin (5,000/km^2), if that helps.

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

Got nothing on Manilla, Mumbai (holy shit, Mumbai!), or Kolkatta.

But what the hell's up with Guttenberg, NJ?

Even if you don't consider zoning laws, could we build enough supply to satisfy demand? People want to live in the city, but many are unwilling to live in (small) apartments. Many even want houses, but obviously the density of that type of housing is too low to satisfy demand. The city would sprawl. The outskirts would be far from where people want to live.

And as another commenter mentioned, the current density of SF is incredibly low. One and two story buildings cover much of the area. Even if it just looked like Paris (wall to wall 5 story buildings), SF could house many times the number of people it currently does.

Zoning rules and NIMBYism are the main reasons for the housing crisis.

Building permits and zoning laws definitely cause a lot of problems, but the trend of housing being unaffordable for young people in cities seems to be happening everywhere. I think there are other problems at play as well, and one of them is simply housing density vs job density. Jobs are often more densely packed than housing and this will drive up prices.

I live in the SF Bay Area, and I've spent a decent amount of time studying this problem. These debates are raging in the city council meetings, with homeowner groups fighting against city councils who were elected on a platform of trying to get more apartments built.

I agree that job vs. housing density disparity is the cause of many of the problems. The way you fix the disparity is that you boost the housing density - you upzone near transit (SB 50 in the CA state legislature is trying to do this across the state), you increase property tax rates to discourage people from waiting for the land to appreciate without doing anything useful with it (ideally by gradually phasing out prop 13), and you streamline the redevelopment process by making it such that if you comply with a clear set of rules, you can start building with the knowledge that homeowners associations won't bog you down in endless lawsuits. And in my dreams, you change the zoning to mixed use commercial/residential so that you can colocate offices, restaurants, stores, and residential, making everything way more walkable and easing the burden on road infrastructure.

Paris: 27€/m^2 ($30/m^2)

SF: $4.95/ft^2 ($53/m^2)

Meanwhile, I understand your point that "many people are unwilling to live in small apartments" but those people are by default not part of the demand in San Francisco itself - they're part of the demand in Gilroy and Freemont, perhaps, but not San Francisco.

But "not being willing to live in small apartments" is not the same thing as not being willing to live in medium/large townhomes / row houses, which can accommodate vastly more people than live in most of the suburban expanse of the Bay Area. Just to make a dumbly over-simplified point, you could theoretically convert every ranch house in the bay area to two victorian townhomes and that would add room for more than a million new people, which I'm sure would make some dent in demand.

Likewise, most of San Francisco's land area is occupied by 1 and 2 story buildings (Sunset, Richmond, Excelsior, etc.). Just going to an average of 3 stories would add a hundred thousand or more new homes.

Regardless, while you may be right that demand is MUCH greater than supply and we'd need to add a million homes to make a dent, that's not a valid reason to do nothing.

If we're not going to build more housing here, why not limit employment growth here and create some pretty major programs to move jobs OUT of the city and take some of the housing pressure with it. There's nothing stopping us building a big new city at moderate density between San Francisco and Sacramento, for example, and if the whole corridor was linked by reliable, fast transit service then it doesn't need to be a traffic nightmare either.

TLDR; defeatism doesn't help, the economics here aren't THAT complicated we just don't seem to have the political will to do anything about it.

Most of the housing problems in western countries, from my point of view, seem to be that people want to live in places where they can't afford to live at.

I agree that housing is ridiculously regulated in many of these places, but I'm not sure that that's the only problem you have to deal with.

I'll try to explain, giving a US-centric narrative because that's the one I know best, but similar parallel things have happened around the world.

- - - - -

Mass urbanization started in the 1800s and accelerated in the 20th century as the world transitioned from a rural/agricultural economy to an urban/industrial economy.

In the US you can see how this worked as placed like New York boomed, but also smaller cities like Buffalo, Cleveland, and many others.

This alarmed a lot of people, notably FDR. They didn't like that people were leaving smaller towns and rural areas and flocking to cities, and he wanted to try and keep the population more spread out. But they were just doing what was economically rational, getting better jobs in the city. And this is still going today -- see China, or the article on HN the other day about entire abandoned Spanish hamlets for sale).

A lot of the push back against urbanization happened via regulatory policy and infrastructure investment. A great case of this is the Rural Electrification Act in the US.

It's cost-effective to serve electricity to a city cheaply from a central plant, thus cities over a certain size (critical mass) started getting power plants and cheap electricity, whereas places below that threshold did not. There was actually a lot of innovation going on in this area, with "off grid" generation and low-power appliances etc. to serve the large, distributed rural population, but it was lagging behind the "convenience" of city power. So the US embarked on a government led program to mandate electrical service be provided to rural areas. The history of all that is complicated and I won't try to narrate it all here, but you ended up with a ton of messy side effects -- see all the land served by PG&E and the California wildfires today.

The same thing happened with roads and bridges and basically every other kind of infrastructure. Without these programs people were trending to concentrating in the larger towns around the countryside (above critical mass) and depopulating rural areas, and the programs slowed that down a lot by providing heavily subsidized infrastructure to make their life more comfortable.

At the same time a different movement was going on in cities, motivated for many reasons, to start limiting development. First it was to separate out polluting industrial factories from residential development -- arguably a very good call -- and then it spread to limit development generally and prescribe lower and lower limits to density. This was greatly aided by that same push to bring city utilities to rural areas -- the interstate highway act, for example, meant that suddenly there were vast areas a bit outside the cities that had great road access to the city center and high voltage lines etc. already going out to the farmers. Suburbanization here we come.

Well, fast forward a few generations and the economic reality of much of that infrastructure is hitting home. Why don't we build big infrastructure projects like we used to? In part it's because a huge amount of maintenance money goes to keep the rural roads and power lines operating at huge losses, to places that would probably either have been abandoned or have adapted to an alternative "off-grid" set of technologies if not for the massive infrastructure subsidy they receive.

But it's more pernicious than that, because the "spread everyone out" policies resulted in a pattern of development where most of the _urban_ areas are also below the critical population density where infrastructure has a positive return on investment. Ie. most suburban development is also an infrastructure money-loser.

These policies are becoming increasingly difficult to sustain, resulting in deferred maintenance and generally bad infrastructure across most of the land area, and also a general lack of funding to keep up with the population growth in the major cities.

And then at the same time, restrictive development policy - which is mostly concentrated on housing, not commercial development - means that housing in the cities that have the best economic opportunity for people is increasingly scarce and thus increasingly expensive.

A final tie-in to your point about financialization and financial engineering -- the increasingly Byzantine development regulations mean that it takes higher and higher skill and more and more patient capital to negotiate the development process. Whereas it used to be quite common for a family to do something like split their lot, sell it, and an individual to buy that lot and build a home on it -- now development activity is increasingly limited to high-capital sophisticated firms that can deal with the regulation and holding cost.

You also have the government funding this system via Fannie and Freddie etc., leading to the securitization of mortgages and a shift away from local savings and loan type funding. That, plus a whole generation of individuals and institutional investors believing that "your home is your best investment," so you have a giant coalition with a vested interest in housing prices steadily climbing. So it's not too surprising that you'd get a lot of financial engineering effort to try and keep the system steadily growing and that this could lead to bubbles every so often.

- - - - -

Whew. That's an attempt to summarize over a decade of reading and observation on my part, so I apologize it's rather long and rambly. But I hope that gives you some better illustrations for how this whole thing seems interconnected to me.

For one thing, there was (and is, in, say, China now (can I get some more commas in here?)) massive inequality between the wealthy, electrified urban areas and poor, low education, rural areas. This is a problem for a democracy like the US, where an urban majority (which only happened in 1910-20) cannot run rough-shod over a rural minority. That political problem is enhanced by a media who is certain to show the famine out in the sticks, in comparison to the comfort of your favorite city.

Further, all of the resources are in rural areas. You'd have a hard time digging coal out of Appalachia if every moves to Jersey City. And you still have to deal with agriculture: your bread is coming from the Dakotas and your corn flakes from Kansas. Unless, of course, there's no infrastructure to transport it from there to here. And this was before the "green revolution" made food really, really cheap.

There are also other factors. The US was largely founded on the idea of a homeowner, living on a homestead that he owns, with property rights and all that. And then there's the belief (which I kinda agree with) that people who own property are more involved in their communities than people who don't, and thus that home ownership is a good thing in itself. ("The city council is doing something stupid! Do we go down and yell at people, or do we pack up the apartment and move?")

But consider as just one example how much the population working in agriculture has decreased over time - much of that was going to happen whether roads and bridges and power lines were subsidized to go out there or not. When this is private investment, it's fine. If it fails, some company goes bankrupt, life goes on. Unwinding money-losing public infrastructure is much, much harder.

The last paragraph, that renters aren't politically invested, I think depends a LOT on the ability of people to become owners in the first place. Ownership is more the effect of someone who has a certain amount of wealth and stability in their life (thus the resources and desire to own), rather than something that CAUSES wealth and stability in your life.

So as for the idea that "the country was founded on the idea of the homeowner," I understand, but I think we have to be careful not to think that it somehow makes an owner morally superior to a renter. That just leads to discrimination against people who probably would love to own but don't have the resources, and thus don't need the deck further stacked against them.

Patrick Gonnagle went to Stanford and really likes living in the Bay area. He also invented the idea of facebook for dogs and made a crap-ton of money in the dotcom era. Nowadays, he spends most of his time trying to out-do his peers in the nuevo-crap-ton-o'-money crowd with his extensive collection of Pia Zadora's underpants.

The rest of the time, however, P-Gon (as he likes to be called) finds smart, idealistic, entertaining, and attractive young people, mostly from Stanford, and gives them large sums of money in exchange for a significant share of any future large sums of money their idealistic and entertaining activities will bring in.

The idealistic and smart people like to get advice, recognition, and affirmation from P-Gon, and he likes to keep an eye on his investments (not to mention the advantage of showing off his cadre of minions to his peer group). So, they all have to live, work, eat, etc. in close proximity. P-Gon lives at the top of the Transamerica pyramid (literally; he built his 12,000 sq ft bedroom on the very pointy top of it). Fortunately, the I&S folks are being showered in cash (well, not literally; P-Gon has a swimming pool full of giant tapioca balls and $1000 bills that he makes them do laps in (hence "funding round")), so they have plenty of money to pay for suitable hovels.

Lather, rinse, repeat for a couple of generations and you discover that rents are stupid ridiculous in the area of the giant fountain o' money. Which theoretically could be somewhat remedied, maybe, except that P-Gon doesn't want horrible brutalist high-rise apartment complexes blocking his view of the Tenderloin.