Idea for fixing the housing shortage

[Jouhou]

Now it seems like it would be complicated to pull off and I hope there's a few lawyers here to weigh in on the feasibility:

First part: create a non-profit to develop and hold residential assets.

Complicated second part: Create an investment vehicle that can finance residential projects through crowdfunding. Basically create funding at an extremely low interest rate that won't return much more than inflation on top of the original investment. It's be like donating to charity except you would get your money back eventually and you could just reinvest it again.

The problem with that is I'm aware there are laws preventing people with a net worth below a certain amount (100k,200k, something like that) from directly financing real estate development. (Due to the potential of completely losing your shirt if things go south)

BUT I'm pretty sure I've seen crowd-fund style real estate investment before, so someone figured out how to get around the laws.

Hopefully if this is at all feasible someone with the ability to make this happen goes ahead and makes it happen.

It makes sense in my head, but it'd require a lot of people with specialized skills to make it happen, particularly lawyers.

 

[JumboBuc]

You're thinking in terms of a microeconomic solution, but this is a macroeconomic problem.

The issue with the housing shortage isn't a shortage of financing. There is plenty of capital available for housing. With the exception of government debt and highly-rated corporate bonds, mortgage debt is just about the cheapest debt available. And rates have been very very low lately (at times, not all that much higher than inflation).

The current housing affordability crisis is the result of there not being enough vehicles (i.e., houses or potential houses) in which to put all that capital. When increasingly available capital looks for assets that aren't similarly increasing in availability, prices go up. This is why low mortgage rates (i.e., lots of available capital) makes housing prices go up, not down. In fact, the primary criticism of the low rate environment we have lived in since the Great Recession is that it has led to inflated asset values (stocks, real estate, you name it). Capital markets have been flush with cash, and there haven't been enough investment vehicles in which to store it.

The only way to address the housing shortage is to construct more housing, and the only way to do that is to loosen regulations that prohibit the construction of housing. Adding more money to the mix without allowing more construction will only make prices increase even further.

Plenty of existing non-profit housing organizations do have a lot of money, and all they end up doing with it is buying existing properties. They do this because public policy makes it just about impossible to use that money to build more housing in their communities. A non-profit buying up existing housing might protect the rent from increasing for the residents of those properties, but it does absolutely nothing to fix the underlying housing shortage (and actually puts additional upward pressure on housing prices). Building more housing would put downward pressure on rents across the market; protecting rents in existing housing only puts downward pressure on the rents in the specific protected properties.

 

[Jouhou]

So I guess we're back at square one then? How do we convince NIMBYs that current policies are causing people to suffer? Especially the ones who own property and are oblivious to Renter's woes?

 

[vanshnookenraggen]

So I guess we're back at square one then? How do we convince NIMBYs that current policies are causing people to suffer? Especially the ones who own property and are oblivious to Renter's woes?

End capitalism. For generations the middle class was sold the idea that owning a home is an investment. So how can you ask homeowners who are seeing their investments grow in value support building more housing which will limit their return? This goes the same for landlords, most of whom are not large corporations which can dictate high prices but mom-and-pop style who barely eek out a profit. Now all of a sudden the market is hot! So why dilute their product?

This is exactly why the suburbs worked and were such a good investment for so long. Highways were relatively cheap to build throughout the country side and farmers were cashing out so middle class families could build an investment. At the same time you had red-lining which was driving these buyers away from the cities and out to the cheap new land.

The problem now is two-fold. First we see that we can't keep building new roads and new subdivisions without some serious environmental destruction and creating unsustainable commutes. Second there is the renaissance with the city. Young people want to live there because it's where the best jobs and the action is and now older folks want to retire to a place where they can walk and feel young (since people are living longer and healthier than ever).

Now I'm not suggesting we get rid of capitalism but that's the underlying issue. Until you understand how a landlord thinks there is no use coming up with "solutions". But a recent CityLab article put it plainly: you can't have homeownership and affordable housing.

Something else to consider is that you can't just build more housing and call it a day. Older cities have ancient infrastructure, from schools to sewers, water mains, and transit. The brilliance of the suburbs was these were all new and paid for by the new owners. Cities disintegrated and while we've spent generations now fixing up old inner cities we've really only touched the surface. You upzone some neighborhood and the population doubles but you haven't added new sewers or water mains so the place becomes unsustainable. So if you build all new housing you need to take something off the top to pay for the infrastructure... if you're smart, which so many cities don't appear to be. So that, tacked on to the fact that new building cost more to build by definition, means that building more housing has a higher cost curve, thus limiting its affordability.

Sure the government could give developers tax incentives to build infrastructure but this only works in the limited space near the development. You can't fix a water main in pieces. Not to mention that demand is never equal so you end up having the rich side of town with working pipes and the poor side with lead in their water.

At the end of the day we are all going to have to pay more for what we want. Tax breaks might make that reality less painful but it's no guarantee that we will chose to reinvest that money. More likely we might keep rent stable but have to pay more in utilities.

 

[Jouhou]

End capitalism. For generations the middle class was sold the idea that owning a home is an investment. So how can you ask homeowners who are seeing their investments grow in value support building more housing which will limit their return? This goes the same for landlords, most of whom are not large corporations which can dictate high prices but mom-and-pop style who barely eek out a profit. Now all of a sudden the market is hot! So why dilute their product?

This is exactly why the suburbs worked and were such a good investment for so long. Highways were relatively cheap to build throughout the country side and farmers were cashing out so middle class families could build an investment. At the same time you had red-lining which was driving these buyers away from the cities and out to the cheap new land.

The problem now is two-fold. First we see that we can't keep building new roads and new subdivisions without some serious environmental destruction and creating unsustainable commutes. Second there is the renaissance with the city. Young people want to live there because it's where the best jobs and the action is and now older folks want to retire to a place where they can walk and feel young (since people are living longer and healthier than ever).

Now I'm not suggesting we get rid of capitalism but that's the underlying issue. Until you understand how a landlord thinks there is no use coming up with "solutions". But a recent CityLab article put it plainly: you can't have homeownership and affordable housing.

Something else to consider is that you can't just build more housing and call it a day. Older cities have ancient infrastructure, from schools to sewers, water mains, and transit. The brilliance of the suburbs was these were all new and paid for by the new owners. Cities disintegrated and while we've spent generations now fixing up old inner cities we've really only touched the surface. You upzone some neighborhood and the population doubles but you haven't added new sewers or water mains so the place becomes unsustainable. So if you build all new housing you need to take something off the top to pay for the infrastructure... if you're smart, which so many cities don't appear to be. So that, tacked on to the fact that new building cost more to build by definition, means that building more housing has a higher cost curve, thus limiting its affordability.

Sure the government could give developers tax incentives to build infrastructure but this only works in the limited space near the development. You can't fix a water main in pieces. Not to mention that demand is never equal so you end up having the rich side of town with working pipes and the poor side with lead in their water.

At the end of the day we are all going to have to pay more for what we want. Tax breaks might make that reality less painful but it's no guarantee that we will chose to reinvest that money. More likely we might keep rent stable but have to pay more in utilities.

No,you build more housing and run to put out the next fires of transit and infrastructure. We don't have a choice at this point, this is what happens when a city decays for decades and is suddenly needed again. So let's stop pussyfooting around it and start diving in NOW. No more damn studies on what we could do. A crisis demands we get on that issue and take care of it, consequences be damned.

 

[TallIsGood]

We have underinvested in housing (i.e., built less units) than the increases population and jobs would require. Remember that the decrease in average household sizes means we require more units to house the same number if people.

 

[DominusNovus]

End capitalism. For generations the middle class was sold the idea that owning a home is an investment. So how can you ask homeowners who are seeing their investments grow in value support building more housing which will limit their return? This goes the same for landlords, most of whom are not large corporations which can dictate high prices but mom-and-pop style who barely eek out a profit. Now all of a sudden the market is hot! So why dilute their product?

This is exactly why the suburbs worked and were such a good investment for so long. Highways were relatively cheap to build throughout the country side and farmers were cashing out so middle class families could build an investment. At the same time you had red-lining which was driving these buyers away from the cities and out to the cheap new land.

The problem now is two-fold. First we see that we can't keep building new roads and new subdivisions without some serious environmental destruction and creating unsustainable commutes. Second there is the renaissance with the city. Young people want to live there because it's where the best jobs and the action is and now older folks want to retire to a place where they can walk and feel young (since people are living longer and healthier than ever).

Now I'm not suggesting we get rid of capitalism but that's the underlying issue. Until you understand how a landlord thinks there is no use coming up with "solutions". But a recent CityLab article put it plainly: you can't have homeownership and affordable housing.

Something else to consider is that you can't just build more housing and call it a day. Older cities have ancient infrastructure, from schools to sewers, water mains, and transit. The brilliance of the suburbs was these were all new and paid for by the new owners. Cities disintegrated and while we've spent generations now fixing up old inner cities we've really only touched the surface. You upzone some neighborhood and the population doubles but you haven't added new sewers or water mains so the place becomes unsustainable. So if you build all new housing you need to take something off the top to pay for the infrastructure... if you're smart, which so many cities don't appear to be. So that, tacked on to the fact that new building cost more to build by definition, means that building more housing has a higher cost curve, thus limiting its affordability.

Sure the government could give developers tax incentives to build infrastructure but this only works in the limited space near the development. You can't fix a water main in pieces. Not to mention that demand is never equal so you end up having the rich side of town with working pipes and the poor side with lead in their water.

At the end of the day we are all going to have to pay more for what we want. Tax breaks might make that reality less painful but it's no guarantee that we will chose to reinvest that money. More likely we might keep rent stable but have to pay more in utilities.

‘End capitalism’ and ‘I’m not suggesting we get rid of capitalism’... that doesn’t leave us much left, does it?

I’ll point out that Houston never seems to have much of a housing crisis. I won’t suggest that adopting Houston’s policies is the best solution for Boston, but it is a solution.

 

[Justin7]

^ "How can we increase land area tenfold while simultaneously doing the opposite for desirability?"

 

[Jouhou]

Uh, I think Houston and the surrounding area started reconsidering some of those policies after Harvey. (Suburban sprawl was blamed as a contributor to the severity of the flooding) Bad example?

There is so such thing as less zoning laws and regulation without removing them completely.

 

[tangent]

Uh, I think Houston and the surrounding area started reconsidering some of those policies after Harvey. (Suburban sprawl was blamed as a contributor to the severity of the flooding) Bad example?

Boston would have had likely had even more catastrophic flooding than Houston with half the rainfall as Harvey. Houston has flooding issues that probably can and should be addressed, but Harvey was an outlier in the extreme. It is hard to conceive that any urban area could absorb that much rain in that amount of time without extreme flooding. There simply isn't the physical time and space to get all that rain into a large enough body of water or absorb it into wetlands.

 

[tangent]

I just go back to this idea of a housing shortage... Do we have a housing shortage or are we just trying to fit too many people into select metropolitan areas? I say we are just trying to fit too many people into these select major metropolitan areas.

Our economy has become much too trickle down and focused on these major cities. I know more recently there has been some resurgence of smaller cities, but still you see people advocating for making these huge per capita investments in already saturated urban areas when other urban areas can grow much more economically.

 

[JumboBuc]

I just go back to this idea of a housing shortage... Do we have a housing shortage or are we just trying to fit too many people into select metropolitan areas? I say we are just trying to fit too many people into these select major metropolitan areas.

Our economy has become much too trickle down and focused on these major cities. I know more recently there has been some resurgence of smaller cities, but still you see people advocating for making these huge per capita investments in already saturated urban areas when other urban areas can grow much more economically.

We have a housing shortage where productivity and opportunity are greatest. And this housing shortage is worsening and expanding outwards every day.

Sure, in a perfect world the per capita economic output of, say, Buffalo, Youngstown, and Memphis would be no less than that of, say, Boston, San Francisco, and Seattle. (The same could also be said, in a perfect world, for Sana'a, Mogadishu, and Tegucigalpa.) But that's not the world we live in. Opportunity and productivity is not distributed evenly, and the places where opportunity and productivity are most plentiful are severely short on housing. This housing shortage makes it increasingly difficult to access that abundant opportunity if you don't already have access to it, furthering inequality. And this housing shortage is a product of public policy which has been specifically designed over the last sixty years or so to perpetuate this inequality.

Would it be a good thing for America if a bunch of successful industries decided to shift away from educated coastal metros and to under-capacity cities in, say, the Rust Belt? Yeah, it would be. But that's not going to happen. Successful companies seek out high-quality labor, and high-quality labor seeks out successful companies. These capital-labor matches take place where they take place, and it's really difficult to get both employers and employees to decide to move, on their own free will, to places where they are not.

It's also important to note that the greater opportunity available in thriving cities is not confined only to those with skill sets that are highly desired by 21st century employers. Just about all trades have more opportunity and earn higher wages in thriving cities than they do elsewhere. Even if you bus tables or stock shelves or empty trash cans, you have significantly more opportunity to gain employment and earn higher wages in places like Boston than you do in most of the country. The problem is that Boston is so short on housing that this greater opportunity and higher wages are offset by sky-high rents. This housing shortage keeps out the labor Boston needs - both skilled and unskilled - and confines that labor to places where it does not realize its full potential.

 

[fattony]

I just go back to this idea of a housing shortage... Do we have a housing shortage or are we just trying to fit too many people into select metropolitan areas? I say we are just trying to fit too many people into these select major metropolitan areas.

Our economy has become much too trickle down and focused on these major cities. I know more recently there has been some resurgence of smaller cities, but still you see people advocating for making these huge per capita investments in already saturated urban areas when other urban areas can grow much more economically.

I think it is fair to say the experiment with low-density communities has just about run its course and we've seen the outcome. Remember the American suburb is an anomaly compared to most of the rest of the world and an anomaly in the course of human history. Whether you like it or not, there ARE benefits to businesses co-locating and businesses are not going to reverse that course anytime soon. Good jobs clump together into good job-markets. There is a critical mass threshold that makes the difference between Anywhere USA (which may have good jobs and sustains a middle class community) and the few areas that are economic powerhouses. Of course, there are a few exceptions that prove the rule like Los Alamos or Huntsville, where an external force like the government creates an isolated nexus of powerhouse jobs.

My argument against your position is that the primo metros that are increasing density aren't all that dense to begin with. The densities of places like Paris and New York are 4-5 TIMES the density of Boston or San Fran or DC. We aren't exactly going to extreme of what is reasonably possible by increasing population by a few percentage points. We are trying to build a metro area that absorbs the demand to work here and simultaneously supports a sustainable development pattern based on a high percentage of transit users. I don't think that is too much to ask and I don't think it unreasonable.

I truly believe there is a stable, sustainable population density for Greater Boston and that indefinite growth is not going to happen. However, I truly believe that we are nowhere near that point yet and that growth can and will continue unabated for decades to come.

 

[JumboBuc]

Of course, there are a few exceptions that prove the rule like Los Alamos or Huntsville, where an external force like the government creates an isolated nexus of powerhouse jobs.

Count me as one who would be fully 100% supportive of a concerted effort on the part of the Federal government to relocate specific agencies away from places like Washington DC and to cities with more spare capacity and lesser economic prospects. Matt Yglesias, for one, has written about this. There's no good reason for the Federal workforce to be as geographically concentrated as it is. Plenty of agencies are big enough and autonomous enough to have the "critical mass" to support themselves wherever they're located. The CDC is a great example of how this can work; it functions perfectly fine in Atlanta, far away from the rest of the Federal workforce. Other "independent" government agencies could also thrive in cheaper cities outside of the Beltway if the Feds decided to let them go.

 

[HalcyonEra]

You have to like what Minneapolis is trying to do here.

I think the pitch folk nimby's and their corrupt politician brethren would never allow such universal upzoning to even be discussed let alone brought to a vote, but at least some metro areas get it.

https://www.curbed.com/2018/11/27/18113208/minneapolis-real-estate-rent-development-2040-zoning

 

[jklo]

I think it is fair to say the experiment with low-density communities has just about run its course and we've seen the outcome.

Have to figure a lot of that is due to the College Kids/Millenials don't want/can't afford kids, and really have to be single and live with roommates. Doing that in the burbs would be pretty difficult. They certainly couldn't afford to maintain a SFH, even if it was free.

Maybe Boston should be doing more to encourage higher levels of person/unit utilization. And of course build a ton more towers. I totally agree that Boston isn't anywhere near as dense as it could be.

Would it be a good thing for America if a bunch of successful industries decided to shift away from educated coastal metros and to under-capacity cities in, say, the Rust Belt

There were a ton of companies that have done just that... thing is they moved the work to India and China.

 

[bakgwailo]

You have to like what Minneapolis is trying to do here.

I think the pitch folk nimby's and their corrupt politician brethren would never allow such universal upzoning to even be discussed let alone brought to a vote, but at least some metro areas get it.

https://www.curbed.com/2018/11/27/18113208/minneapolis-real-estate-rent-development-2040-zoning

That is pretty interesting. I feel like here, though, it would only matter if it could apply to the entire urban/metro area. Boston can only do so much on its own for the housing crisis.

 

[stefal]

Whether you hate the world 'blockchain' or not, there are some pretty interesting ideas and concepts in this. In essence, a pool of investors pays directly to the architect to design the residence, and the houses essentially operate themselves. It's Jouhou's idea, but for-profit, ultra high-tech, and risky. Whether this would help alleviate the housing crisis, I'm not so sure, but it does, in a sense, eliminate developers, which a) could improve the aesthetics/architecture & design and b) in the model, he notes the potential for architects to gain equity in the project as they work on it, potentially bringing architects' incomes up substantially.

I've read here and elsewhere that we shouldn't bother taking a technical approach to a political issue, and yes, while a great portion of the housing crisis is tangled in politics, while every other industry has advanced tenfold with the advent of technology and automation, what major advancements/innovation have we seen in construction and civil engineering? The field seems to move at a snail's pace.

 

[JumboBuc]

There were a ton of companies that have done just that... thing is they moved the work to India and China.

Employers go where suitable workers are abundant. If you're a low wage employer looking for low skill workers, you'll find tons of them in China and India. The employers that moved to these markets did so because the labor was already there.

But the industries thriving in today's high cost metros are not looking for cheap labor. They're looking for labor with a specific (expensive) skill set. That type of labor can be found most easily in high cost metros, so that's why employers locate in these metros. If the companies that occupy Kendall Square could find the workers they need in Detroit (as other companies have found the workers they need in Tianjin) you can be sure that those companies would locate there. But they can't.

In order to move high wage industries to lower cost metros with spare capacity, both the employers and the labor would have to make the move. For a private sector employer in a competitive environment, that's very hard to pull off. When companies move to India or China they going where the labor already is, not pushing it to move with them.

 

[JumboBuc]

Whether you hate the world 'blockchain' or not, there are some pretty interesting ideas and concepts in this. In essence, a pool of investors pays directly to the architect to design the residence, and the houses essentially operate themselves. It's Jouhou's idea, but for-profit, ultra high-tech, and risky. Whether this would help alleviate the housing crisis, I'm not so sure, but it does, in a sense, eliminate developers, which a) could improve the aesthetics/architecture & design and b) in the model, he notes the potential for architects to gain equity in the project as they work on it, potentially bringing architects' incomes up substantially.

But all the best architectural planning in the world will amount to nothing if you aren't allowed to put it anywhere.

I've read here and elsewhere that we shouldn't bother taking a technical approach to a political issue, and yes, while a great portion of the housing crisis is tangled in politics, while every other industry has advanced tenfold with the advent of technology and automation, what major advancements/innovation have we seen in construction and civil engineering? The field seems to move at a snail's pace.

The issue with construction and civil engineering is that they are bound by the simplest laws of physics (like, the Newtonian stuff you learn in the first week of physics class in high school). This makes major advancements and innovation really hard. There certainly have been incremental improvements, but standards rise with them so in the end the efficiency gains aren't as noticeable (e.g., elevators, sprinklers, and central air are great, but then we basically require every building to have them at great expense so when it comes to productivity it's a wash). We've seen huge advances in areas like telecommunications and computer processing and medicine because there exists huge amounts of room for improvement in those fields without running into the most basic physical restraints. None of those fields deal with the physical locations and movement of people and tangible goods. Fields like construction and civil engineering (and transportation) do run into these physical limitations. The basic functionality of a computer or pharmacy in 2018 is vastly superior to those from 1968, but a bridge, jetliner, train, or house works just about the same today as it did then with just a bit more polish. This is because at the end of the day, you can't build a house in the cloud or engineer a commute in a laboratory. Construction and transportation take up physical space on a crowded earth and are subject to same constraints of inertia and gravity as always. Telecommunications, microchips, and pharmaceuticals don't have to worry about those pesky laws of Newton.

And to your point on politics, no amount of technological innovation will ever make it easier to get people to agree on shit.