Wrong. Without Land Value Tax the housing market simply doesn't clear. If there is no force to make house and land owners to sell to those who would actually utilize it better, they will sit on it forever until a huge ass corp or gov eventually buys them out for ridiculous price. As an owner you just have to wait while not paying virtually anything. Everybody else who actually needs to live, work or produce something in that location has to rely on new housing in ever increasing urban sprawling cities.
San Francisco is a prime example of this and apparently always has been as Henry George showed more than a century ago.
There's actually another solution, but people don't talk about it: reduce demand. Break some windows. Have a few organized robbery parties. Hold monthly "Stabby Sundays" where you just stab people randomly. That'll drive down demand, and prices will drop like a rock.
Obviously, I'm joking. Building more houses is the only solution to the problem of "a lot of people want to live here" and "it's almost impossible to build new houses."
I don't know anything about Berlin, but in San Francisco, there are plenty of affordable housing requirements placed on developers of new apartment buildings. This ends up just making new construction MUCH more expensive, as a single unit has to support itself as well as some fraction of an affordable unit. The result is that it's even less profitable to build new housing.
One clear alternative to this public housing. In Vienna, for example, about a quarter of the population lives in social housing. And these are poorly maintained slums, these are nice, well-located and affordable apartments. The city/state can optimize for the actual housing needs of the city rather than for profit.
I would argue that housing, much like healthcare, can function better when managed as a public good, as there are too many perverse incentives at play when there is a profit motive involved.
This comes up a lot, but is false. It's easy to have every single home become more expensive over time while the average unit remains affordable. Let me paint a picture of how it would work in a city where you can actually build new housing at higher density.
Family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how density increases happened almost everywhere, until zoning laws became the new way to keep racial minorities out of white neighborhoods, roughly mid-century, after restrictive racial covenants (i.e., "when you buy this house you agree not to sell it to anyone non-white") became illegal.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity. That is what leads to this contradiction.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.
This feels transient to an extent no? At some point your building is tall enough and your unit as small as people are willing to accept.
But does this not apply primarily to the land underneath the building? Once you reach a certain plateau a 700sqft apartment on the 10th floor of a 50 story building isn't worth any more than an apartment on the 10th floor of a 70 story building is it?
Yes, there is an endgame here -- and also, truth be told, construction costs per unit start to go up once you pass 4 or 5 stories, so there's other economics at play.
But that endgame is Tokyo or midtown Manhattan, and we're not close to those levels of density basically anywhere on Earth -- and certainly not in the USA, where you can count with one finger the number of cities that might not be able to increase density because the buildings are so tall it's hard to imagine building more-attractive taller ones.
> But does this not apply primarily to the land underneath the building? Once you reach a certain plateau a 700sqft apartment on the 10th floor of a 50 story building isn't worth any more than an apartment on the 10th floor of a 70 story building is it?
This is an interesting question -- in my example, you might think it's pretty clear that a single condo in a 4-plex would be less valuable than the same land area with a single family home (even if all 4 units together are worth more). But it's not clear why a single condo in a 25-story doorman building is inherently more valuable than a similar condo in a 50-story doorman building, which is basically the only density increase that's realistic -- and in fact, maybe the larger building supports more amenities, making the individual units more expensive as density increases? Also, this level of density supports rapid transit that allows for more effective geographical distribution than the "freeways choked with traffic" sprawl we're seeing today.
That said, this is not the situation that SF (or really, any market in the USA outside of Manhattan) finds itself in. In all these cities, developers could build a larger number of less-expensive units to replace more-expensive lower-density units on a given land area (and still profit! And increase housing supply!), if they were allowed to by zoning and other (typically local) policy.
Uh, no? Suburbs reaching further out, without the infrastructure to support them, are not a happy ending. High risers in the wrong places cause infrastructure overload too. Putting high risers in the right places will ruin someone's vista. Hardly unsolvable, but far from "just build more".
So cap how far out you can build. Generally, of course, that already exists.
> High risers in the wrong places cause infrastructure overload too.
More houses means more residents means more jobs means more tax revenue. This revenue can then be plowed into shoring up the infrastructure to fit. That's what a city is.
> Putting high risers in the right places will ruin someone's vista.
And that sucks for them, but they've no right to a view.
However it's not simple supply and demand. We have a ton of "speculative demand" which increases when prices rise and we can't reasonably stop that by building more. Yes California needs to build but even if we started Shanghai levels of growth today it's unlikely we'd get affordable cities before climate change renders the state unlivable.
We need to kill land speculation and taxes are the right way to do that.
But it is very easy to have cheap housing and lots of it without a land tax. If I could sign a 50 years lease with strong protections that might even be better for me than buying, and landlords would have the usual incentives to build lots of houses if there is demand.
The problem in California sounds like the landholders who are being rewarded are the ones who choose not to build more dwellings. Greedy landlords in high-demand areas would build more, because then they make more money. I'd rather rent to an apartment building of people than a wealthy middle class family. And they'd be making generational fortunes doing that.
surprise, surprise, if you don't vote and assert your civic duty and rights, you don't get included in the process to decide the direction of society.
> view property as an investment while also wanting it to be affordable. These are mutually exclusive.
they aren't - investment is supposed to increase the efficiency of production, thus increasing the availability of said product. The issue here is that land is scarce, and can be made more scarce by various laws. Building/construction costs have decreased somewhat, but the major cost is the land, and lack of density leads to lower supply.
> Anything other than permitting tons of new building is at best a band-aid over a hole in the dam.
yes, this is exactly it. However the people _want_ low density, but affordable! Both cannot be true. And thus, here there is conflict.
You may have misunderstood, I'm suggesting it's not possible for something to remain perpetually affordable and be a good investment. A good investment becomes less affordable over time. A bad investment does the opposite.
For instance, nobody complains about how unaffordable AAPL shares are do they? That wouldn't make a lick of sense because that's the desired outcome. That's why you invest.
If you want housing to be affordable you don't invest, you buy. Like a car.
The problem is twofold.
1. Americans view property as an investment while also wanting it to be affordable. These are mutually exclusive. If you want something to be a good investment you want it to become less affordable over time.
2. Renters tend to be younger, transient, non-voters with weaker ties to the community. Landowners tend to be older, established voters with strong ties to the community. This means the city council panders to landowners, and they pass policies which prevent development.
SF is the worst for this, the city is basically unchanged since the 1970s to the absolute and sole benefit of landowners.
There are wonderful examples of cities which pretty much default-allow building housing, like Tokyo. Tokyo is incredibly affordable, downtown starter-home/condos cost $200K USD, and people in Japan do not view property as an investment but rather as somewhere to live. More like a car.
Yes, prop 13 sucks, yes a land value tax is pointing in the right direction, yes rent control isn't helping, but none of these things are a substitute for the simple unit economics of supply and demand. Anything other than permitting tons of new building is at best a band-aid over a hole in the dam.