Home prices are driven in large part by the ease of obtaining loans.

Interest rates and mortgage policies have a huge effect on housing prices.

Bizarre tax policies like the ability for Americans to write off interest on mortgages also certainly don't help.

There are governments that intervene directly to keep their housing market cool in order to maintain affordable housing stock for their workers. My understanding is the German state tries to do this, for example, in order to maintain its ability to be a relevant industrial exporter.

https://qz.com/167887/germany-has-one-of-the-worlds-lowest-h...

Obviously rates and mortgages amplify price increases but they are not the root cause, which is... supply and demand.

Prices are driven up because people compete to buy a limited stock.

Restrictions on mortgages and higher rates to not necessarily make desirable areas more affordable. The absolute prices might be lower, indeed, but fewer people will also be able to afford the mortgages.

For effective and sustainable affordability there is no alternative to balancing supply and demand.

I don't get the disconnect here. I _am_ talking about the demand curve. The demand for private ownership of housing is driven in many respects by the ability to take out a mortgage loan. This kind of low interest easy to get loan exists for no other type of asset, and is unique to housing, and is in large part a product of macroeconomic state policy. These types of loans are backed in many countries by government insurance. So they are in effect a kind of macroeconomic planning by the state.

So it should be no surprise that in countries where the state effectively encourages private home ownership through favourable loans that the demand for private homes is high enough to drive prices high.

Obviously there is the supply side to this. I think in some regions, especially the badly planned sprawl that is Silicon Valley, restrictions on density and supply are really a big part of the problem. But it doesn't explain it everywhere. There are regions where construction and density are not similarly restricted that still have high, unaffordable home prices, because demand for single family homes is effectively stimulated by economic policy.

> This kind of low interest easy to get loan exists for no other type of asset, and is unique to housing, and is in large part a product of macroeconomic state policy. These types of loans are backed in many countries by government insurance. So they are in effect a kind of macroeconomic planning by the state.

Not quite unique: this kind of loan is available for college tuition too!

Perhaps unsurprisingly, that’s another disaster zone...

An even worse kind of loan I'd say. No collateral, no underwriting, only requirements are a business willing to sell a product and a customer willing to buy it.

Private ownership vs. renting is quite irrelevant. In the end, affordability whether in terms of property price or rent level will be set by supply and demand.

The demand for private homes is driven by people wanting to live in a specific location. Prices are then set according to how that aligns with supply.

It is unrealistic to expect every locations to be affordable to everyone.

Apart from increasing supply, a remedy is to spread demand. Prices in e.g. London or Silicon Valley are high in part because these are very attractive locations and there are so in part because jobs are concentrated there.

In North America, there are few state level macroeconomic policies that encourage demand for rents, apart from the few places where rent control is still in place.

There are macroeconomic policies that underwrite and encourage private ownership of single family homes.

The two are not equivalent in the real world.

Supply of houses and infrastructure is however something that governments can do a lot about, even if they can't impact the demand too much.

Okay but what if we just let people build condos until people stopped buying them?

> Okay but what if we just let people build condos until people stopped buying them?

I guess the question is "let people build condos" ... where? What if there's a natural park? Or what if something is private property and the owner doesn't want you to build there?

Umm...many cities (SF, NYC, most of California, ...) have plenty of prohibitions on building condos that go far beyond “there’s a natural park there” and “the owner doesn’t want random people building condos on his property”.

Zoning laws basically prevent construction of condos even by the owners of the property in like 90% of the Bay Area, if not more...

>Prices are driven by supply and demand. Highly desirable locations with limited scope to increase supply will always be expensive.

You know it's possible to regulate prices with laws, do you? The thing you said is not a law of nature, just something we agreed on. And we can change our mind.

People can and do change their minds about where they want to live and how much they will pay, but they don't do it just because there are laws saying they should. You can legislate prices, but if they don't match what people want then someone will end up rationing desirable things in some other way.

You can't legislate what people value, but you can change things so they value them more or less. I think the most promising thing would be to convince companies to create jobs in places where the cost of housing is lower.

> it's possible to regulate prices with laws,

You know they did just that in Venezuela, with noble intentions, do you?

Sure, you can, but pricing laws won't change the fact that there is more demand than supply. If anything, it will make things worse.

There has to be some selection. With free market, the selection is about how much you can or are willing to pay. Cap the rents and other criteria will be used. In many cases, more or less legal froms of bribery will make up for the gap in value.

Another common thing that happens when rents are capped is that landlords are going to make sure that they are only renting to the rich, because the rich are less likely to default. How are they going to know that you are rich? Obvious ones are to look at your bank account (privacy?), but unfair criteria like race can also be used.

You can also become communist, have the state take all housing and redistribute them "fairly". I think it is an area where communism actually works, but it probably won't be well received in the US...

That's how you get a black market/under-the table cash payments.

That's why you get rid of the landlords

Supply and demand is as close as a 'law of nature' as can be. It is natural human behaviour.

Price controls do not work and are actually damaging because instead of trying to balance supply and demand they make the imbalance even worse. They do not remove the pressure of supply and demand, which continues to be at play.

There are other ways of deciding who gets a valuable resource, like housing in an area that a lot of people want to be in, than giving it to the person with the most money. This defeatism always can drive me nuts.

What are the other ways?

Waiting lists and lotteries are simple solutions which have their own problems sure, but are significantly more fair than by wealth.

How does a waiting list or lottery work in practice for housing though? Would people not be able to sell housing? Would they have to sell to the next person on the waiting list? Are children able to inherit it?

I'm not trying to be coy, I simply haven't seen a viable alternative with details. And since most of the world converged on using money to decide allocation of resources, I'm wondering if the alternatives have significant drawbacks.

I understand that wealth begetting wealth, especially for generations seems unfair. But the solution to that doesn't have to be lottery or waiting list of housing. If the goal is to spread the wealth around more evenly, then that can be accomplished with higher taxes.

What they are suggesting is state ownership of all housing, with 'democratic' allocation based on needs. It's been tried...

Even if we agree that money should decide who wins, it's still deeply problematic since money is not equally distributed among demographics.