Pretty much every mainstream economist put the blame for this squarely on the massively increased regulation of the housing market since the 70s causing a massive decrease in the amount of new construction, not wealth itself.

That's simply not true. Economists who try to explain the housing crisis have pointed to increased regulation, cheap credit leading to an asset bubble, speculation, ill-advised tax cuts for homeowners, NIMBYism (not by government but by current residents), irrational buy vs. rent decisions, changing preferences for city vs. suburb, relaxed downpayment requirements, changing lifestyles and demographics with bachelors and asset-rich elderly people taking up a lot of housing stock, population increases, stricter building codes and demands for comfort, the rise of short-term rentals for tourism, reluctance by governments and builders to look too far into the future in case demand collapses, and so on, and so on. If you'd have to pick one factor, I'd have to guess it's easy money leading people to buy more expensive homes than they ought to, which drives up prices, but it probably depends a lot from country to country.

What about just, people buying multiple houses/apartments to rent them out? IANAE, but I have a sinking feeling the situation would quickly improve if ownership had per-person limits (and no easy way to pool the limits into a company).

Countries could build new housing faster than the population grows, but as long as it can be scooped up by the wealthy for renting out, the scarcity would prevail.

Not an expert in macroeconomics either, but in a perfect free market there shouldn't be a lot of difference between renting and buying: if you can get a 5% yearly return by renting out a house, then the person renting from you can probably also get a 5% yearly return by investing their freed-up capital elsewhere and/or by not having to pay interest. If renting is too expensive, you buy, and if buying is too expensive, you rent. If one kind of investment like land or housing turns out to be particularly lucrative, capital will flow towards that type of investment and drive down returns towards the average again. Companies rent and lease stuff all the time, even if they have the money to buy, because often it just makes more sense. So there has to be something to disturb that happy picture and benefit owners at the expense of renters: a wonky tax structure, speculation, rate of return on land consistently higher than for other asset classes, cultural norms that value homeownership, who knows. Ownership of multiple dwellings by the wealthy might play a role, but in itself it's not a sufficient condition for high housing prices.

(It would be different if the wealthy were buying these houses to live in them or to leave them empty, as that would increase demand and constrain supply. Happening in London, Vancouver and a bunch of other places, I think. Also sort of like what happened with the quinoa fad: https://en.wikipedia.org/wiki/Quinoa#Effects_of_rising_deman...)

> If renting is too expensive, you buy, and if buying is too expensive, you rent.

Buying a house is not that easy. You need a bank to approve your mortgage, plus pay upfront money (plus pay for furniture and such) that people might not have because high rent prices stop them from saving money. More renters and less buyers might cause more wealthy people entering the market for speculation, compensating the decrease of people that want to buy to live. And on the other hand, given that housing is a necessity and not something that people can live without, landlords can still push prices up even with increased offer.

In general, I see a lot of takes on the housing market that focus too much on the theory and forgets the reality: people need houses, moving is not easy nor cheap, speculators and realtors can push prices up without that much pressure, and a lot of people don't have enough to face the expenses of buying a house.

I agree, but my point was not that armchair economics is wonderful, what I tried to say was that it's often useful to find out precisely where theory and reality diverge and to focus solutions on those gaps, to avoid putting the blame on things that don't matter or suggesting regulation that won't work, like social housing (except as a short term solution), rent control or restrictions on who can buy.

I would use a formula based on the tax-assessed value of a property to set a maximum rent. Landlords should be free to reappraise their properties as often as they like to be able to raise rents at the end of a lease, but doing so will increase the tax bill as well. Call it market-adjusted rent control if you like, but there needs to be a tight range between rent and value if we want to encourage more housing starts.

> then the person renting from you can probably also get a 5% yearly return by investing their freed-up capital elsewhere and/or by not having to pay interest.

This might be true if one could get as cheap and deep leverage on alternative investments as a house mortgage.

You cannot have a "perfect free market" when huge swaths of the population are simply not anywhere near as free as the wealthy and privileged swaths. See the top comments for details.

Side note: It's heartening that the HN community has evolved in the last 10 years -- the current top comments wouldn't have been at the top 10 years ago, or even 5 years ago. While I think there is still a long way to go, it has come far from almost unbridled worship of PG, libertarianism and "meritocracy".

> I have a sinking feeling the situation would quickly improve if ownership had per-person limits

Running an economy on feelings is a sure way to ruin an economy. People who buy multiple dwellings would be more than happy to rent them. Renting is good. It provides a liquid market to access housing. If the market is efficient, rent or buy should be a preference rather than a financial decision: The financial impact should be the same.

If people refuse to rent, or sell their property then you have something wrong with your economy (too much regulations, people are afraid of devaluation, etc...). You don't fix a structural problem of an economy by implementing a per-person limit to buy houses.

> Renting is good

[House] renting is only "good" for the people making a profit off it. For the actual renters it's patently absurd.

"Rent-seeking" is a term with negative connotations for a reason.

Argumentation by synonym, that's a new one!

"Rent" in an economic context refers to "any payment to an owner or factor of production in excess of the costs needed to bring that factor into production" (https://en.wikipedia.org/wiki/Economic_rent) as opposed to profits or wages: without a profit nobody would invest in anything and without wages nobody would work so these are both necessary costs. In a well-functioning market the monthly payment to your landlord is primarily a compensation for the cost of capital (profit) as well as administration and maintenance (wage), though of course if there's a bubble in the housing market, landlords will be happy to take advantage of that too (rent).

As someone who has had to move often for work and school, renting has been pretty good for me and my partner. What would the alternative be?

Someone who travels even more often (and I know several that do, due to business/a semi-nomadic lifestyle) would consider hotels and hostels to be pretty good for them, and yet I'd hope they'd still be able to understand that

- the hotel model is a poor one for general, large-scale provision of shelter, and - the arrangement is heavily biased in favour of the hotel owner.

I always ask people who rent to take some time - whether now, or in the next ten or twenty years - to calculate how much they have spent on rent so far and how much they are still projected to spend for the rest of their lives. And then consider that they get no tangible asset for the often mind-boggling amounts the total comes to; that, in fact, they may have actually paid for other people's houses several times over with nothing to show for it. The situation is somewhat tenable when the landlords actually own their properties outright, but in the modern real estate world they are more often just middlemen that shuffle money between the renter and the bank.

I wish more people would question why the provision of shelter has become such a runaway profit-making machine, but I'm not holding my breath.

You might need a subscription, but the NYT has a rent or buy calculator and it really depends a lot on the market and on your specific situation: https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

We recently bought the house we used to rent. If we would have continued to rent for 25 years, then, adjusting for inflation, that would cost us maybe 300K. That's a lot of money and you have nada at the end, you're absolutely right. But our loan plus interest plus insurance plus the leaky roof that is now up to us to fix plus 1% of your house's value for maintenance every year plus property taxes... napkin math puts it at 600K after 25 years. At that point it's ours, but meanwhile it will be harder for us to move if we have to, our monthly payment is twice what our rent was, and all of our savings are in the house so we have no money to invest in stock, less to save for retirement (tax-free) and less money if we decide we want to do something crazy like start a business. Psychologically it's a mixed bag as well: it's really nice to know something is yours, but you also start noticing a lot of things you don't like that previously you just didn't care about, and we're on the hook whenever something breaks down. We're happy with our choice, but surely you see that it's not a slam dunk in favor of one option or the other?

Interesting that for natural monopolies (water supplies, power distribution, telco, radio spectrum) governments tend to regulate and de-monopolise. For real estate it's almost opposite and oligopolies are protected.

When we were young my (now) wife kept jumping from job to job around the south east, and we'd move pretty much every year. As we were renting it didn't cost much to move - hire a van for a couple of days and job done.

However when we settled down with kids priorities changed, living close to a train station with good connections for work was less important, school catchment areas were, and the main importance is stability. The longest rental contract you can take in the UK is 3 years, after that who knows what will happen - maybe the owner will sell up, maybe they'll double the rent. A 5 year or even 10 year fixed mortgage gives certainty.

But the key thing is we wouldn't be able to rent if nobody owned properties they didn't live in.

It's a hard problem to tackle as it would have to be a national law but that goes into individual state jurisdiction. I would say if our goal is to increase affordable housing we just need more of it.

Ban renting of single family dwellings, but allow and encourage it where increased density is achieved (apartments, condos, multiplexes, etc). Owners of single family dwellings will scramble to convert their rentals to duplexes / multiplexes and create the additional inventory while companies acquire multiple properties to convert into apartment complexes.

It's very simple. If you have N house-seekers and M house-sellers then when N >> M: houses get expensive. Given it's hard to change N, raising M implies building more houses.

In the UK the equivalent of 'zoning' regulations keeps M low. Government 'help to buy' here exacerbates the problem as it directly increases N without directly increasing M.

The fundamental model here is musical chairs.

I'd still be renting if it wasn't for help to buy. The mortgage payment was the same as we'd pay in rent, so affordable, but saving up even a 10% deposit would have been impossible.

I'm glad you found a place, but I think this amounts to help to buy incrementing N.

Yes it lets more people without money buy houses, which I can see why socialists don't like that (same as they didn't like buying your council house - reducing dependency on the state)

The problem with the council house sell off was not replacing them on a 1:1 ratio -- for every house sold, a new one was built.

It also reduces the number of people renting, which lowers rental prices, which is also good.

It may increase the price of new houses for cash buyers. I have little sympathy for people that wealthy.

If you want to get more houses built, institute a land value tax. Taylor Wimpy owns 6,000 heactares of land. With just 25 houses per hectare, that's 150,000 unbuilt houses across the country. Assuming that a land value tax would replace council tax that would be about £1500 a year tax, or £225m a year in tax, maybe that would encourage them to speed up construction rather than building them at a rate that maximises profits.

> The problem with the council house sell off was not replacing them on a 1:1 ratio -- for every house sold, a new one was built.

At least you agree that there is a problem with supply.

> It also reduces the number of people renting, which lowers rental prices, which is also good.

Converting renters into buyers without building more housing reduces both the demand for and the supply of rental housing. This will not reduce rental prices.

> It may increase the price of new houses for cash buyers. I have little sympathy for people that wealthy.

Your sympathy is not required, but you should at least see how landlords paying higher prices for housing leads to higher rents for tenants.

> Converting renters into buyers without building more housing reduces both the demand for and the supply of rental housing. This will not reduce rental prices.

HTB is only available on new homes so not removing any stock

> Your sympathy is not required, but you should at least see how landlords paying higher prices for housing leads to higher rents for tenants.

Why? Someone is either willing to pay £1k a month for renting a place or not, they care not for the cost of the house they are renting.

> you should at least see how landlords paying higher prices for housing leads to higher rents for tenants

I owned a flat, I rented it out for the maximum amount of money I could get for it (balanced against other things like reliablity of tennant etc). It doesn't matter how much the flat sells for.

https://www.rightmove.co.uk/properties/75180448#/ sold in November 2006 for £150k, it's now worth about £320k, it's being rented out for £1k a month because people will pay £1k a month, it has nothing to do with how much it was bought for, only what people will pay.

> HTB is only available on new homes so not removing any stock

Okay, increasing the supply of housing will lower prices regardless of whether they are rented out or bought.

> Someone is either willing to pay £1k a month for renting a place or not, they care not for the cost of the house they are renting.

Sure, but landlords do care and won't buy property to make it available for renting if they don't expect to be able to cover the cost. This decreases the supply of rental housing, which means fewer options and higher prices for tenants. If they already own the property and can't manage to get tenants paying rent which represents a competitive return on their capital (i.e. the current market value of the property) then they'll sell to someone looking to either own the property outright or demolish it and redevelop some other form of property. Either way it removes the housing from the rental market.

> … now worth about £320k, it's being rented out for £1k a month because people will pay £1k a month …

So the owner is only getting a 3.75% return on their £320k investment. That's not completely terrible, but it still essentially has negative value compared to the opportunity cost of selling the property and investing the proceeds. This is not a sustainable situation.

> … it has nothing to do with how much it was bought for, only what people will pay.

That much is true. The original purchase price doesn't matter in hindsight. (Obviously it does matter when deciding whether the property is worth purchasing to begin with.) Aside from calculating capital gains/loss for taxes, what counts after the purchase is only what the property would sell for now, not the amount that was originally paid.

> So the owner is only getting a 3.75% return on their £320k investment. That's not completely terrible, but it still essentially has negative value compared to the opportunity cost of selling the property and investing the proceeds. This is not a sustainable situation.

They will charge what they can. If they aren't happy with the return, they can sell the house and invest the money in DOGE or whatever, that means more houses for people to buy, higher supply leads to lower prices, which is good (with very limited exceptions - mainly of those in negative equity looking to move or remortgage)

> Yes it lets more people without money buy houses, which I can see why socialists don't like that

Or libertarians, because government subsidies distort the market and all that.

> Taylor Wimpy owns 6,000 heactares of land.

UK has 25 million hectares of land, ~2m in the south east. The problem isn't Taylor Wimpy owning all of the unbuilt ones. The London greenbelt is 500k hectares. That's a more plausible bottleneck. Considering 'London greenbelt' is just one dimension of regulation on housing construction and Taylor Wimpy presumably owns land outside south east.

Wait, all mainstream economists put the blame on massive increase of regulation all around the developed world? I really doubt it's happened everywhere, from NYC, San Francisco, Los Angeles, Houston, Portland, Seattle to Berlin, Paris, Stockholm, Copenhagen, Oslo, München, Vienna, Brussels, Amsterdam and so on.

Everywhere housing prices went way up, I doubt everywhere had the same issues with regulations since the 70s.

Now let's talk about cheap credit...

Yes - GP is right. When they say regulation, they mean preventing market forces from building as much prices allow. This NIMBYism is a global phenomenon and the root cause.

All the other factors certainly contribute, but cheap credit only affects how much the most desperate buyer is able to pay. This becomes the limiting factor almost everywhere, meaning that prices would be equally unaffordable if credit wasn’t cheap.

Building much more is the only fundamental solution, as this will reduce the proportion of desperate buyers. But of course local democracy prevents that - meaning, the problem persists indefinitely and we’re only wasting time discussing it.

> cheap credit only affects how much the most desperate buyer is able to pay

I disagree with this statement, cheap credit allows banks to offer longer term mortgages and buyers able to afford a larger principal with the same per-month cost, pushing the prices upwards due to keeping payments low on a per-month basis, due to low interests and longer term plans.

This definitely pushes the price of all market upwards. It's a similar effect to tuition costs in the US, cheap credit, bankruptcy laws make them pretty safe for banks to take risk, flooding the market and allowing universities to hike prices.

Building is fundamental, but cheap credit has an upwards pressure in price, magnifying the effect.

All in all, I completely agree with your take on the solution. Build fucking more, population and specially cities have grown quite a lot on the past 3-4 decades, we still live with most dwellings built then than now.

I agree with you.

The interest rate is the "price" of money. Central banks controlling the interest rate effectively practice price controls for debt. Much has been written about price controls, but fundamentally they create inefficiencies. Unfathomable amounts of debt have been completely misallocated in pursuit of whatever the goal of interest rate control has been.

> This becomes the limiting factor almost everywhere, meaning that prices would be equally unaffordable if credit wasn’t cheap.

The point is that cheap credit (mortgage regulation) significantly raises the upper bound on this limit.

In the UK, house construction companies buy up huge tracts of land and then build at a rate that keeps house prices high.

Profit margin at the publicly listed UK house builders in around 30%

In the UK the governments of the 70s and 80s stopped building houses and started selling off their existing housing stock.

https://en.wikipedia.org/wiki/Housing_Act_1980

> By 2013, some tenants who had purchased their council flats, sold them later to speculators, investors or property companies. By 2013, a one-bedroom council flat that sold for £50,000 in the early 1990s, for example, had a market price of £250,000.[9] A tight housing market led to increased rent as construction of new homes decreased.[9]

I keep hearing people debate about why housing prices are so high but it confuses me. Didn't housing prices fall dramatically in the 2008 financial crisis? Didn't various governments put vast amounts of money into the economy in an effort to ensure house prices returned to their previous levels and continued to rise?

It seems as if high housing prices are an explicit policy of most major powers at this time.

> Didn't housing prices fall dramatically in the 2008 financial crisis?

No, not really.

https://www.statista.com/statistics/240991/average-sales-pri...

> Didn't various governments put vast amounts of money into the economy in an effort to ensure house prices returned to their previous levels and continued to rise?

No.

They put lots of money into the economy as Keynesian economic expansion policy, to combat unemployment.

House prices simply weren’t as dramatically effected as you seem to think. Check the statistics on the previous link if you don’t believe me.

No, housing prices didn't fall dramatically in the wake of the 2008 crisis. I mean, sure, they fell 33%, but they were still higher (compared to income) than at the beginning before the start of the 2000-2008 bubble, at least in the 80 years of records I can trivially look up.

That's true in the US and UK.

I'd contend that preventing massive asset depreciation, including housing, was an explicit policy of every major economic power in North America, Europe and China. I don't know, but suspect other major economic powers also participated in that, but I'm not as well versed.

(I should point out that in the 1950s it was just as large a multiplier of household income, but in that time we went from one wagerearner to two.)

Yes, exactly.

https://betterdwelling.com/canada-says-property-bubble-not-g...

Pretty much every mainstream economist defending the mainstream economy to preserve the status quo in that widening the income gap is a good thing for the mainstream economy you mean?

High housing prices is terrible for the economy. It's the cause of the decrease in worker mobility which is probably a big the part of the stagnation in productivity growth. Estimates put it at a full 10% of GDP lost.

There are actually loads of mainstream economists today who recognize and are looking to address the wealth gap. Most of the pushback I've read about has been objections that specific policies proposed to solve it have side-effects that create a whole new slew of problems.

Pretty much every economist thinks "high prices? make more!". That applies to housing too.

Which is then snapped up in a lot of cities (London SF Vancouver) by the newly rich from places like China / Russia as a way to get their money out of the country.

Buh... but the GDP went up? That's good right?

Spain and its empty 3.5M houses send you regards.

https://www.thelocal.es/20140225/spain-worst-in-europe-for-e...

The price of those houses should be 10% of what it is, but the problem is banks own them and if they reduce the price then their numbers look red. They are artificially inflated housing prices to keep bank bonds from plummeting.

So how do you fix this shit? We're basically fucked.

It's not like our government will get EU's permission to let the banks fail or something...

> So how do you fix this shit

The banks in question are essentially in agreement about prices and work together to keep them inflated. That's essentially cartel formation and needs to be prosecuted.

From a social standpoint, denying folks a roof over their head just because you want some numbers on a paper to look good should already mean that everyone ostracizes you. It's unquestionably evil.

I don't think our judiciary arm, which is supposedly independent from our government, but reality is much more messy than that, will do anything about this shit.

Revolving doors... and all.

Maybe change could be enacted on the local government level which is the power more easily sizeable by real people and not political drones, in order to hijack current zoning laws which as far as I know are heavily concentrated down to local adminstrations like -ayuntamientos-, which in itself seems to be what's making things more complicated as corruption is harder to spot there, even if it's more obviously done than at higher levels... Anyways...

Maybe a return to the ghost villages once a job is not easily found in a city but online, but remote seems hard to implement here locally on a culture level at least until a couple generations of older folks retire from management, where one could get cheap land and construct with fairly advanced and economically minded new construction processes, like 3d printing homes or whatever, maybe...

But at the end of the day, we're still fucked, paying high rents for small jails in highly contaminated city centres... One can only dream to retire on the countryside for now.

But there is nothing about pricing in there.

I mean, I'll be honest and share that I didn't know the housing regulations are so f-ed up in the US, but they are pretty complicated everywhere.

What drives housing prices is a deflation of living goods coupled with an inflation of luxury goods which makes finding safe investments for large sums of money with relatively high yields hard to find. This is driven by an increasing inequality gap, which makes rich people desperately trying to find more things to invest their money into. And they have found housing in urban areas is the safest bet right now. So houses are bought and sold for the millions in hopes somebody else buys it for higher prices or the area justifies the rent.

> But there is nothing about pricing in there.

Sure, but that part immediately follows - there was a good piece from a property developer working in Los Angeles (which has a lot of those kind of regulations) that was posted here a couple of months back. Because of all these regulations (parking minimums, max heights, setback requirements and so on), the only kind of housing that is profitable or even possible to build is luxury housing - the land costs x, the things that the regulations require cost y, you have to charge a lot more than the city's existing housing stock (most of which is grandfathered in) so you can only justify that by targeting the high end.

There is definitely speculation in the housing market, but most or all of the price rise can be explained by simple supply and demand. And since housing demand is fairly inelastic (everyone needs a house), a small amount of undersupply means a big increase in price.

Many things driving housing pricing (nothing is monocausal!), but the main thing driving housing pricing in the locations where people constantly talk about housing pricing (SFBA, NYC, London, etc) are restrictions on building. That's basically it. Housing is a relatively poor investment vehicle compared to broad equity market indices; the only reason you'd want exposure as a "rich person" to it is for diversification, and for that you wouldn't really care to buy in overinflated markets with significant political risks.

High prices are a symptom of poorly planned neighborhoods.

Homes in the US today are much larger than they were in the 1970s. About 2x as large! Per square foot, the average home is actually cheaper today than it was then, inflation adjusted, and this isn't even factoring in the modern 2.2% mortgage rates vs the 13% mortgage rates of those days.

Housing built small in the 1960's is still going for unaffordable for most rates in my area ...

At least in Canada (massive housing bubble now), if you look at median income and average house payment (not house price as payment decrease with decreasing interest rates), thy aren’t that different - it takes about the same amount of median income to own a house.

Not to mention illegal to build.

Square footage is more a function of what builders are willing to build than what people actually want. Try getting a 1200 sq ft 2bd/2ba built today. Builders will laugh at you. All they want to build are large mcMansions and 'luxury' apartments, because that's where the profit margins are. There are in fact, lots of people out there who are perfectly willing to live in smaller, cheaper homes, but they simply aren't built anymore. Anyone who wants this has to go buy a little house from the 50's or 60's.

Looks like the housing problem comes from the fact that average incomes have not been adjusted for inflation... which means the income of the rich have been over adjusted.

There was a house for sale close to where I live. It was at a fairly comfortable price, a normal family could have potentially gotten a normal mortgage for it and paid it over time, eventually owning it. It was a modestly sized house, perhaps around 70-80m² enough for a couple with one kid and a dog. It needed some repairs, not anything serious, but some work over time; and the homeowners could live in it, perhaps get some savings over the next 5-10 years before starting the costly repairs. I was hopeful. I did consider it, but I thought if I didn’t get it some other nice working class family could move into it.

Alas, no mortgage agency would loan for this property, there was no central heating system, and the roof was suboptimal. Only people that had $200k at hand could possibly consider it. And off course a cash offer came from a rich family who lived there for a week, did some renovations and sold it again for more then double the price, more then anything that a normal family could afford, even with a mortgage.

Things are bad indeed.

World population crossed 4B in the 1970s and 5B in the 1980s, now we are about to cross 8B in the next few years. I agree with your point about real estate becoming more heavily securitized, as well as being used as a method to escape capital controls. But, you cant ignore the fact that there are a lot more people both rich and working class competing for those major world city houses than there were 40 or 50 years ago.

But the problem is the supply of housing hasn't kept up with that demand due to artificial limits placed on the market. Single-family zoning has made it illegal to build more of the dense housing that's needed in cities today.

https://www.nytimes.com/interactive/2019/06/18/upshot/cities...

Note, that kind of zoning is US specific issue. The situation zoning wise is quite different in Europe. At the same time Europe also has a housing crisis.

Don’t most European cities have pretty strict building height restrictions? Of course that’s not as bad as banning multi family housing complexes completely but it does seem like basically the same core issue

Yes, but even with a 5 or 6 story limit you can fit 10x as many families living in the same area of land than you can with single family detached housing. The problem is that people that own these detached houses don't want to see more dense housing being built in their area because that will "ruin the community feel" aka lower their property values.

To play devils advocate, surely removing the artifical limits won't help in the long run as the city will just continue to spraw until it hits natural limits?

Most American and European cities are significantly less dense than their Asian counterparts. There's a long way to go before they reach any natural limits.

which comes back to the original question - people who are used to larger spaces prefer to continue having those larger spaces. So houses are more sought after, which causes apartments' prices to not grow, which causes fewer of them to be built (as not as high appreciation).

It's partially a cultural problem imho.

cough Grenfell Tower fire.

Lots of tiny Jerry built flats in tower blocks are not the answer - even more so when the rise of WFH is taken into account.

The answer is to update codes to require new buildings have sprinkler systems, and not to put extremely flammable cladding on the side of a damned building. We absolutely need to be able to build more medium density housing more easily.

New buildings do have to have sprinkler systems - it's the older ones that are the problem. You can add cladding to a 1970s building without having to update it to the latest fire safety rules.

Also it is illegal to put extremely flammable cladding on the side of a building. The problem was that if someone sells you "non-flammable cladding" and they are lying, nobody properly checks.

You are aware of all the problems of quickly built high rise tower blocks both technical and social.

Population in Germany has been pretty much constant since 1970. I'm relatively sure that this is true in many other developed nations too. A more important factor than total population is the fraction of people who want to live in a big city. Urbanization has been ongoing, because jobs have increasingly moved to urban centers. Real estate in small villages is quite cheap.

Its very similar in many european coutries. The problem is that cities are owned by someone else than people living in it. Many flats are empty because development cartels can wait long time before they rent it. This way they push the price and cost perception more and more. They will do so to infinity because they have monopoly.

If there is a cartel it is the government.

Pretty much every landlord (also developers) is out there to stab the other landlords in the back if they have the option, which they don't have. The price increase is purely driven by the availability of people who are willing to pay for the price increase and the landlords are not allowed to solve the problem.

I've heard this a lot, but is it true? I know some flats are empty because they're between tenants or being renovated, but how many are actually empty for years at a time? The idea that not earning any rental now (and paying tax on the place) in the hope that you'll bump up prices years down the line seems risky to me.

I am not sure. I know how is it in my city. It got bought out by few foreign companies. The property tax is not very significant compared to having much higher rent in a year for foresable future.

Don't forget if nobody is renting then nobody is "destroying" the property. That's other tactic. You reconstruct everything so its "too good" to be rented cheap. This way you lower the pool of "normal" flats so their prices go up to a point where the "too good" is the only option.

It's apparent from the increasingly huge differences between rent prices. Often times the longtime landlords who own maybe one building are renting so it makes them enough money to take care of the property + good profit on side and they are happy. They don't check market prices often and are 30%+ cheaper. The rent prices are completely fabricated with no relation to running costs or price of the property.

Of course you will renovate it and rent it out to the top earners. You know what else? You'll ask for the highest deposit allowed since it doesn't cost you anything and filters out the problematic tenants.

You can do it differently when you are on the other side of the table. However you'll soon find out that most of these things are done for a reason.

It's pretty obvious that it's done for gatekeeping. Besides that whole insulting idea that lower middle class will trash your property.

Much more important question is that who has the right to live in a city. Maybe most of the people living in there, people who give that city its purpose and take care of it, want older cheaper flats.

Maybe these companies misjudged their customers and are just forcefully trying to feed on peoples need to live somewhere.

It may be insulting to you, it might be true that you or the people you know would never trash a property and still at the same time some people in your demographic might behave like that. Since it's zero cost to exclude the whole group, that's what the owner is going to do.

People with money are not perfect or of inherently better character, the banker that does coke on Friday is just less likely to use the floorboards as kindling compared to a junkie with more congruent background.

Wow now you threw lower middle class into same group as "floorboards as kindling". It has not been my experience with renting out flat at all.

Username fits i guess.

Only about 1% of the flats in Berlin are empty. Rents have tripled in recent years.

The obvious solution is to build more housing. We know how to do that! The obstacle is politics, not technology or economics.

Not really.

Some countries have wealth tax. Some countries don't.

It's sensible to park your money somewhere, where it's not taxed.

If you build more of it, yes, you will meet some of the housing demand (basically just for the richest), but housing is competing with rich people saving.

You need to tax unproductive behavior to rid of it.

If housing values become stagnant or gradually falling, fewer people will use it as a store of value.

Edit: or even if there is a prospect of this being the case.

Jurisdictions in China have started taxing investment properties on a sliding scale that ramps up a lot the more properties you own.

They have also put heavy restrictions on bank lending.

Basically they are desperately trying to slow/reverse responsibly an out of control housing bubble.

That said they have unique cultural and geographical issues in terms of the sheer scale of their urbanisation

The obvious solution is to make renting out properties illegal.

Assuming we went this route, housing prices would obviously fall in spectacular fashion. What do you suggest is done with the houses already rented out, does the government buy them from the owners? If so is it at a fair market pre-announcement rate or at a rate that causes losses to the owners, if for a loss what happens to the economy when those losses hit? What happens to the banks that own those mortgages? In addition why would you not now have massive amounts of empty housing as banks refuse to lend to unqualified buyers?

In addition, how do you account for the massive drop in new development that occurs as much fewer new houses are built as the housing prices are being deflated due to investment being banned? What about apartment buildings?

All genuine questions I would be interested in hearing a solution too?

> In the 70s and 80s even 90s someone on a teacher's salary could own their own home in a major world city - say London.

You can still have that. All you need is a real estate tax. But nobody wants that. People don't want cheaper homes, they want to become part of the home-owner elite and get their own appreciating asset.

Property taxes in certain areas of the US (most of the East Coast, for example) are already ridiculous. You could buy a house in the midwest for you what you pay in property tax alone in New Jersey.

Is the property tax higher than the yearly increase in value of that real estate?

No, tax won't help. The reason is because the population grew and the amount of land available stayed the same. (Google London population growth charts).

How much of the increased housing costs is due to growth and how much due to lack of real-estate taxes?

Real estate prices are going up everywhere - including places with negative demographic trends.

Again, Google the population growth charts for London. It's been increasing since the 90's. Yet, there's still the same amount of space. Taxes will probably have unintended consequences, ripple down the whole economy. Another post-Brexit blow.

Exhibit A. A-Rod (Baseball player) owns 13k units: https://www.merlynnacquisitions.com/post/a-rod-owns-13-000-u...

True - I'm in my late 40s in London and accepted some time ago I will never own a home. If UK renters had the same protections as they do in eg Germany it wouldn't be such a precarious existence.

What is your opinion of the "Help to Buy" and "Shared Ownership" schemes in the UK?

https://www.moneyadviceservice.org.uk/en/articles/help-to-bu...

What protections are you lacking in the UK that Germans have?

I think its more than just that. I think less people are interested in actually owning their housing.

For me housing is the least thing i want to worry about, so i gladly rent and simply can fix any problems by calling my landlord who is by law obliged to keep the house in a liveable condition.

Also flexibility, i can move whenever i want without worrying about the value of my house (which in reality likely only looses value)

> I think less people are interested in actually owning their housing.

How do you reconcile this impression of yours with the fact that housing prices are shooting up in all major cities, and have been so for decades? Why is this happening if fewer people are actually interested in owning their own housing?

As a sidenote: in my own personal experience housing is the single major issue of all my close friends and family, but it's only an option for a small minority of them. In fact, I have never met a single person who was in the financial position to buy a house/apartment and didn't do so.

Simple, rich people looking for stable assets. I mean sure its not as simple as that but this is generally what is happening in my city. Old space with smaller houses is bought and built on by big housing companies. More and more space in the city is owned by a few big (some stock traded) companies.

I live in Switzerland and a lot of my social circle is in tech, so i know quite some people who have the financial means to own their housing but only few do. Most in the high income spectrum even use the flexibility of moving regularly.

I personally don't consider buying a house anytime soon either. I could prolly afford the house i rent, however i dont live near a city, i highly doubt the value would ever rise, more the opposite as the house is old and needs regular repairs. Buying the house would be like 350 times the rent, at least. Plus all the repairs are suddenly my problem.

But you lose the ability to continue to rent if the landlord doesn't want to continue, aka you can get kicked out.

And any costs to maintain a livable condition is going to just be added to the cost of the rent anyway, so it's not like you're actually saving money.

Buying as its own costs of course, and sometimes it's more cost effective to rent. The most unuseful answer, hence, is that it depends on the specifics.

I agree it really comes down to the individial situation.

However both points are kinda non issues due to our renting laws and the more or less standard contract around here. Getting kicked out only works with a reason, plus a prior notice from i think at least 3 months plus they are not allowed to increase the rent just for maintaining liveable conditions (i.e. repairs that have to be done).

But sure if you are willing to think and calculate in long terms (~30-50 years) buying often is the cheaper option. Yet comes with an additional workload (taxes, repairs, ...)

> who is by law obliged to keep the house in a liveable condition.

Depends on the country. In Poland, the landlord is only responsible for heavy/structural repairs (cracks in walls, broken windows etc.), while everything else, like clogged pipe, broken fridge etc., is actually tenant's responsibility by law, and they can be held responsible (witholding of deposit, lawsuit) if they neglect it.

In the US at least, I would put healthcare and education costs way above house prices as bigger problems.

The cost of healthcare is insane in the US. Recently had to put my family on cobra for a few months as I transitioned to a new job. $1500 a month for a family of 4. That is unsustainable.

You are right but homes is the only asset regular people can get a fair shake at and the government helps by making interest tax deductible. If you want to stop the rich from cornering the market on housing, you have to switch to a land tax instead of a property tax. Then you need to stop the NIMBY zoning nonsense.

A gas station attendant being able to afford a newly built house is a historical anomaly. The kind that only happens after half the population dying of plague or after a world war. The current trend is just a return to the normal state of affairs.

The rich outbidding poor people is not what is causing a housing shortage. There are only so many houses a rich person can occupy. Even if you assume that every rich person keeps a number of spare houses, there are not enough rich people to cause a housing shortage.

The problem isn't a "housing shortage". The problem is that interest rates are so low, so everyone who has a bit of money on the side tries to invest in the real estate market.

The result is that for every house thats sold, there isn't just someone who wants it as a living space, but also 5 people who want it as an investment. So 5 people outbid each other, the highest bidder gets it, and then the sucker who wanted to live there but couldn't afford to buy it ends up renting it.

The problem (at least where I live) is absolutely not that there's too little housing. The problem is that a lot of people want to make money from the real estate market, which drives up prices.

Also, because these investors really really want to make a profit, they'll rather let an appartment sit empty than charge lower rent. The appartement I live in was empty for a year because nobody wanted to pay the high rent. (I was able to negotiate a bit, but it's still pretty high)

Pretending that the people who use the real estate market as investment don't profit off the working class who can barely afford housing is laughable.

My brilliant* idea to solve the real estate problem is to tax the hell out of properties that are sitting empty.

Something like a 2x or 3x multiplier on property taxes or something, especially in densely populated areas, and especially in areas where there is rampant housing insecurity. The tax needs to be greater than the potential gamble of waiting for occupants. This should be both for residential and commercial use real estate.

*facetious

It's a myth that there are just a ton empty houses sitting idly like that. The reality is that the most expensive housing markets are also the ones with the least vacant. Even after a ton of people temporarily moved out of NYC during the pandemic, like me, the vacancy rate of NYC is still less than that of the entire US.

> It's a myth that there are just a ton empty houses sitting idly like that.

Maybe where you live. NYC and SF are special in that they have very powerful people working to reduce the construction of new housing. This is obviously what needs to get fixed first in those markets, but it isn't a relatable problem in most of the US.

> The reality is that the most expensive housing markets are also the ones with the least vacant.

This is a basic supply and demand observation, and does not preclude the existence of people who allow their properties to sit vacant for long periods of time.

Looks to me like in NYC the vacancy rate is up to 6% (from a previous steady 2-3%) while housing insecurity is increasing.

https://www.cnbc.com/2020/10/08/empty-rental-apartments-in-m...

https://cccnewyork.org/press-and-media/family-homelessness-i...

To my eyes this seems like a tragically dumb problem with several really obvious solutions.

This exists in Vancouver. Unfortunately, the richest people once again find ways out of it, such as claiming the unit is uninhabitable due to renovation, and proceeding with the slowest and most inefficient renovation process imaginable.

The solution is just a land value tax.

You don’t get taxed on improvements to the land, you get taxed on the value of the land (ie based on the value of the surrounding land... a vacant lot—or a lot being “renovated”—pays the ~same tax per acre as a 3 story apartment building next door instead of an order of magnitude less).

Not without pretty severe fallout for those on the other side of the equation. That same tax would force long-time homeowners and retirees out of their houses as soon as the neighbors start selling to build condos. Maybe this isn't a terrible thing if it leads to more density, but the profit still goes to the developer.

On the contrary, in your scenario, the profit goes to the retirees whose land is now super valuable. That they can’t afford to pay the wealth tax on that land without selling/mortgaging some of it doesn’t mean they’re not now very wealthy. A mortgage or a reverse mortgage would allow them to live the rest of their lives there if they really wanted to. But they’d have to pay their fair share of the tax on that wealth.

You could waive fees for primary residences and tax the hell out of investment properties. I don't understand why prop 13 in California didn't work this way.

Californians couldn't even majority vote last year to tax commercial properties at standard 1-1.5% rate, let alone investment properties...

https://ballotpedia.org/California_Proposition_15,_Tax_on_Co...

society still benefit from it

I've often thought this about those dark strip malls and grocery stores. They need to be incentivized to either lower the prices so low that someone will move in, or to demolish the building. Just marking it off as a loss every year while it slowly decays destroys the property values nearby.

That’s a zoning / central planning failure.

We have too much retail space in America and too little housing, but zoning has often made it impossible to repurpose the land.

I have a different idea that maybe I can get some feedback on here. Maybe it's really dumb for obvious reasons, so please tell me.

Construction companies that build residences are clearly creating value for society, so they should be allowed to make some kind of profit. Real estate agencies that buy property from construction companies are doing a very bad thing by renting them as "luxury" housing to people who otherwise have no choice since their livelihood is tied to an urban area.

Why not put a cap on the profit that can be made from a residence? Something like 5x construction costs, plus ongoing costs of maintenance. Suddenly, the "luxury" housing market is no longer suffocating all the affordable housing out of town since the property owner can't expect to rake in the piles of money every month.

If we say "no more profit after 5x" then buildings will constantly be torn down and rebuilt or otherwise "re-constructed" to reset the clock. Renting property has its own ongoing risks as any landlord will tell you, and we reward risk with (potential) profit.

Many buildings are "luxury" in that they cost 15% more to build but then ask for 50% higher rent. It's not hard to find buildings that were once "luxury" but are now kinda gross since the veneer has peeled off. But there's not enough competition in housing to force the rent lower.

What gets people fed up is the seemingly universal constant of rents raising 10% every year despite no additional investment.

The multiplier should be the number of empty houses owned.

So if you have house A that you live in, whose tax bill is $10K, and house B that's empty, whose tax bill is $7K, then your total tax should be $17K.

If you additionally have house C that is also empty, whose tax bill is $8K, then your total tax should be $10K + ($7K + $8K) x 2 = $40K.

If you additionally have house D that is also empty, whose tax bill is $5K, then your total tax should be $10K + ($7K + $8K + $5K) x 3 = $70K.

This would strongly incentivize against this activity of having one person or entity simply hoovering up homes and treating them like bars of gold.

> solve....is to tax

You won't solve sh*t. Just like the other gazillion times new taxes were introduced to solve something.

Well, I mean, unless your goal is to make the poor even poorer.

This is actually being tried, starting this month, in my area (https://www.bbc.co.uk/news/uk-wales-56293250)

Monthly council tax will double for properties that do not have occupants. This is due to my area having over 10% of houses being bought as holiday homes or investments that stay empty for most of the year.

In the UK, it's not just low interest rates, it's also that the rules on renting have made it more attractive for landlords and less attractive for tenants. For example, you used to need a good reason to evict someone, now you can just evict them whenever you like.

Once you moved in, increases in rent used to be regulated. Now a landlord can charge whatever they want after the initial period and if you can't afford it you have to leave.

Landlords used to have to maintain and fix the property. While they still do in theory, in practise they often just threaten one of the two options above to anyone who wants a repair done.

> Landlords used to have to maintain and fix the property. While they still do in theory, in practise they often just threaten one of the two options above to anyone who wants a repair done.

That's not very smart. So the current tenant leaves, and then what? Good luck finding someone else to rent the property at the original price without fixing the issue…

I agree with the premise of what youre saying. I dont think the ratio is 5:1, but probably more like 1:5 -- but -- more importantly -- doesnt this make it good for renters because now there are investment properties in an ample environment looking for people to rent?

I would argue that it is low interest rates AND low supply. If supply was sufficient then renters would just rent the houses which were purchased, possibly at a discount.

It does not as the new owner now has to have the rates high enough to cover the mortgage on the house he just purchased in a bidding war. moreover, the person that wanted to buy it and live in it is now priced out and has to pay rent and misses out on the asset appreciation.

To cover the mortgage, the owner has to pass it to the renter. If the renter could afford the rent, he can afford the mortgage, which mean he can probably afford the house in the first place. Sounds like the stupid people outbidding each other will lose money on the rent because renters are not outbidding each other.

> If the renter could afford the rent, he can afford the mortgage

This is not necessarily true. In Los Angeles, for example, the price-to-rent ratio is about 38, i.e. if you pay $1000 / month in rent for a place, buying a comparable place would cost you about $450,000 (38 * 12 * 1000). There are a lot of people who could afford to pay $12,000 / year for housing, but could not afford the down payment on a $450,000 mortgage.

For that matter, the interest payments alone mean that renting is cheaper than buying -- 3% interest on a $450,000 loan alone is already $13,500 / year, and that's before taking into account that you also have to pay property taxes (another $3,500 / year), maintenance (probably another couple thousand a year), and principle on the mortgage (about another $9,000 / year).

In less inflated housing markets, it is generally true that the cost of rent is similar to the cost of a mortgage, but that is definitely not true in all markets.

> ... which mean he can probably afford the house in the first place.

Not true. The people (or companies) winning the bidding war for these properties are paying cash. Normals don't have $900K cash laying around to buy a property originally listed at 550K.

You completely miss that a property that I purchase to live in will probably be both interest and loan while a property purchased to rent out will be interest only.

This means that someone buying it to rent out can get a loan for significantly more than someone looking to purchase, making it much easier to outbid them.

Not sure why you refer to the renter as "he", but anyway there are many reasons people cannot afford to buy a house such as living paycheck to paycheck, damaged credit, no collateral etc.

Nobody should have to rent.

Not even 18-year-olds fresh out of their parents' house with no considerable assets, employment prospects, or credit history?

Sure, why not?

...and this would be ameliorated with more housing. Real estate is only a good investment if there is tons of demand.

Well, real estate has always been one of the best ways to invest money. But the problem is that there's much more demand than there are supply in some places. If a lot of people wish to live in a specific place, then the price will go up, and vice versa. You could buy several houses in small cities for the price of only one house in Paris, for example.

The renter doesn’t hold the risk. They can walk away.

If you want the profit, then hold the risk.

If you want the freedom of mobility, then rent.

I see you've been rightly downvoted. In the US, landlords also hold little risk, especially if they are corporate. Renters are stuck by leases and in many states, have little recourse to do anything when the property goes bad and the landlord won't fix things.

>landlords also hold little risk

Feel free to expand upon the argument of real estate as a "little risk" investment.

>Renters are stuck by leases

Leases are on average, an order of magnitude shorter than mortgage loans. Less exposure, less risk. Your leverage is to walk away after a year.

Every year they have more equity they can just cash out and walk away. Worst case, they lose the property and their credit gets ruined, exactly the same thing that happens to any renters that have to break their lease. Landlords lose an investment, Renters lose a home and their kids might have to change schools, etc...

>very year they have more equity

offset by property taxes? Maintenance? Inflation eroding the value of the equity. Time/cost of managing the property. Potentially depreciating property values, depending on area?

I've been a landlord. It's a money sink. Tenants brought in cats (against the lease) that peed all over, making the residence smell unbearable. Had to completely rip out carpet, reseal the floors to get the smell out. Ripped out stair case railings.

It's far from "little risk". It was a time and money sink.

The area itself did not appreciate in value. So after all said and done, definitely lost money.

I'm glad to be done.

I didn't "walk away" like the renters could. I fixed the house, the damage that the renters caused, I assumed the very liabilities that the renters get to punt on. Their leverage in the deal worked in their favor that time. They get to just move on.

Did it break you? Did it damage your family? "After all is said and done", you lost money. You walked away.

How is any of that different then a renter where the landlord sells the home, raises the rent (they can do that every year or so), refuses to fix something (or takes forever to find the "best" price), or just starts doing some other crazy stuff? The risk seems pretty similar to me.

The renter does not lose a lot of money. The landlord may end up with enormous debt.

That's very difficult and unlikely to happen under US law. They probably have a corporate entity that will just cease to exist along with any debt. If they don't, bankruptcy or old debt will only impact their credit for afew years.

No different and probably more easily explained then an eviction. Try renting anywhere with an eviction. The risk is largely the same.

> If they don't, bankruptcy or old debt will only impact their credit for a few years.

The idea that you think someone could lose large amounts of money and not have it impact them personally or that there isn't personal fallout perplexes me. This feels like that episode of Seinfeld..

Kramer: It's a write off for them.

Jerry: How is it a write off?

Kramer: They just write it off.

Jerry: Write it off of what?

Kramer: They just write it off!

Jerry: You don't even know what a write off is, do you?

Kramer: No. Do you?

Jerry: No I don't

Are we talking business, or personal? Yes, it hurts; but the ability to mitigate that risk is there for any responsible landlord. The landlord has all the consideration about what type of property to invest in, how to structure their payments, how to increase rent or continue renting at old prices, etc.. The tenant has no ability once they move into a place.

All my experience is in the midwest, where there are essentially no renter protections.

> landlords also hold little risk

Landlords hold all the risk. There's risk of devaluation, risk of renters destroying property, risk of unexpectedly high maintenance costs, risk of insurance/taxes going up more than planned. If anything bad happens to the property, the renter can just walk away, the owner is stuck with it.

I'm not a landlord, sometimes look into it but every time conclude that the risks are far too high for what minimal profit it might bring. So I stick to index funds.

In what world are owners "stuck" with property? The bought an asset, the can sell an asset. Yes, they may need to absorb some losses, but probably not more then then several thousand it will cost a renter to move if the landlord does any number of things in addition to the risks you outlined above.

Yes, landlords have risk. My original point was that renters shoulder the same and more risk.

By "stuck with it", I meant stuck with the problem. e.g. flood damage renders the place unihabitable (nearly always not covered by insurance even), renter packs up and moves, owner is stuck with the problem and the expenses.

Rents are small portion of the overall loan size. They have a limited contract.

Less time and monetary exposure.

Renters incur less risk.

The amount a landlord is likely to lose is more then likely less then on years rent. The renter assumes the risk of one years rent and carries that, albeit diminishing, ever year they sign the lease. There are multiple issues that could cause the landlord to lose the house, all of which would also impact the renter. There are multiple issues that could cause the renter to lose their lease, only some of which impact the landlord.

The renter is more likely to carry the financial fallout longer, because they have no assets backing their risk.

Interesting video that makes some of the same points:

https://www.youtube.com/watch?v=EBb9zf_zWvU

If you think being a landlord is such a great deal, why don't you do it?

Some of us are not trying to get into the business of exploiting people with less money than us?

From your description, it seems to me that renting is cheaper than buying. So it seems renters get the better deal.

It's a pity if a flat is empty for a year, but that in itself also does not cause a shortage. After all, it was rented out after a year.

The market is supposed to deliver the flat to the person who needs it most. In that case, apparently it was you. Without the speculator, somebody would have rented it for a very low price long ago, and you would not have been able to live there at all. So maybe the market worked.

Debtors have to make even on their mortgage, at least, so an increase in prices also drags rental rates up - either because the landlord bought later and has higher costs; or because the increase in prices drives up property tax and thus increases costs on existing properties.

If the market worked, you'd see people building multi-family units everywhere until supply caught up with demand, and then you'd see a huge crater in prices as people who took a bath on real estate speculation were overrun with the resulting supply glut. This doesn't happen, for a host of various reasons. Governments want housing to be simultaneously affordable and an investment, which is impossible. Hence most cities wind up building a sort of shadow immigration system, through rent control, selective property tax moratoriums, and so on. People who have lived in a city all their life enjoy lower rents, subsidized by people who just moved in and have to buy at market rate.

A market working does not imply the creation of unlimited supply. Governments that restrict building are an external factor. Markets can only operate within those bounds. Since land for building is scarce, prices rise.

There are other factors, of course. Just speculation does not really seem to be a major one.

Key word here being "working". The market is literally hindered here by said government. The natural response to high demand for housing would be more housing and higher density housing. Zoning laws do a fantastic job of hammering that down.

Renter here. I have yet to find a person who pays a lower mortgage then I pay renting. Renting also goes up every year with little ability of the renter to arrest that increase. In my experience the renter is usually paying the full cost of the mortgage, plus a little to the landlord. The landlord has no savings or interest in improving or fixing anything past the bare minimum.

So why don't you buy? I am in the opposite position. I would like to buy something, but I can not find anything that would be worthwhile (mortgages lower than the rent I pay at the moment, or lower than rent I could ask for renting out).

Not GP but usually the big reason for not buying is that you either need a large amount down (20% in my market, or 10% + additional monthly "Mortgage Insurance" payments until you hit 23% ownership). Average home price in the "Greater Area" around the city (meaning you might still not live close enough to be able to use public transit) is currently ~$665,000 according to Zillow, which means you need to come up with ideally ~$133,000 to put 20% down, or ~$66,000 and pay a premium on top of your mortgage. Either way, this huge down-payment is in addition to the ~7-15k in closing costs you'll be paying. Even then, you're bidding against cash buyers who are willing to waive inspection, so good luck.

$70k-150k up-front isn't easy to save up for even above-average earners (remember, these are average home prices, not luxury homes), so anyone earning average or below is forced into either renting forever, or moving to another town.

Mortgages are generally cheaper than rents right now in the UK, provided you have capital put down for a mortgage

But how much capital? You also have to consider opportunity costs of putting down that capital.

Maybe if I put down one million and borrow another 300k, I can get a low mortgage. But I also lost one million.

Total return on the housing market has kept pace with the stock market in the UK for 20 years so there hasn't been much opportunity cost over here.

> There are only so many houses a rich person can occupy.

Do you really think that’s a factor? That the wealthy say “My family has all bedrooms they need, so I’m done investing in real estate?” PE firms buy up entire communities and repackage their mortgages into investment products. Foreign investors will buy property regardless of location and never step foot in it if it’s in a more stable country than theirs. Real estate investing is not about finding a place to live for the wealthy.

Then we should have a substantial land value tax. If they want to park their wealth in unoccupied housing, they’ll have to pay dearly for it. And they won’t get a cheaper bill by leaving it unbuilt or unoccupied.

It’s not just “rich people,” it’s “wealth.” Speculation in there housing market is a widely accepted contributor to rising housing prices: https://www.princeton.edu/~wxiong/papers/Speculation.pdf

It’s the second sentence on the page:

“We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”

The comment was about house owning, though. Owning a house is becoming more and more a thing for the upper classes, it wasn't always like this.

> Owning a house is becoming more and more a thing for the upper classes

Something like 60% of US people own a home. 30% even own their home completely outright, with no mortgage.

Obviously 30%, let alone 60%, of the population cannot be considered 'upper class', and 'middle class' is probably even a stretch.

The home ownership rate seems broadly stable since the 60s to me, with gentle ups and downs with the economy, so as well as saying home ownership is an upper-class or middle-class thing not being true it's also not the case that 'it wasn't always like this'.

https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...

4th paragraph of that Wikipedia article: "The name "homeownership rate" can be misleading. As defined by the US Census Bureau, it is the percentage of homes that are occupied by the owner. It is not the percentage of adults that own their own home. This latter percentage will be significantly lower than the homeownership rate because many households that are owner-occupied contain adult relatives (often young adults, descendants of the owner) who do not own their own home, and because single building multi-bedroom rental units can contain more than one adult, all of whom do not own a home."

> 30% own their home completely outright...

Which tells me that they likely bought their house over 30 years ago. Which tells me that they have been largely unaffected by the complaint you are responding to.

As someone in their mid 20’s with a tech job, it blows my mind that 60% of people own a home. I can’t imagine having enough money to own a home in a major city.

> I can’t imagine having enough money to own a home in a major city.

Who do you think owns the homes all around you, and in all the suburban streets around the city? Normal people like you. There aren't hundreds of elites living on every US street, clearly. They're just normal people who saved up over a few years or got a little helper money from their parents.

Don't forget, "or were lucky enough to have the opportunity to buy at a low point in the market."

I think you just don realize the scope of numbers you need to play with especially if you dont start with a reasonable amount in the first place.

Real estate is worse than crypto when it comes to speculation.I realized this myself when my property doubled in value in less than 2 years.

Sure, maybe right now when the real estate market is really hot, but imagine people in the market around 2009-2012 getting a really good deal on real estate.

Once you're in the market, it's easier to STAY in the market. If house prices go up, you'll have to pay more to move to a new house but this is an easier pill to swallow because your current house has increased in value.

The home ownership rate is a lot higher outside major cities. It's only 30-40% in most major US cities.

Regardless, at current (historically quite low) interest rates, a typical software engineer's salary will qualify you for a very large mortgage.

You'd be surprised. At 30, I saw many of my friends go from thinking they'll never afford a home to each buying one over just a few years.

Median house prices in the UK are 8x median incomes. Banks will lend you something like 4-5x income on a mortgage.

Low interest rates aren't helping most people, they're hurting by pushing up house prices. Only those with significant capital for a deposit benefit.

> Median house prices in the UK are 8x median incomes. Banks will lend you something like 4-5x income on a mortgage.

Most people buy as a couple, so this is achievable.

Until 1 parent stops working (entirely or goes part time) to help raise the kids

Yes, sorry, I was referring to the USA specifically. The real estate speculation problem is a lot worse in other Anglosphere countries (UK, Canada, Australia). Outside California, US prices are still somewhat reasonable compared to incomes.

It doesn't say 60% own a home in a major city.

> Obviously 30%, let alone 60%, of the population cannot be considered 'upper class', or even 'middle class'.

Huh? Why can't 30% (or 60%, for that matter) of the population be middle class?

Wikipedia [1]:

> The American middle class is a social class in the United States.[1][2] While the concept is typically ambiguous in popular opinion and common language use,[3] contemporary social scientists have put forward several ostensibly congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households.

[1] https://en.wikipedia.org/wiki/American_middle_class

One in three of people do not have middle class professions. Only about 35% of people go to college at all!

But anyway even if you don't agree with that, the original claim was that they were 'upper class'! Which is obviously ludicrous. You do not need to be an elite to own a house - drive down almost any suburban street in American you'll see people who own houses.

>the original claim was that they were 'upper class'! Which is obviously ludicrous

This goes back to the above post regarding the ambiguity around defining class. The traditional definition that I’m aware of uses quintiles, so “upper middle class” is defined as being within the top 20% (minus the top 1%-5% reserved for upper class). With this definition, the upper middle class will always be 15-19% of the population, on a sliding scale of income. This threshold comes out to about $87k/yr. at the individual level currently, I think.

But then people redefine that meaning. There was an article recently on HN saying the middle class is shrinking because more people are moving into upper middle class. They defined it based on absolute (as opposed to relative) income. But if you dig deeper into the research methodologies they normalized income so that a person making $58k/yr is equivalent to $100k if they are single. Magically, the threshold for upper middle class on an individual basis is reduced by 33%. (To be fair, they had reasons for this like the way poverty is defined by the government to factor in the number of people in a household).

I have a couple problems with this. 1) research indicates people are single, longer without kids because they feel less financially secure. It’s hard to square being single as a reason to be vaulted into upper middle class in that context 2) out of curiosity I took the average expenses for a mortgage, utilities, taxes etc. and tried to balance that against the $58k definition of upper middle class. In that case, if you have the average student loan debt you can’t afford the “average” American lifestyle even on an upper middle class income.

The point of all this being, we need to be careful about how we define economic class.

“If you torture numbers enough, they’ll confess to anything. “

My parents own a home. They bought it in the 70's for a fraction of what the land is worth now (inflation adjusted). My dad was a blue collar worker for Ma Bell, my mom a part time teacher.

Now break that 60% down by demographic. Also, the rate has been going down over the past 2 decades, and I'd wager it will continue to go down.

> the rate has been going down over the past 2 decades

No it hasn’t.

In fact it’s up since 1990! And about where it was as far back as 1970. It seems relatively stable to me?

The basic need for a house is something different than owning a house, though.

If owning a place to live is too expensive, it follows by logic that renting is cheaper than buying. Otherwise for the price of the rent, people could get a loan to buy.

So it really doesn't seem obvious that this is an issue of rich vs poor.

Um investments?

Invitation homes owns over 10k homes https://www.google.com/amp/s/www.newsweek.com/us-largest-pro...

In 2015, about 1/3 of vancouver homes bought were to Chinese nationals as investments https://www.fortunebuilders.com/one-third-of-vancouvers-real...

Rich people can charge rent on any number of houses, outbidding people in the edge of being able to afford owning a home

It is not just "rich" people.

In the UK there was a trend for Baby Boomers to buy up one or two (or more) properties and rent them out as a "nice little side income" etc in addition to their pensions at a time when savings interest rates were low, so there was no point saving (since returns were awful) and property loans were cheap. You even got a tax break on the loan interest!

These people are not mega-rich - just middle-class anybodies. I don't blame them - why leave large sums of money from your pension in the bank where you'll earn 0.05-0.5% interest a year, when you can spend it to buy a property that you can rent out for 5% yeild and benefit from property value increases if/when you need to sell.

The laws have changed a bit now to make it less attractive (no more tax breaks on loan interest, and more tax on "additional" properties you buy beyond your own personal home), and there is anecdotal evidence that "amateur" landlords are exiting the market in droves. Even so it has stoked the market considerably over a good decade or more, and so prices for even very modest "starter" properties (think 1 bed flats, small houses etc) are relatively unobtainable for the average person on the street or first-time buyer.

While this is fair, you forget that real-estate is an investment opportunity. Between flipping houses becoming cool and rental properties being a good investment, if you have an extra couple hundred thousand you can make a strong investment right now. So yes, if this is an investment strategy and you have enough capital, they can just buy up all the houses.

Established wealth leverages their outsize influence and power to ensure that new housing for the poors isn't built, so that they can maintain their lush and leafy, exclusive rich person neighbourhoods.

There's literal mansion districts in my major city, where not only is building an apartment illegal, but even building a small detached house is illegal. How on earth did that happen??

Exactly. Why is there no car shortage? Because politicians can't limit car production.

But politicians can (and should in my opinion) make car ownership less attractive.

Only by making public transit more available and reliable.

They are not buying the homes to live in, they are buying them to rent out as investments.

Less rich and more upper middle class (doctors, lawyers, etc) who are buying lots of properties as rentals.

This. 100% agree

You’re going to provide a source for a teacher owning a home in London in the 70’s, unless you mean far flung suburbs.

US cities like LA, SF, NYC have been very expensive for a long time.