This just isn’t true, it is only a contradiction if the type of housing remains constant, which it does in zero-development, extreme-construction-cost markets like San Francisco where public policy forbids the modification of (almost) any housing to increase density.
Here’s how it would work otherwise: 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 densification happened almost everywhere until zoning laws went crazy mid-century.
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.
The example I gave above is meant to illustrate this. “Housing” remains affordable — a family can still purchase a 1200 sqft unit in a desirable neighborhood for a reasonable amount of money.
But the value of a particular house or apartment grows our[acing inflation because (of course, assuming more people want to live in that area—which all housing price growth is predicated on anyway) the demand on land is high, and a developer can come in and increase density on any particular lot.
In other words, the cost of housing remains affordable while the cost of any particular house or apartment grows above inflation, because each particular unit reflects a claim on land, the comparatively scarce resource.
Everyone needs housing, but not everyone needs a detached single family home on a half-acre lot.
In other words, The piece that is missing from your assessment is that a house is two things: land and a structure on top; the value of the land can go up, ensuring a high return for the owner of the land+structure, even as new structures can offer fractional claims on that same land at a more affordable price.
I’m happy to dig in further here if I’m still not being clear!
The areas where housing is no longer affordable are the areas where you can’t buy any housing with the median income, not where the fanciest housing is inaccessible to the median income.
What form that housing takes (detached house, apartment in a duplex, then 4-pled, then larger apt building) will change over time as density increases.
Now comes prospective buyer C who can’t afford to live there unless new developer D buys and builds. However B is ok with their profit and doesn’t sell.
Unless you tax in a way such that the maximum capacity must be used (and that can be gamed easily) you’ll always run into this. This is the ideal situation but then incumbents will fight to change what maximum means.
The problem is that there’s no standard. If it were said that a living space must be 300sqft + 300 soft per person things would converge, but without that you get sprawl or comfortable density. A decent compromise is locale adjusted limits but then you run into the same original issue. Rinse and repeat.
Indeed, there have been proposals to address this!
In addition, to making something split into quarters each time it's "sold and redeveloped" isn't possible, as you'll run into a lack of space at some point. You could potentially do this one time.
Truth is, density is super nonuniform — when people fear “Tokyo” they just don’t want to live in Shibuya or Ginza, not the leafy outer suburbs that are still part of Tokyo metropolis, and are quite nice.
With the exception of Manhattan (70k/sqmi), probably all the USA could double in density — enough to support another 70 years of population growth — with minimal effect on neighborhoods. This is one story-houses in inner suburbs becoming duplexes, two-stories going to 4, etc. over the span of 70 years. You’d barely notice the change.
Instead, we’ve decided to engage in the largest-ever wealth transfer from younger, poorer Americans to older, wealthier Americans the country has ever seen.
Ahh, the future is bright.
Since the industrial revolution (at least?) people have got richer, so incomes have grown faster than inflation in the long term.
So it is sustainable for the value of property to increase faster than inflation, in that sense property can indeed a valid and sustainable long term investment.
But overall, in the long term the value of property cannot increase faster than incomes. Where it does this can only be temporary and a slowdown is unavoidable.
If the housing supply rises, this puts downward pressure on home prices, which means they stop being a good investment.
Consider a hypothetical where no new housing was built for a decade, and existing housing is wildly overpriced. If your thesis is correct, then someone buying on the last day of the building moratorium is not making a good investment, because prices will either drop, or stagnate right after they bought.
Unless you mean to tell me that the cost of housing is the same regardless of whether or not construction is happening... (Which would be a truly odd claim.)
The thing with good investments in that in a world of low interest rates, prices for them get inflated, as mountains of cash are trying to find some place to go.
I see this cliche often but it's simply wrong. Housing prices don't need to increase over time for housing to be a good investment, as long as the rental yield is sufficiently high relative to cost of capital.
Society wants stability and homeownership provides that.
So owning a home is valuable - add capitalism, land, time and you get an investment whether you want it or not
For current homeowners, one good way to preserve and grow the value of your home is to support policies that reduce new supply from coming on the market.
New supply is prevented from coming on the market through high costs and ever expanding rules and regulations.
Persistent low housing supply is the expected outcome when housing is treated as an investment.