Some interesting historical context on construction costs:
100 years ago the cost of construction was about $45/sqft when adjusted for inflation and today it is closer to $220/sqft, approximately 5x the cost. Blue collar wedges are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.
The 1914 sears Model 147 house was 900sqft and cost $872 for materials, estimated at $1,530 with labor.[1] Adjusting for inflation from 1914 to 2020, that is about $22,000 for materials and 40K with labor.
Looking at 1913 US national labor statistics, the average baker in 1913 San Francisco worked 54 hrs/wk and made $0.46 per hour for an annual wage of $1,291[2] (or 33K in 2020 dollars)
The median baker in 2020 California makes 36.5K/yr [3]. The cost of new housing construction is $220/sqft[4], or 200K for the same size house.
The standard of construction has also changed since 1914. Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book.
A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.
Quality lumber is incredibly expensive now compared with 1914. I owned a 1910s-construction house for a while, and they used huge, thick wooden boards around the foundation where the structure met the stone-and-mortar basement walls, and in the floor joists (visible in the basement), and in the diagonally-run underfloor boards (used where we'd use plywood, today). Nearly knot-free, perfectly straight, that stuff would probably be put aside for high-end fine woodworking or even veneer-making, now. It was beautiful stuff and they stuck it under the floors. The ones around the walls must have been something like 8"x14" or bigger, and tens of feet long. Nearly-flawless pieces of lumber. I assume the wood used in the wall framing (some pieces likely three stories long—it was a balloon-construction house) was similarly astoundingly-good by modern standards.
That stuff was, evidently, so cheap from the perspective of people in the 1910s, that they didn't think it worth any amount of effort to sub in worse wood for places where looks didn't matter. These days, some of that would be hard to find at any price, short of salvaging it from old buildings like that. And that's the "crap" they put under the nice wood they used for finishing!
OTOH we do have drywall, which has got to be cheaper in pretty much every way than lathe-and-plaster.
I live in Canada, where we are swimming in lumber (in theory). I just don't understand why it is so expensive. I know the processing and treatment is very sophisticated but there is so much automation throughout the whole chain. My only explanation is that lumber is a globally traded commodity .. price isn't determined by just Canadian demand for lumber but the global demand.
It makes me wonder .. if the US shutdown Canadian wood imports, would that significantly lower prices for Canadian consumers? How low would it go?
my un-schooled guess is simple - the rest of the industrialized world has benefited from profit markups in real dollars of today - that fun book or skateboard was priced in modern terms.. while lumber is a commodity from the previous century or three.. their dollars and costs were low to start with, and were pressed down by commodity markets.
I once asked a recent undergrad in Economics graduate, at a party, why one pound of bread costs more than one pound of meat (the inputs and processing costs are vastly different, through the life of the animal, the meat should be way, way more) but, blank stare, more beer.
I for one believe that most of the markets, most of the time, make no sense at all from the perspective of the real natural inputs, and all the sense in the world from the point of view of one human group selling things to another human group, any way they can; old timber included.
Bread doesn't seem like the best example here, because the finished product is not dense, can't be smushed, and has to get shipped to the store. Transport plus the shelf space (and rotation) can explain most of the price.
If you look at pure flour, rice, beans, pasta, and stuff like that, there are lots of cases where it drops from prepared-foods price down to something closer to its commodity value. Looking up rice, it goes for $14/c.w.t., which I think translates to a little over $0.10 per pound. You can't buy it at that price, but you can buy a literal 1 lb bag of the bad rice for $1.00. Consider larger quantities and you'll probably see an asymptote to a reasonable multiple times the commodity value.
Meat will not follow those rules. The floor for meat is much higher due to the physical inefficiency of production. Even at that higher price floor, there are huge untaxed externalities. A lot of people know the reality that we have to eat a lot less meat due to halt climate change. I think there is a strong business and social culture for businesses to move meat at close to its price floor, with business models like fast food.
as a consumer, I will walk to the corner store here in the California city, and I will check the price of a loaf of ordinary bread, and the price of a pound of ordinary meat, again today or tomorrow. Not "the cheapest rice by the ten pound bag" .. or "chicken parts whole in a ten pound bag" I believe my point stands.. yes, there are layers in the consumer markets.. times one hundred for a fast food meal, too.
Where is a pound of meat cheaper than a pound of bread?
Either way, no offense, but your economics grad needs to re-take some basic classes. To simplify, input costs only establish a floor on prices. Otherwise, prices are set by dynamic market supply/demand curves.
>It makes me wonder .. if the US shutdown Canadian wood imports, would that significantly lower prices for Canadian consumers? How low would it go?
It probably wouldnt go low because you are not recognising global demand and a growing global population, cost of automation for factory (automated built) furniture, bespoke furniture by individual or small teams of carpenters, cost of transporting wood to other countries where costs are different.
Here in the UK we have this place https://www.oakfurnitureland.co.uk/ it does real solid (oak) wood furniture, not some furniture made of chipboard.
It seems quite cheap but there are visible cost savings, like the furniture isnt that big, its suited to smaller homes than some grand mansion or luxury home, and with a lot of businesses, where finance/credit is available, sometimes the company main business is actually a credit broker/finance specialising in a niche market product.
Some people have said GE (General Electric) is now more a financial entity than a manufacturer, this is business diversification over the decades.
> the furniture isnt that big, its suited to smaller homes
To be fair, pretty much anything built after 1960 is small, and all UK housing is small by American standards.
I also don't think most people in the UK consider OakFurnitureLand a cheap, or even an affordable place to buy furniture. Despite being made of cheap internationally sourced oak, and somewhat mediocre, it's definitely a premium brand. If you were to buy all your furniture there many people would consider you well off.
Spot on with the reality of their finance business though
I spent quite a lot of time in https://www.oakfurnitureland.co.uk/ returns outlet picking through stuff. I furnished most of a house from there. The furniture is made in places like Thailand, and woods like mango are used as well as 'oak'. They must make reasonable margins even with the normal prices they charge. I'm sure they also benefit at least on their lower tier of credit plus upsells on insurance etc. I didn't encounter any of that as the outlet was strictly cash.
Even the carcasses use solid wood. Some of the returned furniture had cracks in interior wooden boards where a composite like ply/chip/MDF would not have cracked. I guess solid wood is lighter, part of their brand and they have less diversity of material sourcing. It must pay off, even with slightly higher returns.
I don't think most countries build houses of wood like North America does. In Europe houses are mostly built of various kinds of bricks and concrete. Only the roofs in detached houses are usually made of wood (and not all of them).
In the American south, there are a lot of masonry, or concrete homes or even AAC. See florida.
In the north masonry homes have a lot of problems with freeze thaw cycles. As far as upgrades
, remodeling, overall costs goes stick built homes are superior.
> In the north masonry homes have a lot of problems with freeze thaw cycles
That's weird, central Europe has pretty northern climate with cold snowy winters and hot summers and I've never heard about any such problems. I've lived my whole life in such houses. You just need proper insulation (but you need it anyway cause heating is expansive). I think Americans don't much care for good windows for example, at least in the movies they have these weird 1-layer sliding windows that nobody would use here :).
> As far as upgrades , remodeling, overall costs goes stick built homes are superior.
There's a bit of stigma against wooden houses here and they are considered worse investment because they degrade and lose value much faster.
Single pane windows are not common in the US in anything built in the last 30 years or so (give or take a few decades). Sliding windows are usually 2 or even 3 pane. Movies use single pane candy "glass" windows so characters can be thrown through them.
I would not be surprised if Canadian lumber was going to China. I believe a lot of Alaskan lumber, if not the majority of it, was China bound (this may have been close to two decades ago though when I had heard that).
Canadians are so stupid that we have allowed raw logs to be sold to Chinese offshore lumber mill ships, to be sold back to us, instead of insisting that the value-added processes be kept on-shore so that we have good-paying jobs for our own citizens.
> so that we have good-paying jobs for our own citizens.
Protectionism isn't always a good idea. Doing so would've made the final lumber output more expensive for Canadian consumers.
Automation is coming for the good-paying jobs sooner or later, anyways. The solution wasn't/isn't to ban outsourcing/automation, it's to better distribute the gains from outsourcing/automation across society.
The better mills have amazing automation. Penetrating scan of the log and then laser-guided slicing and dicing to maximize wood usage and profitability.
Now if only the lumber were properly dried instead of shipped slopping wet. (Actually, I suspect the kiln-dried lumber is destined for wealthy foreign markets; we locals get the c-grade crap. I have spent literally more than an hour picking through stacks to find enough good lumber to build a shed.)
The kiln drying process is exactly why you get what you get. When you crank the kiln to 11 in order to get the most throughput out of it you get residual stress and bent boards.
A covered pile outdoors or in a warehouse will yield straighter lumber (or just don't crank the kiln to 11) but that is not economically viable for random pine that people frame things with.
Canadians know that - they have only to look at dairy. Milk is probably fine from a consumer perspective (just not if you want to get into farming it), but whether deliberately or as a side-effect it cripples cheese.
Imagine my great-grandfather planted a seed 150 years ago for $0, then we did nothing but wait for 150 years, then I chop it down and get $100 of lumber.
But you can't enter the market and compete with me, because you don't have the right grandfather.
Property values in Canada are quite high. That free free squatted on non-free land for 150 years before you got to chop it down. How many dollars per year did the land cost for those 150 years?
This reminded me of the fact that the US Navy maintains a forest of trees that are of appropriate size to keep planks for the USS Constitution, the last remaining wooden US Navy vessel.
Sweden planted 300,000 oak trees on a particular island in the 1830s, after the Napoleonic wars, to provide lumber for future naval ships. It takes the trees about 150 years to reach a suitable size, so they were well obsolete for their intended purpose before they were ready.
> Quality lumber is incredibly expensive now compared with 1914.... Nearly knot-free, perfectly straight, that stuff would probably be put aside for high-end fine woodworking or even veneer-making, now. It was beautiful stuff and they stuck it under the floors.
Could that have been lumber from old growth forests that are now either extinct or protected from logging?
IIRC, lumber nowadays is basically farmed using relatively fast-growing trees.
I don't know if it is true that quality today is worse, but they used way more wood for heating back then. So maybe they picked the nice trees for wood work and lit up the rest.
Trees on plantation are straighter than wild trees.
I'm really curious to know why, in our hyper-industrialized world of today, is lumber so expensive when compared to yesteryear? Is it cost of land on which it grows? Is it increased demand because of population growth? Increased demand because of new uses? Increased demand because of global markets? Is it because lumbar prices were artificially depressed because the cost of growing new trees was not included (because people were just cutting down what was already there). Maybe it is because land/housing prices have gone up so much, people are just willing to spend more as it is a relative small percentage of the total cost of housing?
My understanding is that the trees no longer exist. We cut down ancient hardwood forests that took hundreds and thousands of years to grow. All of that is gone now except in a few places like national parks and monuments. In its place are tree farms that are harvested after growing for a few years. Instead of cutting down trees that are 4 feet across with beautiful straight grain knot free lumber, we get crap heartwood with knots that bows and warps.
To get that beautiful wood again, we would have to plant the forests, let them grow for hundreds of years, then harvest the wood. Well, that's not going to happen, so we end up in the situation we are in of having to use a very poor substitute.
This. You buy a 4"x4" post (nominal. Actually 3.5"x3.5") at your local home improvement store and it has wane on all four corners and the pith running down the middle.
Translation: it's made from the smallest possible tree you could plausibly saw a 4x4 out of. And the pith (the center of the trunk) running through the middle guarantees that the post will split along the radial plane as it dries.
If you go to a better lumber yard, you get better lumber. Except, apparently, for 2x3's. They are universally crap. Source: built a chicken coop with 2x3's and bought from a local outfit because they deliver inexpensively. Everything else was gorgeous compared to the box home improvement store. The 2x3's were pretty much the same.
Heard you should get the largest lumber you can get and rip it down. Like get 2 x 12's and rip down to 2 x 4's.
Makes sense that the larger cross-sectional lumber needs to come from a larger cross-sectional tree with few defects. The crap-wood they can turn into 2x4, 2x3....
I did the above to create a nice workbench with few knots. It helped of course that the lumber I ripped was glued up to make the butcher-block-style top, the uprights and cross braces also doubled, tripled up.
North america was heavily deforested during the pleistocene which wasn't really all that long ago. You can also find historic pictures of mass clear cutting from the start of the 1900s that are now heavily forested and will eventually produce large mature trees.
My dad, born in toward the end of WWII, has complained for at least the last three decades that it keeps getting harder every year to find usable boards at lumber yards. Tons of them warped, damaged, way too many knots or other problems, and so on, and that's when you are shopping a couple tiers up from the worst stock. I don't know why that is, but that seems to be the trend he's seen over his life. Makes sense, if he came into adulthood about halfway between the unthinkably-nice framing & foundational lumber in that 1910s house, and now, and it was a somewhat continuous process instead of some sudden change.
Interesting. This might be explained by the switch from old growth to new growth^. Older trees would be larger, and have more core to work with (I think knots are mostly from the outer layers of the tree).
It's a little more complex than that. You get branches (which manifest as knots in boards) where there's sunlight that can reach the leaves on the ends of those branches.
Trees grown among other trees have to grow up to reach sunlight. The innermost part of the lower trunk might have knots from branches when the tree was young, but once they reach harvestable size, there's a fair amount of clear lumber down low.
Trees grown in the open don't have the pressure to grow upwards, and end up with branches down low throughout their lives (from the center all the way through to the bark). As a result, there's very little clear lumber in them.
Disclaimer, I'm a furnituremaker, not a forester. The above is somewhat better than pure speculation, but likely misses some important bits.
The sapwood is an approximately constant radial dimension over the life of the tree once it gets big enough to form heartwood. Sufficiently old trees are more heartwood by percentage than sapwood.
For hardwoods, it's typically the heartwood that's more desirable. Walnut and cherry both have pretty strongly contrasting sapwood that does not match the customer's expectation for the color of those woods, for instance.
That would be my guess for at least part of the reason, too, but it'd only be a guess. I also wouldn't be surprised to find out that tree species plays a role, and that we plant species for harvest that simply produce worse lumber than what used to be widely available (as old growth).
The funny thing is that the straight grained radiata pine is sold at a premium imported from Australian and New Zealand plantations when it's an American tree that could be farmed domestically.
The wood used to built those houses was the old growth timber of the western united states. Its basically gone now. As well as the second, third and fourth growth.
Wood of sufficient quality to do the things we used to do with it simply doesn't come from industrial forests.
At least in Finland, there has been a trend of forest owners to favor faster growing species or just felling them earlier. Most of the trees won't be good enough for quality lumber so it's just sold at bulk prices to paper mills. With the method you can probably get 2 good harvests in the time of one. If you let the tree grow 100 years instead of 30, you might not still get 3x the price and you would have to wait 70 years more.
A detail I liked in the Blade Runner 2049 movie was the office of the Wallace Corporation CEO -- every surface was covered in wood.
Right after seeing that movie I visited an old house where everything is wood. Huge wood cabinets, wood floors, wood ceiling, etc...
I suddenly realised that I can't afford wood furniture any more! The IKEA stuff I buy these days is made of "manufactured" materials that are "wood-like", but have essentially cardboard honeycomb between two sheets of plywood or something.
I used to have IKEA furniture that was solid pine, but good luck finding anything like that in their store these days...
Why would anyone want solid pine? Furniture has been made of veneered wood for a very long time. It has been popular since the late 17th century, long before IKEA.
It didn't take long to find it in their catalogue.
Anyway, IKEA is not the only company selling furniture.
You are correct that most solid woods are expensive (not pine usually though) but that is at least in part simply due to high demand for such furniture and the lack of supply of the raw materials.
That’s because when this country was still being settled, standing trees were an obstacle in the course of productively developing all this land, which, at the time, meant mostly agriculture. Before big machines arrived on the scene, getting rid of all of that heavy garbage was a lot of labor, and since there was a lot of trees around, and shipping them far away was way too expensive, there were few buyers, all of which made prices low. When all local trees were cut, land had been developed into farms and towns, and lumber needed to be shipped from further away, prices started going up.
Long leaf pine of the South Eastern United States is now also used as a heating and electricity generation fuel as far away as Europe. North Carolina is on track to become the World's largest single source of wood pellets[1]. On the other hand, during the lumber shortage of 2020/1 the bottleneck was at the mill.
Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book.
Lots of people want to build 900 sqft homes. It's just that with land costing 100s of ks and utility hookups etc at 100k, it make no sense to build a 900 sqft house.
Basically, areas with high house prices have created a situation building a little house on a bit of land is between very cost ineffective and simply impossible and then said "no one want to do this".
100% agree. Beyond that too, it is very difficult (relative to FHA or even Conventional mortgage) to get approved for a construction loan, and in a lot of cases you have to close on your loan twice, the extra fees and higher interest rates eating into your potential savings. There's also no way you're going to get that loan without a general contractor overseeing the entire operation, who will take 20% off the top alone, which don't get me wrong, is fair if you need it. If you want to do anything DIY to save cash and hire inspectors to catch your mistakes + professionals to do risky/difficult stuff (electric, plumbing, HVAC), you can't do it with the bank's money.
Also, it is pretty common for county codes to require each home to be a minimum 1000 sqft (at least in FL and MI). Even if we don't want to allow tiny homes of sub-500 sqft to gasp potentially lower the value of my home by giving someone else a place to live, the 700-900 sqft range is still very nice for a lot of people.
Also, with min lot sizes a 900 sq ft house doesn't quite pencil out at today's land prices. Most jurisdictions would not let you buy a 900 sq ft plot of land, for example, because the size would be too small.
Quite a few, though it may have crept up slightly - one link I found said the Uk average new builds size 2002-2012 was more like 1030 sq ft.
UK new build houses (as a type - of course there's lots of variety) are a strange breed. Small and crammed into tiny lots though cleverly designed to make the most of a small space. Energy-efficient but shoddily constructed. The cheapest premium-looking materials (i.e. brick). Generally nice enough to live in but a bit depressing.
In UK you can buy a house that was built in the dark ages, before Americas were 'discovered', were declared a listed building and the owners are legally barred from making major changes.
They cost like 3x what a newbuild does, this "but building codes" stuff doesnt stand up to scruitiny.
You dont have to use wood, we have brick. We've had automation and 100 years of growth in productivity.
> They cost like 3x what a newbuild does, this "but building codes" stuff doesnt stand up to scruitiny.
I don't think that's a fair comparison. There is a fixed supply by definition of those old buildings, so their price will be pushed up by demand with little relation to their cost to build since they can't be built anymore.
A better comparison would be to look at the cost of new houses in developing places like SE Asia where there are little to no building codes.
The building code certainly allows homes to be built with 3 foot brick walls, but home builder building 100 cookie cutter homes on a plot of land are in it for the money (despite saying they are in it to build peoples dreams in their ads).
They build using the cheapest methods allowed by law, see the choice to build with fireproof cladding (£24 psm) vs flamable (£22 psm). Building codes are about setting a floor in the construction quality, not a ceiling (pun intended).
There's a lot more than you probably imagine, other than these 3x price ones GP's thinking of - that seems pretty niche, they'd have to be exceptionally well-preserved and dripping in original features.
The average craftsman home listed for sale in CA - 80+ years old - seems substantially better than the average newly built D.R. Horton home.
Maybe this is highly biased toward craftsman homes that have been well maintained due to how expensive CA housing is. But why wouldn't D.R. Horton homes also be maintained? They're theoretically equally expensive.
The surviving craftsman homes, which weren’t average for the time time due to survivorship bias, are more likely to be built in higher density walkable environments closer to urban cores. Real estate in those areas is more valuable in general.
The average D.R. Horton home is built further out on lower density, less valuable land.
There’s also an element of scarcity here. There’s a subset of people who find older homes appealing specifically because they are older. The supply of older homes can’t increase, but the supply of D.R. Horton homes can and does.
I wouldn’t exactly characterize that as “construction costs going up” though. We’re building different things. The standard of living has changed significantly.
The 1910’s were a very different time. Comparing houses now to houses then is like comparing a horse to a Honda Accord. We’re not just talking luxury features here —- You can be pretty certain that a home built in 2022 has indoor plumbing, a refrigerator, and a furnace that doesn’t require shoveling fuel.
That said, I think the difference is overstated. I have lots of friends who live in craftsmen homes. They resell at basically the same price as similar sized houses built 25 years ago (even with single pane windows ect) . If somehow you got one that wasn't upgraded since 1920, you are looking at a few tens of thousands to put in electrical, plumbing, and appliances.
Still, you are right that that they are not the same. But a lot of people today would kill to own a beautiful new craftsman home for 40k! I wouldn't trade out my car for a horse, but I would trade 40k a year rent for a craftsman home!
The point is that even you wanted to replicate an original craftsman home today, you wouldn't be able to do it for that price, even ignoring regulations. Labor costs have gone up, wood has gone up, minimum cost of every material used has gone up.
The average craftsman home built 100 years ago isn’t going for the same price as a 25 year old house.
The craftsman homes that have survived for 100 years in good condition are. That’s a very different thing.
Old houses also have tons of problems even when upgraded, and they just aren’t anywhere near equivalent to a modern home unless you essentially gut them and rebuild.
Insulation isn’t nearly as good. Bathrooms aren’t nearly the same size. The floor plans aren’t nearly as open. This last one in particular is a big cost difference because creating large open spans is expensive.
Those things might not matter as much to you, but they are big differences.
>The point is that even you wanted to replicate an original craftsman home today, you wouldn't be able to do it for that price, even ignoring regulations. Labor costs have gone up, wood has gone up, minimum cost of every material used has gone up.
Depends on the part of the country and whether or not you can use modern equivalent materials.
Where I live, assuming pre pandemic prices, I could probably build a 900 sq ft, single story house with a wooden pier foundation, no plumbing, no electrical, no insulation (or maybe old newspapers like my great grandmothers house used for insulation), no driveway, no sod, and no inspections for $40-$50k.
That would be roughly equivalent to your average house built 100 years ago.
> The floor plans aren’t nearly as open. This last one in particular is a big cost difference because creating large open spans is expensive.
That especially is just fashion, I'd be really careful with that sort of conversion. Or, if the only 'problem' with a property is that it has too many segregated rooms, and that's depressing the price.. snap it up, fashion's bound to come around. (Unless it's for you to live in and you particularly care of course, live where you want!)
There’s probably some an element of fashion to it, but there’s also a technical element. Engineered lumber allows for cheaper, larger unsupported spans.
Cooking is also less frequent, extraction fans are better/cheaper, we don’t use wood burning stoves. When people do cook it’s less likely to be an all day process, and less likely to involve methods like deep frying in bacon grease. It’s also less likely that a middle class family has a servant to do the cooking for them.
All this leads to less need to segregate the kitchen from the rest of the house.
If you look at Victorian houses, kitchens were placed as far away from living spaces as possible. Going forward from the 19th century there has been an overall trend towards integrating the kitchen with living spaces. Culminating in the modern trend of combining the kitchen and living room into one large space.
Families are also smaller than they used to be, so there’s less need for as many rooms. Plus furniture is larger on average.
The point is there are factors pushing houses towards larger open spaces, and larger open rooms in general that are likely durable.
Comparing houses now to houses then is like comparing a horse to a Honda Accord.
I don't think that's a fair comparison. I've lived in a Sear kit house. It had everything someone now would recognized as necessary for a house (including everything you mention, plumbing, wiring, etc and as opposed to a house built in the 1800s, which could have or not-have anything).
A fair comparison is a VW bug versus a modern SUV. The bug has everything needed to be a basic car but has nothing to make it special. And the comparison would be closer if only giant SUVs were being sold as cars today.
Just interjecting "but building codes!" doesn't make a lot of sense. If the codes are so strict that we can't actually build houses they are failing at their purpose.
I dunno if you've dug deeply into most building codes but they're almost always overly specific in pointless ways and in ways totally unrelated to safety. Getting an engineer to sign off on a design should be enough, especially for a freestanding (tiny)house.
OTOH, hiring an engineer to actually put their name on your home construction will almost certainly cost significantly more than the city inspection cost.
Every location (in the US) I'm aware of requires houses to be signed off on by an engineer before construction. You always have to pay for it. The issue is engineers are usually obligated to enforce code, and a lot of them try to be stamp mills -- they only want to look over and assure designs that are very similar so they don't have to think about it.
There's an unfortunate number of locations in the US where you must use wood frame for your house, or you must route your power in exactly this way, etc, even if it'd be equally safe or cheaper to do something else.
> Every location (in the US) I'm aware of requires houses to be signed off on by an engineer before construction.
This varies widely by state. In some states, it matters if you're in a municipality or if you're rural.
Where I am, in this county, I do not require a permit or inspections or anything to build a house for myself unless I'm inside a municipality. The government doesn't care until it's time to pay taxes. I may need some sort of inspection to hook up to the electric grid though, or to get water turned on. In (edit: some) other states, you can barely build a small dog house behind your house in the country without permits, inspections, engineers, surveys, and all kinds of other stuff.
I will admit that I don't know regulations outside of my area, and I'm guilty of assuming they are somewhat standardized across the US (and indeed, for some codes, internationally).
Here we just have city inspectors to check basic code compliance. They'll take a quick look at the framing, electrical, and plumbing before the sheetrock goes up, and then they come back for a walk-through before issuing the certificate of occupation. No engineers.
The biggest fees by far are the permit fees, but that's for revenue and would still exist if engineers were doing the analysis for the construction.
Have you checked on the prices for prefab homes? Even in the Midwest 40k won’t even get you the cheapest ones unless you go with something like a used mobile home.
also as someone who is working with architects and builders right now on a house, I can say the houses you are getting at the 250 /sqft range in many cases are terribly built.
They are going to last a fraction of the time that that $45 / sqft house from 100 years ago lasted
Many houses built 100 years ago were incredibly shoddily built / assembled. Have you ever looked at the foundations on old houses? Wooden piers that are lucky to last 40 years were very common. You’re seeing survivorship bias at work.
Also 250/sq ft is far from cheap/shoddy quality in much of the US. And with proper maintenance just about any house built to code in most places in the US will easily last longer than the average house built 100 years ago.
I don’t need a house that lasts 100 years. My estate will be selling it in 50 years, if I don’t sell it in the average ownership duration of 10 years.
Lasting a long time does not mean a structure is better in every way. Old housing can be a challenge in terms of safety, cohesive design, lifestyle fit, land use, environmental concerns, etc.
In Japan, for instance, it is popular to frequently tear down housing rebuild it, and it works well for them.
I have lived in and fixed up many old houses with strong bones. They might stand for hundreds of years but everything attached to those bones is a patchwork of afterthoughts.
+1 for wooden American homes, made from naturally sequestered carbon :)
I haven't done the math, but I'd bet the energy efficiency requirements would more than make up for it. Uninsulated/underinsulated homes are a huge waste of energy.
The Sears kit wasn’t unique in that regard and they were built pretty good for the time. Non kit houses were often balloon framed or featured other serious code issues.
I live in a northeast city, and the average house in a ten block radius was built between 1920-1940. They seem to weather just fine and gradual retrofits to things like electric panels eventually take place. You can’t compare that meaningfully to a mobile home, which is more like a car with a 20 year lifespan. Frankly, I think the building codes are out of control in some respects and add needless cost.
The standard of construction of a middle class home built in 1925 is better the 2022 on the basis of materials alone.
“Lasting a long time” also <> higher quality. There’s a lot of other factors that more closely contribute to making a house a nice place to live. Whether it lasts for hundreds of years after the owners death is relatively unimpactful on their quality of life.
In 1925, only half of homes in the US had electric lighting. None had air conditioning. Many would have had only steam boilers (which can function without electric pumps) fired by hand-shoveled coal. Most would have had no insulation. In 1940, half of homes had no indoor flush toilets and no hot running water.
If you built a house today without electricity, with only cold water service, and an outhouse, I think you’d save a fair bit on skilled trades (and be pretty damn unhappy when you visited a neighbor and saw their utilities).
>In 1925, only half of homes in the US had electric lighting. None had air conditioning. Many would have had only steam boilers (which can function without electric pumps) fired by hand-shoveled coal. Most would have had no insulation. In 1940, half of homes had no indoor flush toilets and no hot running water.
This is true but can be a little bit misleading.
You would expect new homes built in 1925 or 1940 to have many more of these amenities than the average. (you can see the flush toilet in the Sears 1914 home).
For context, The average home in the US today was built ~45 years ago.
"In 1925, only half of homes in the US had electric lighting."
Surely if our goal was to compare prices of TVs over the past 20 years, and if we found that prices of TVs haven't changed, you cannot then claim 'well, old TVs were 720p and modern TVs are 4K, so actually the price of TVs dropped 4 times!'
Today we have all kinds of things that increase productivity: electric power tools, prebuilt parts, laser levels and measuring tools, CAD software, flooring that interlocks, expanding foam that's easilly applied from a spray can, drywall and dozens of things I never even heard of.
There's a lot of ways that the standards have changed, it's not just one dimension.
Complexity and feature set are probably the biggest. New construction single-family homes today are more likely to be customized, not kits, have way more features and way better mechanicals. That 1914 house had no kitchen appliances, no laundry appliances, no driveway, no garage, no insulation, no central HVAC, etc.
No kidding. Brick foundation, exterior plumbing, knob and tube wiring with 1 electrical outlet and 1 ceiling light bulb per room, zero insulation, single pane glass windows, dirt driveway... all features of my "charming, historically accurate" previous residence.
As an owner of 90+ year old home. Yes. It's quite dramatic how underbuilt old homes are. 2x4 joists spanning 10+ feet was commonplace. Foundations were cinderblocks holding up whole timbers. Insulation wasn't even a thing!
Yes its interesting example, but 1914 Sears house didn't have electricity, or hot water (was an extra), no shower, I'm guessing its single glazed and lightly insulated.
Certainly I think most modern houses are too luxurious with marble and complicated accessories that aren't really needed.
Are most modern houses really too luxurious where you're from?
What I see is that they have pretty poor build quality when you look closely, and are thrown together as cheaply as possible, and are not designed all that well. Where I am, "marble" would be engineered stone (which I don't have a problem with it's functional and looks okay), but many new kitchens (and bathrooms) aren't well designed for the space they take up and come with flimsy gimmicky fittings and appliances.
Where modern houses go overboard (in my opinion) is optimizing floor area per dollar and making them very large and lowering quality. Although that's also a response to buyer preferences, people like having very big houses and don't care too much about the design, the details, or efficiency.
> Blue collar wedges (wages?) are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.
Blue collar wages as a whole may have, but construction workers' wages since 2006 have increased 47% when adjusted for inflation. This should come as no surprise, since that field historically has strong unions. You also have more rigorous safety codes for those workers.
On top of that, building codes have changed dramatically (thankfully) in those past 100 years. Whether it's structural, insulation, windows, electrical wiring and capacity, plumbing (older homes pipes were narrower, so couldn't handle things like a garbage disposal).
Did the 1914 house have electricity? With "acetylene lighting plant" being extra, I think not.
Did the 1914 house have more than one toilet? Cost per square foot doesn't cover what goes into the square foot, and fixtures cost a lot more than an empty room.
Does it cost 5x to add electrical wiring into a house? I would happily take a 1915 house and upgrade it.
I love in a 'premium' newbuild block in a 1st world country, and the construction quality is so atrocious it would be condemned in some 2nd world countries!
The builders forgot to connect the extractor fan to any ducting, it just sits inside the ceiling and makes noise, the piping of the sprinkler system in not secured to any structure and is wobbling and threatwning a flood, the guy that made a hole in the ceiling for the sprinkler missed and we have a hole in the ceiling and a sprinkler somewhere inside. Last week a hot water mains has burst creating a flood of scalding water and 13 floors had to be evacuated. We had a nice steaming waterfall down the side of the building 40 meters down. The electric meters are installed in breach of code.
It's a 23 story building and elevators never work, etc.
The building was completed 4 years ago, apartments sold at a premium to 'investors' based in tax heavens - not a single resident here owns the flat. Mine is based in Cayman islands.
> I would happily take a 1915 house and upgrade it.
Why do you think it's so much easier/better to upgrade an old house than fix constructions errors with a new one?
I live in an early-20th-century house with minimally-acceptable plumbing and electric (pipes not secured to the structure? welcome to the club!), no insulation, terribly cold windows, one tiny bathroom, sometimes-wobbly feeling floors, etc.
"Upgrading it" would basically be "rip it down to the studs and redo it all" which is basically "everything but one of the easiest parts of new construction" anyway.
The idea was basically 'I would rather upgrade a well-built 1900 house than try to fix a poorly built, possibly structurally flawed modern one'.
I am not sure it would be easier, but my genereal experiece is telling me the outcome is usually better.
I think the new 'buy to let' phenomenom makes it possible to sell shoddy construction as premium houses to investors based in tax heavens becuase it looks shiny and htey don't give two shits.
Baker is a strange salary to look at. Back then bakers were everywhere churning out a staple food by hand. Today a baker is likely to be an artisan of some kind, with a specialist product.
It's odd, don't you think, that an "artisan" of some kind, with a "specialist" product, would only make about 10% more per annum, adjusted for inflation, than a generalist churning out a staple food by hand?
Modern bakers are competing in a market dominated by extremely cheap mass production. The economy of scale has moved out of the local bakery and into the regional bread factory.
People are willing to pay double or triple for artisanal bread compared with mass produced bread. But are they willing to pay 10-20x? If not, and the extreme cost efficiency of modern food factories inexorably lowers prices, the market clearing price of artisanal bread is limited and declining.
Ex-Baker by Trade here. yes even the little shops are effectively mass production factories.
Buy the ingredients in big pre-mixed sacks. add the right temp water and yeast into a big mixer and press go.
drop that into a machine that cuts the right mass chunks out and shapes it ready for production line style dropping into tins and mounting in the proofer then into the oven.
Typically they only have one actual baker, a few apprentices and often just unskilled laborers.
actual "Artisan" bakeries are very rare and not terribly profitable unless in highly affluent areas.
Propose an alternative comparison for a simple job that does not require a degree and has existed for a hundred years, and tell us - are the results are different?
Any tradesman job that's existed that long? We could keep it related even - bricklayer, basically exactly the same job (..on a large site cement might be made elsewhere and delivered for you, or on site the mixer might be electric).
I expect that most "bakers" in the US today work for grocery chains (or maybe for manufacturers of packaged bread and pastry products--not sure how precisely the category is defined). They're probably mostly not working for artisan specialty bakeries although I wouldn't be shocked if people at those places weren't exactly raking it in either.
As I say. I don't know who is counted. In any case, I certainly imagine grocery chains that bake on-premise have "bakers" and there are more of them in that type of job than working in high-end artisan bakeries.
Just wanted to say I've enjoyed this HN rabbithole gold, where we've gone from talking about increasing house costs to discussing the role of bakers in modern day industrial bakeries :)
It is just a point of comparison. You can ignore it and focus on inflation and dollar purchasing power for consumer goods, also included. Point being that house construction costs have grown on a different trajectory than dollar value and salary.
yes that occupation has changed considerably in the last 100 years. A "baker" today is usually the person who opens Krispy Kreme in the morning. 1914 was a decade and half before sliced bread was even invented!
These days, bread is made very efficiently in massive plants (which is why it costs only $0.93 a loaf at my grocer)
By how much and why the cost of labor has changed over time is an interesting question. I'd assume that the bulk of the cost of labor is wages, but there are some other direct and indirect costs that might contribute in addition to wage related factors.
Carrying workers' compensation insurance was not the norm at the turn of the 20th century; injured workers could instead sue their employer for negligence but usually lost. Legal challenges to state legislation that made participation in a workers' compensation program mandatory weren't resolved until the Supreme Court's 1917 ruling on N.Y. Central R.R. Co. v. White. In the modern day, Texas is the only state where workers' compensation insurance isn't mandatory.
In a similar vein, workplace safety standards have seen a lot of change. With the exception of a few states that passed legislation sooner, workplace safety was largely unregulated until the Occupational Safety and Health Act of 1970 established OSHA.
I know less of the specifics but consumer protection laws have also changed. Many states now impose statutory warranties on new construction that cover construction defects for a period of time. It seems plausible that builders had less liability for such defects in 1914.
Construction equipment and the cost of running and maintaining it is another thing that I would expect gets rolled into the cost of labor. I'd assume that equipment costs are usually offset by increased efficiency (paying wages for less time), so it wouldn't increase the cost of labor, but it would be interesting to see data on that.
As far as wage-related factors, while blue collar wages may not have changed in general there are some exceptions. Based on the sources you provided, plumbers in 1913 San Francisco worked 44 hrs/wk and made $0.75 per hour for an annual wage of $1716 (or $44.9K in 2020 dollars). The median plumber in 2020 San Francisco makes $110.9K/yr. (Since SF might be an outlier, in St Louis in 1913 plumbers made $1515 annually, equivalent to $39.6K in 2020, and had a median annual wage of $80.6K in 2020.)
It's also possible the number and types of workers required to build a home has changed. Constructing a new home might now require more "specialists" (like plumbers) who command higher wages to do work that was either not done at all or was previously done by general laborers paid lower wages. It would be interesting to see data on that as well.
They cost about the same. There's a few differences, like some better tech--also some worse tech, like preferring lasers and CPUs over older cheaper techniques that also work better[1]. There's more regulation too. And wages have swung upward and downward in the intervening time, right now we're barely past the bottom of the cycle[2] of the relationship between leaf-node employee wages and everything else.
But the real difference is that official inflation is a lie. Inflation since 1970 is closer to 38x (candy-jar guessing), not 7.25x. So the costs of construction are pretty similar.
[1] So once upon a time, to create a level line, and in Latin America to this day, you fill a clear hose held up in a U-shape with water up to a foot from the top on either end. Hold one waterline up to the mark that marks the height you want for the level line. Then extend the other end out to the wall you want the level line to extend to. The waterline will be at the same height on either end. Mark it. That's the endpoint of the level line. Costs like three dollars for the hose and that hose lasts indefinitely unless it is damaged, by getting stepped on pretty much not due to any other reason. Whereas apparently in USA there's laser levels that have all these buttons and a manual and a CPU and data and...yuck. And it starts at $29.99 for the basic model, of what I can tell--you can't look up prices online anymore much because they're tailor in many cases. That's what I think that crappy product costs--that's the "price point" they target. Plus there's price discrimination and rebates, points, programs, whereas with the clear hose you're clearly not getting hosed.
[2] Since about the seventies--a time when I daresay managers were underpaid--there has been opposition at multiple different levels against leaf-node employee wages. From opposing the minimum wage, to promoting immigrant arrivals who rarely manage anybody when they arrive, to busting unions and strikes, to right-to-work laws, plus noncompetes for the likes of sandwich makers, plus SCOTUS making paying union dues destined for political speech optional (but no such luck for the part of the price for a good that corporations destine for political speech), to women entering the workforce (more leaf-node competition, they don't start out as management), to college becoming impossible to pay for as a leaf-node worker, then endless distortions in the housing market to make rent a third of income (this is by design, it can just as easily be a tenth), plus the erosion of safety nets...it's a subject unto itself, but leaf-node wages are heavily opposed in America. After IIRC their peak in 1978, 44 years ago, they are coming back up from the trough. Tying it back to the subject of inflation, leaf-node wages are considered inflationary in a way that other wages are not. And according to the BLS, inflation and leaf-node wages are the sameself thing.
EDIT: I forgot the other main ingredients of inflation: commodities, cars and computers. Commodity prices are also strongly opposed politically, corporately, and "mediatically." Cars and computers are not politically opposed--on the contrary, they're good, that's why they're included, to make inflation look smaller, look it up on http://www.shadowstats.com.
I take it you haven't done any construction with a modern laser level? Have fun hanging level ceiling tile grid with your hose, hauling it around and keeping it filled between sites, making sure those walls are level horizontally AND vertically, and while you could use a hose/string for laying tile it's going to be much quicker and easier with a laser.
The only levels where you might have more than a couple buttons and need a manual are specialty ones like for surveying, not something you would do with a hose anyways.
It's all about consumer preference. It seems this article largely misses this.
People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. Policies can make this worse, but the problem will still manifest itself to some degree. (Potentially as affluent people, especially in suburban areas, buying up more land to create setbacks, or simply buying because they can afford it now, or HOAs setting limits, none of which help density, demand, and cost).
"reduce the costs of construction, particularly residential construction (ie: housing)"
Changing preferences are the best way to address this, yet is likely the most difficult to sucessfully influence. Houses being built today are mostly larger homes, and definitely much larger than the majority homes built generations ago. This means more materials, more labor, more regulation, etc. Now we might be using cheaper materials, or less per sqft, or using tools that increase speed of laborers. But I think this is mostly canceled out by just increasing the size of the house (ie we're growing into our fish bowl).
For a personal example, my wife complains that an 1800 sqft house is too small.
>People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases.
This ignores the world's giant pool of floating capital ravenous for returns that jumps on trends and amplifies demand by buying up what it thinks will have good resale or rental value.
I saw this happen in the area I grew up in recently. Some people I know who were struggling to gather a deposit saw their dreams of homeownership go up in smoke as they got consistently outbid on a series of properties by investors.
This would be a pretty harmless outlet of an for a glut of capital if A) land werent finite or B) land had not been slowly untaxed for decades.
Of the two, B is a more prudent way of making property prices sane again.
I was including that under "or simply buying because they can afford it now".
"Of the two, B is a more prudent way of making property prices sane again."
Maybe if you taxed unused land. Otherwise that tax will end up increasing a resident's rent/mortgage substantially (as it's a perpetual annual expense). So really, you'd have to tax way above what a normal person can afford (average US household about $75k, so $7500 is 10% gross), and that still wouldn't be much of a disincentive to the wealthy (ignoring the fact the the market would collapse because normal people can't afford to buy it from them nor pay the rent).
Now if we did tax unused land, then we are reducing conservation and incentivize development. This is a major concern for some areas, especially around loss of agriculture land, riparian buffers for water quality, etc.
If we had work that was more distributed, like remote is for IT, then it's possible the effects of all the capital flooding a handful of markets would be diluted by spreading it across numerous others. A generation or two ago we had many small cities with industrial or manufacturing jobs. Now it seems many of those cities have shrunk while the national population has grown, mostly concentrating in specific metro areas.
>Otherwise that tax will end up increasing a resident's rent/mortgage
It would do nothing to rents or mortgages intrinsically but it would cause property prices to fall and it could add to the tax burden of regular property owners depending on how it were implemented (i.e. if the tax free threshold were set too low).
>that still wouldn't be much of a disincentive to the wealthy
It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability.
They would dispose of properties that were nonperforming because taxes > capital appreciation + rent and this would spiral as falling prices leads to more hoarded properties being given up.
They would also scramble to rent out previously unrented properties where capital appreciation wasnt covering taxes. More rentals on the market means even lower rents which makes their properties worth even less to them.
"It would do nothing to rents or mortgages intrinsically"
Most people have their property taxes escrowed with their mortgage payments. Taxes can easily account for 25% of one's monthly payments. As for rent, the property owners just pass the cost on to the tenants by increasing rent. So property taxes are related to rent and mortgage payments. Even if not included directly in the mortgage payment, it affects how much of a mortgage one can afford.
"It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability."
I'm not sure about this. Just because they own more property doesn't mean they would be the most affected. The tax would likely be a larger percentage of a "normal" person's income for their own home and thus more impactful to them. Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents (because property tax increase priced more people out of homes (because the price drop was a drop in demand), increasing demand for rentals). I do agree that it should incentivize full utilization of rental properties. But I don't think there are enough vacant rentals to affect supply/pricing, but I don't have the numbers. I would think that most owners are already utilizing residential rentals pretty much at full capacity in the markets that are the tightest.
>As for rent, the property owners just pass the cost on to the tenants by increasing rent
Rents would either remain unchanged or go down.
I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged.
The only change I could forsee to affect either is previously empty properties being put up for rent in order to cover tax payments to turn property liabilities back into property assets. This would increase supply.
>Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents
They'd really love for that to be how it works and sometimes they pretend it is.
"I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged."
What you're missing is that the market floor get universally pushed up. There's no competition from cheaper places because they all increased their rent to cover the new coat so they can still make their same margin. The demand is still there because people still need a place to live.
"The only change I could forsee to affect either is previously empty properties being put up for rent"
Any numbers on that, or are you just going to keep claiming it's a big enough vacant supply to significantly affect prices?
"They'd really love for that to be how it works and sometimes they pretend it is."
This is still tied to the previous comment. If the number of vacancies are not sufficient, then supply is adequately constrained to just increase the prices to cover costs. Because, again, this increase moves the market floor.
The last few cities I've lived in have seen 10+ straight years of rent increases (with a brief drop then rapid spike again from COVID) so... they do already do this?
Writing in the context of preceding comment. Landlords increase prices as much as they're able, they don't decline to increase when they could to maintain some fixed margin. I'm not saying they're generally unable to rise prices in general, but that they have no special additional capacity to raise prices in response to land taxes.
If it's s limited resource which people require (shelters), the price (rent) will be quite elastic. There will still be competition if the taxes go up. Competition is what prevents the price from rising unnecessary. The floor for all the competitors went up because taxes went up and they all want to stay profitable. They aren't going to take loss, so they raise rent to cover it. Buying won't look very attractive either because the tax increase raises those costs, and if it's as significant as they other poster wanted (to affect rich people) then it will likely exceed the $10k SALT deduction limit.
This SALT deduction is part of how they penalize landlords already, which is just passed on in the rent payments. This is part of the reason renting is more expensive than buying (comparing just monthly payments), in addition to management fees, profit, and repair/renovation reserves.
>What you're missing is that the market floor get universally pushed up. There's no competition from cheaper places because they all increased their rent to cover the new coat so they can still make their same margin.
You're saying that it doesnt matter if supply and demand remains unchanged, rent goes up coz every landlord independently decided that it does?
Not that they decided it does, but generally that they all had to in order to stay profitable. Part of this is due to the othwr commenter's suggested goal that the rise in rates be significant enough to demotivate rich people.
And of course many landlord resources say to just build it in.
"The best way to protect yourself from taking a hit is to plan ahead. Plan for a tax increase every single year and adjust your rents accordingly. Build the tax increase into your rent and allow for future rent increases. A planned annual rent increase will allow you to stay ahead of tax increases instead of being caught off guard and behind."
> >As for rent, the property owners just pass the cost on to the tenants by increasing rent
> Rents would either remain unchanged or go down.
The rent must cover all the costs of the property (+ some profit). If any cost goes up, the rent will go up by at least that much. Anything else is wishful thinking.
If the costs go up so much that it's no longer possible to rent because nobody can afford it, that still won't make the rent go down because the owner isn't going to start taking a loss on it for fun. Instead, they'll sell the property and now it is off the rental market for good.
>The rent must cover all the costs of the property (+ some profit). If any cost goes up, the rent will go up by at least that much. Anything else is wishful thinking.
When businesses that can't raise prices get taxed more than their profits they go out of business.
Anything else is wishful thinking.
>Instead, they'll sell the property and now it is off the rental market for good.
It's almost as if there were an army of renters complaining vociferously that prices are to high for them to get on the housing ladder.
"If the costs go up so much that it's no longer possible to rent because nobody can afford it, that still won't make the rent go down because the owner isn't going to start taking a loss on it for fun. Instead, they'll sell the property and now it is off the rental market for good."
What do you mean it's off the rental market? The house doesn't dissapear. Either the next owner rents the house out, so nothing has changed, or they live in the house which means that someone who previously had to rent is now a homeowner. Either nothing changed or it's an improvement.
What is this weired attitude anyway, laws and markets change all the time and sometimes I have to eat a loss, are landlord some kind of divine nobility that never does?
> What do you mean it's off the rental market? The house doesn't dissapear.
I mean it's no longer available to renters. If it's no longer affordable to rent out, the alternative is to sell it off to someone who wants to live in it themselves. Of course the house itelf doesn't disappear, but the number of units in the rental market for that town now went down.
That's fine if those who were considering renting that unit are just as happy buying it as a homeowner. But I see many people saying they only want to rent, so for that audience, the rental supply went down.
> What is this weired attitude anyway, laws and markets change all the time and sometimes I have to eat a loss, are landlord some kind of divine nobility that never does?
I don't understand this comment. What I'm saying is that if the landlord find that renting out becomes unprofitable, they'll simply get out of that situation by selling it off.
"I don't understand this comment. What I'm saying is that if the landlord find that renting out becomes unprofitable, they'll simply get out of that situation by selling it off."
So if previously the buyers consisted of 50% landlords, and 50% would-be residents, presumably now there will be fewer landlords buyers and the price will go down. Is the landlord selling at a loss?
Basically every city in the world is growing and thus demand is increasing. If you increase costs and make it unprofitable to build, nobody is going to build until the rising demand increases rent to make it profitable.
I think that is the point. The market doesn't make sense already for people who actually use the homes because of the investors. If there were property policies that targeted investors and forced their money elsewhere, prices would drop dramatically, making housing affordable again.
"The market doesn't make sense already for people who actually use the homes because of the investors."
I think that depends on the area.
A true crash, if it were to happen, would affect all though. You'd have people underwater on their mortgages, unable to move by selling or renting out the home and instead being foreclosed. People in some sectors my lose their job because people have less discretionary money (if they'd be smart and save more for retirement to offset the loss on their property). If anything, I would think more people would be looking for cheaper apartments to rent because they were foreclosed, leading them to rent from the rich who have a large share of that type of housing.
If it was just investors why would rent be as close to mortgage payment amounts as it is? The vacancy rate is low. Demand is high. Demand is high even among people with more money than me so there are a lot of places that both sell for more than I can afford, and rent for more than I can afford.
People are competing for the more desirable neighborhoods, whether renting from an investor or buying outright, that's what makes it an attractive investment in the first place. They'd still be competing, so the prices would still go up until an equilibrium was reached. Maybe just slower?
"If it was just investors why would rent be as close to mortgage payment amounts as it is?"
I am not clear how this is meant to prove anything, an influx of investors increases prices and rent, both. perhaps it's better to call them speculators, because they don't invest in the economy to create new properties, just inflate prices on existing ones.
How do you implement B) without causing a disproportionately negative impact on existing homeowners?
For example, would you just tax "new" purchases more heavily? Or scale it into existing homes? Give caveats for fixed-income (elderly and disabled)?
Politically, this seems like a tough road, even if it's the best choice. You have to essentially convince people to vote against their own economic self-interest. I think current tax policy around homes is curious because it's one of the few areas that there is a rather clear consensus around economists that it's bad policy that incentivizes the wrong actions, yet we can't seem to change them.
It could be made palatable to regular people by making a high tax free threshold. Most homeowners could be left unaffected.
That leaves 50% of land owned by the 1%. A fair chunk.
Additionally the money could be funneled initially into pensions for the impoverished elderly.
Capital/billionaires would fight back by arguing that it would hit the elderly the hardest just as the howard jarvis taxpayers foundation did with prop 13 but if it was very obvious how many elderly people were helped, crying about grandmothers having to sell multimillion dollar mansions would probably backfire.
They would throw immense resources at trying to discredit and kill this, though. They would use every character assassination trick in the book to stop those pushing it. Some would probably also resort to violence if that failed. It would be an uphill battle the whole way.
So I could build a mansion or a small house and pay the same, just because I'm paying for the zoning. And of course zoning could change and much of it can also have dual use. This complicates the calculation and can lead to surprises.
It seems current actual land usage through property tax better accounts for the way the land is being used, is more stable, less arbitrary, and implicitly complies with the existing zoning.
Without reforming zoning, it is largely useless. Sure it might cause some improvements in places underutilizing their land but I think most places are using their land for the highest value thing it is zoned for.
If I have a SFH zoned for SFH in the heart of manhattan next to skyscrapers, the value of the land isn't based on the skyscrapers, it is based on what you can put on it and you can prove that by selling it for which nobody is going to pay as if you could put a skyscraper there.
"underutilizing their land but I think most places are using their land for the highest value thing it is zoned for."
In urban or higher density suburban areas, I think you're mostly right. But in lower density areas, a lot of the land is multi purpose or has few restrictions. So technically, you could build apartments or homes on land that is used as agriculture. However, there might not be demand for it in that area. Essentially, the tax-by-zoning works well in the situations where zoning is restrictive and demand is high. But in low density areas where the actual use is not well defined with a single zoning use, the value would be potentially arbitrary or inaccurate (making property tax a better measure of value).
I would love to see no tax on primary home property at all. Just for commercial/investment properties. Unfortunately, a lot of that would be passed on to renters unless income taxes were assessed differently. But that would also mean drastically changing school funding, which could be a good opportunity but would likely turn this into every more of an impossible shitshow.
If you are referencing property taxes funding schools, you should know that it actually only funds about half of total school funding. The other half comes from federal and state governments and the way they give out funding is to selectively counteract that misallocation such that 47 states actually allocate more per-student funding to poor areas than to wealthier ones and according to this article [0], it has been this way since at least 1995.
So if you actually informed people that the wealthy areas don't get more funding, I don't see why it would be an issue.
I thought it says they are relatively neutral? And that 35 states have policies to counter local discrepancies?
Maybe I'm just missing stuff - that page is a design/user nightmare. But I do agree that the pet student funding tends to be pretty fairly distributed.
"So if you actually informed people that the wealthy areas don't get more funding, I don't see why it would be an issue."
I generally agree. I think the main point that the rich areas would not like, is that often the state money has restrictions on what it can be used for, or comes with policy requirements attached. If I remember correctly, PA schools could lose state funding if they didn't implement and enforce the state's masking policy. This caused a bit of friction in many districts.
I think one argument is this incentivizes in the wrong way regarding home buying. It seems similar to the mortgage interest rate deduction argument: it incentivizes larger homes, it's regressive because it benefits those with more wealth in property than those with less, increases the likelihood of defaults due to people being incentivized towards more expensive homes, and potentially distorts housing prices, related to excessive borrowing.
Maybe. My idea is to shift property tax to income/capital gains tax. In theory (depending on the structure) that should provide less net income because the number of working years should be lower than the number of years living in any property, and it should impact the higher earners more. This lower net income should lower the amount one is approved for (and hopefully stay the same towards the lower income range). This should reduce the burden on people who are on a fixed income while keeping houses a similar size. Maybe even smaller since the tax is taken off the top rather than perpetually taken off the back end - people tend to notice a smaller paycheck more.
This is an interesting perspective, thanks for clarifying. I think it would also be interesting if it leads to a more equitable method of funding schools.
I think it would be a mix in my view. Most of that should be income taxes at the state level, but still allow for some smaller percentage income tax to be collected at the local level. This should provide a higher base level of per student funding across the state, but still allow local municipalities to collect a smaller amount of funds that wouldn't have state restrictions on them. Maybe something like 95% fed and state funding with 5% local.
It sounds plausible if we could get around the PR issue of any raise in state income taxes being viewed as an evil. (I do think this would cause the need for higher state taxes, considering how many state and local municipalities struggle to fund education programs through general funds).
It reminds me a bit of the universal healthcare push. It seems very hard to convince people that, yes, their income tax levels may go up, but their overall costs will go down.
> For a personal example, my wife complains that an 1800 sqft house is too small.
A modern blueprint 1800sqft house, yeah, for sure.
But somehow a 1960s split level at 1800sqft is spacious.
We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small.
The recent trend towards 4 story narrow houses doesn't help. A literal 1/3rd of the house is taken up by stairs!
I'm in a 2300sqft house that has 4 bedrooms and 3 bathrooms and an office. There is still a bit of wasted space, but not much!
Meanwhile, I've seen new houses, 3000sqft, 3 bedrooms, 4 bathrooms, 1.5 million.
"Oh you want 4 bedrooms? Those start at 1.7 million" <-- Said by an actual house developer
> We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms
Two living rooms (well, “living” and “family”) and two (“formal” and, well, not) dining rooms are pretty common in 1960s homes at the size being discussed.
Bedrooms, bedroom closets, and kitchens are probably smaller than newer homes, though.
> The recent trend towards 4 story narrow houses doesn't help.
Tall, narrow houses have been a feature of urban single-family homes for a while, I don't think they are a new trend.
> Two living rooms (well, “living” and “family”) and two (“formal” and, well, not) dining rooms are pretty common in 1960s homes at the size being discussed.
When house buying in 2020/2021 I looked at over 100 homes.
Very few, if any, of the 1960s houses wasted space on two dining rooms, and a fair number had basements converted to family rooms but it obviously wasn't an original part of the floor plan.
The 1960s split level design is obscenely efficient in space usage. There are plenty of variations on it, but the well done ones, vaulted ceilings, visible interior wood trusses, are still nice to live in today. The only modern amenities they are missing are a walk in closet and a full master bath.
Clocking in at ~2000sqft they can do more than a modern 3000+ sqft home does.
> Tall, narrow houses have been a feature of urban single-family homes for a while, I don't think they are a new trend.
Agreed, but the new breed is much narrower than before. I've been in Chicago row houses, and sure they are narrow, but the new ones they are building around Seattle are insane. It is basically one room then a flight of stairs. 3 bedrooms, one in basement, one on 2nd floor, 3rd on top floor. It borders on unlivable for a family, not to mention anyone over the age of 35.
Honestly it'd be much better if they just made regular condos, instead of 4 across narrow homes of 4 stories, do 4 flats.
I haven't really noticed that. Some older home don't have closets, or only small ones. But then it was common to have a shifero etc, taking up space too.
Areas commonly used for storage, like unfinished attics, basements, and garages aren't generally counted in the assessed sqft.
"The recent trend towards 4 story narrow houses doesn't help. A literal 1/3rd of the house is taken up by stairs"
If you want vertical efficiency, we have apartments for that. You get a single staircase and 20 single-story homes instead of 20 staircases in 20 homes.
Its funny that US/UK/ anglosphere seems to have never figured out apartments, in Uk you can't even be a true owner - first you pay leasehold, then you pay ground rent, then you pay service charge (for which they are not obligated to provide any service), so you paid 3 times for the same thing!
And then when yoy find out that your block was built in breach of fire regulations, it's not the material supplier, not the developer and not the building landlord that get the bill, its the leaseholder that does not even own the house that has to pay for 'waking watch' (pateolls by firemen) and any repairs!
People who bought Shared Ownership apartments (you own 25%, other 75% is owned by investors) are responsible for 100% of the cost of fixing the building because between developer, supplier, fire inspector and landlord someone has commited fraud.
UK likes to think fo itself as free country, but I have never seen laws as tyranical and feudal as housing laws here. It's like they were writted for medieval lords to opress their peasanta and never changed.
If you want to know more about this, google 'cladding scandal, UK'
Funnily enough Scotland has figured out apartments - both Edinburgh and Glasgow have some really incredible spacious apartments. I wonder if it's a result of the divergent legal systems.
Living in London, I'd happily live in a generous sized apartment (I grew up in one in Scotland - it was fine), but the system here doesn't allow it. The apartments available are almost all very small (with a few very central and highly priced exceptions) and the leasehold system makes owning them and doing work a bureaucratic nightmare. So along with everyone else, I'm buying a house and bidding up the prices of those.
The US has large apartment buildings, the problem is that there is not a whole lot of anything between 5-20 stories, and there is a construction premium for 20+ story buildings.
(And in the US it would be two staircases and 20 single story homes, specifically because building codes require two staircases to prevent a Grenfell-like disaster.
In all honesty, Grenfell was caused by bad construction choices, materials and political penny-pinching. A second stairway filled with cyanide smoke would have had very limited benefits.
People really want to live in their own little hut - as we have done for centuries.
"in Uk you can't even be a true owner "
You can never be the 'true owner' of any land in England. All land is technically owned by the Crown. You can only ever hold an interest in land in England - a freehold being the best you can get, and even those are littered with covenants these days.
If my previous town home had 1 more bedroom I would have stayed there and not moved.
The shared green space / yard is much larger than the one I have in the house I bought. Having an HOA take care of all maintenance and yard work is amazing.
At their best, condos and townhomes can be better than single family houses, but sadly most development isn't "at its best".
>But somehow a 1960s split level at 1800sqft is spacious.
I've actually found the opposite. Modern builds seems to prefer open floor plans and higher ceilings that older homes do not. To me at least, this can make the equivalent square footage seem less cramped. To your point though, it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.
Having more rooms and more division between them is part of why older houses feel bigger to me.
Modern ones also do some really stupid stuff with square footage. One house we owned had a massive master suite the size of the entire 2-car garage (it was over it) plus some more carved out for the bathroom, but without any dividing walls or doors (even the [large] bathroom was just an open, wide doorway entry, no closing doors). It was huge, but also not quite big enough to divide into multiple spaces with furniture and rugs or whatever without it looking and feeling weird. A kind of awkward fake-luxury size. And it was a front-back split with a living room in the lower part alongside the entryway, with a fireplace and big window... the layout of which made it almost impossible to set up actual living room furniture in a decent way, so we basically didn't use that entire room and used the basement instead.
The house could have been a solid 500 sqft smaller and felt just as large, with some tweaks to the design. Nearly every other house we've owned, aside from one very old one (by American standards-1910s construction), had similar issues with large areas being wasted for one reason or another, due to how they were designed.
I think the "open floor plan" trend is mostly to look impressive in photos and to get that "wow" factor when you first walk in. In practice, as commonly realized at least, it's terribly wasteful of space and makes houses feel smaller, because it's harder to get a wall between you and someone else, than it is in older houses. Harder to furnish, and arrange furnishing properly, too (not enough wall space, more backs of things visible)
[EDIT] I'd actually liken the open-floorpan trend to the haphazard McMansion appearance of the outside of houses. One thing I've noticed looking at lots of houses over the years is that nice, big, older houses, or newer ones built with balanced and regular exterior layouts, tend to look smaller on the outside than they actually are—or, put differently, McMansion-style houses look much bigger than they actually are. They're loud, and deceptive. Open floor plans are like that for interior space.
>I think the "open floor plan" trend is mostly to look impressive in photos and to get that "wow" factor when you first walk in. In practice, as commonly realized at least, it's terribly wasteful of space and makes houses feel smaller, because it's harder to get a wall between you and someone else, than it is in older houses.
I don't know. I live in an old house that I've incrementally opened up the first floor of. And I find the largely opened up space much airier and lighter and a generally better use of space than the more closed spaces were. That said, I do mostly live by myself so I don't really run into the issue of not being able to get away from other people unless I retreat to my office or small bedroom.
> it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.
Newer homes also seem to be kitchen heavy, and have larger closets (and also bedrooms), all of which reduces shared (and, but for the bedroom part, total) living space with the same square footage.
Yes, although the dining area is often part of a largely open common area that includes the kitchen and living room.
My brother recently rebuilt a house in Maine and largely went with an open floor plan with relatively modestly-sized bedrooms and bathrooms. It makes pretty efficient use of space. The downside is that if someone want to have their own space, they pretty much have to go outside or retreat to their bedroom.
My house is fairly standard 200 year old New England Cape (though some of it isn't original). I've largely opened up the downstairs to be a common space that I use heavily. Upstairs are four fairly small bedrooms and one small bathroom. It's fine for myself and guests. But even with just two people, there's really only one spare room which I tend to use for staging trips and various hobby stuff I don't want to clutter my office.
I'd add that for a lot of people, one small bathroom would be a deal-breaker although shared bathrooms were considered the norm a few decades ago.
Big kitchens with islands and casual dining space add so much value to a home today. People absolutely love making the kitchen a centerpiece room. It can be used for so many things.
I think in older homes the thought at the time was that the kitchen was a utility room meant for cooking, food storage and dishes. And that the living room was the center of it all.
>I think in older homes the thought at the time was that the kitchen was a utility room meant for cooking, food storage and dishes.
And in some cases, it was where the servants dealt with such things out of site of any guests.
The house I grew up in had such an arrangement. And although we didn't have a cook, etc., in the sixties, my parents did a lot of large dinner party entertainment. While my mother did the cooking, it would still have been pretty much unthinkable for guests to be hanging out in the kitchen much less helping to clean up etc.
My ideal/dream/lottery home would be laid out as though I had a decent sized staff, utilitarian rooms out of sight, clear division between things. I won't turn down the staff if you're offering, but note that's not what I'm saying - I'd just like each room to be efficient/appropriate for how I'm spending my time when I'm there. A functional kitchen that's easy to clean but can be left in a mess while I send the food up in the dumbwaiter, and myself through the baize, to a more 'form over function' dining room. (Functional as a dining room of course.. I just mean that's decorated for comfort etc. rather than being a work area.)
1960s split levels, knock down a single wall and you have an open floor plan. It is an incredibly common remodel.
They often have vaulted ceilings and front bay windows.
While I do <3 a well done modern floor plan, sadly most new houses have garbage floor plans. Ironically, and IMHO, the smaller houses tend to make better use of space out of pure necessity. Take a 1200sqft 2 bedroom house, tell builders they have another 1000sqft, and they'll shove in a 2nd dining room, 3 closets, another bathroom, but no more useful space.
Related, 2 bedroom 3 bath houses make me want to scream.
Yeah those higher ceilings are very popular, andextremely inefficient. We recently saw this in the new constructed homes in Texas, which made their problem with the power grid last year even worse. The few minutes they gave power to those fancy new home regions (during the time they were cycling power steering) basically went to waste, because the ceilings were so insanely high, and everyone has the open and spacious aesthetic. Many of them had 2 story entrance like ceilings, and few doors to close off where the heat should be directed.
Older homes in the north tend towards lower ceilings and smaller rooms with doors - so heating one room can be efficient and fast
Sure, I was going to mention the tradeoff with the inefficiency but left it out for brevity.
I will say, though, that the same inefficiency in those geographic areas exist when building multistoried buildings. A ranch is much easier to cool in west texas/new mexico/arizona than a multistory building where the bedrooms and living areas need to be cooled.
I've notice the construction style also mitigates this somewhat. In the west where slab-on-grade is the norm, ducts run through the attic, meaning diffusers are in the ceiling. This makes natural convection of cold air more efficient, especially when coupled with something cheap like a ceiling fan. But at the end of the day, you're right that there's still substantially more air to condition.
I don't know if I'd say that was even a proximate cause of the texas power grid situation though which was largely due to weatherization issues. Can you elaborate?
There are a lot of articles that go through the issues in detail. The main points they list are that in that climate heating is less of a concern and so inefficient resistant heating is common. Then the grid itself didn't winterize, which lead to some plants not staying up and the others not being able to cover the spike in demand with a reduction in generation capacity.
That's kinda what I'm getting at. The root cause of the failure was not winterizing the plants and infrastructure, not really about residential construction design.
The resistance heating failed due to the grid design, not the other way around. Having more electrical demand would have not been much of an issue, I presume, had the grid been more resilient. Conversely, less resistance heating would not have magically made the grid more resilient.
"A modern blueprint 1800sqft house, yeah, for sure."
This seems to mostly be a difference in preference. The house is 1.5 baths and not large ones. Some layout parts are less efficient, like a master bedroom bigger than it has to be (so opposite of the numerous small rooms issue you brought up). But overall there is plenty of room, even a room dedicated as a play room. But overall this is a great example of shifting preferences over time since an average size house was 1970 was about 200 sqft less that this, and I grew up in an 1100sqft house.
Prices vary by location. You can have a 4 bed house build for a quarter of that in many areas of the country.
I don't necessarily disagree, but I have been thinking about what it would take to hypothetically limit the ability for people to buy multiple properties within some geographical boundary, or even put some pressure on low density owners in that geographical boundary while the cost of housing/vacancy rates are within some extremely scarce range. It's a naive thought atm, but I would be curious if everyone basically had only one slot for residential ownership in the metro area of the city, how much could regional demand actually push prices?
For example, is it even remotely reasonable as a society to allow extremely wealthy people to own two or more condos in Toronto, when the minimum cost to get any condo is 3/4 of a million and salaries not remotely keeping pace? Is it unreasonable to settle on a definition of excess being that of the multiple residential property owner? Likewise for consideration towards residential property development companies. Maybe it's possible to own a lot of land specifically designated for development, but not for just holding more than one or a few properties.
I don't think it's possible with all the shell corporations and other gimmicks the rich use. It's just too easy to conceal who owns what. I think simply removing all the market restrictions that make homes such a valuable investment would do it, when demand meets supply suddenly housing markets start to look like any other market. But this seems to be politically unthinkable just about everywhere.
I think there's a difference between completely impossible, and partially very difficult. If reasonably well-off people can pretty easily leverage low-interest rates and take control over property that otherwise wouldn't have as much competition, then that's probably a bad thing. The super rich will always figure out a way if it's lucrative enough, but those actions would stand out more if it was generally unacceptable. As it stands, I don't even know how to track down data on how many people own multiple properties. Likewise, you can't possibly out-pace multiple property ownership with supply in a desirable place unless you exhaust the excess capital available to wealthy people and ban low-density zoning codes and maybe even ban surface-level parking lots.
In my neighbourhood, lots of wealthy homeowners have signs up decrying the construction of a sky-scraper that's sort of vaguely near the edge of their neighbourhood, which is currently occupied by a parking lot. The effect it would theoretically have, is adding to the available housing supply in the area for people currently renting at absurd rates because it's impossible to buy anything. It would take away rental income from people who already leveraged themselves too much, and marginally decrease demand for their scarce commodity known as a place to live.
A lot of it is cost of labor. What I suspect is cheap loans to homebuilders has propped up the price of trades and secondarily materials to the point most people can't afford to build their own house in any location.
Then, depending on where you are, you have fixed costs for building in an area like geological or ecological impact statements that can be $20k or more. Too much.
"Changing preferences are the best way to address this, yet is likely the most difficult to sucessfully influence. Houses being built today are mostly larger homes"
Surely people who are currently homeless would rather rent a small house than none at all? I haven't met one demanding '1800sqft or i'd rather live on the street!'
This is why minimum wage, that prohibits low-wage work, and minimum floor size ordinances, that prohibit micro-suites, are so harmful.
Fortunately the former has been mostly neutralized by the statutory minimum wage being reduced by inflation, but the latter is getting worse, with more such laws being implemented and reducing affordable housing.
One important factor to increasing house size is that localities in the US tend to have fairly large lot sizes. To recoup the cost of building on more expensive land, builders build more house, because the opposite (building 2 or more houses and subdividing the land) is just illegal.
In areas with high supply or low demand, the price of housing approaches the cost of construction.
In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.
The price can even go lower than the cost to remediate the property for residency. This is a bit of a tail risk. This has never happened to most U.S. neighborhoods, but the risk is not zero.
Getting loans to build on these lots is nearly impossible, which contributes to their continued decline.
Can we be more precise in language on what “new housing” means. More urban sprawl versus densification both are “new housing” but very different. I’m pro densification but highly against sprawl.
The two are pretty clearly related. If cities aren't allowed to densify, then people who would have lived in the city center have to live somewhere else.
My natural inclination is to agree with this statement, but I'd like to hear your rationale. Can you elaborate on your preference? Is it location dependent?
Sprawl is environmentally unfriendly (transport distance and construction material usage), financially expensive (sparse service provision, roads), and it excludes poor people from the city center (since everyone has to compete to be within 15 minutes)
also, it's actually bad for public health as well. Walking rates have declined significantly over the past few decades due to sprawl making it impossible to walk anywhere.
For starters When has sprawl not caused a reliance on cars? Eaten up large tracts of natural land with cookie cutter homes, pavement, and non-native office park type landscaping? Encouraged McMansions over appropriately sized homes with all the extra energy consumption etc those require? That’s just getting started.
It’s not location dependent. Phoenix and Vegas or wherever are doing themselves no favors by building out rather than up.
London doesn't have this problem if I am not mistaken. But housing is very very expensive still. So much that a 3 bedroom 120sqm apartment can be more than 6 million dollars even outside Central London depending on the area.
From everything I've heard London has some of most restrictive, bureaucracy laden, red tape filled city building processes out there. I've heard that all of England has "councils" at the local level that basically operate as HOAs with the full force of the law. I don't know that I'd pick anywhere in the UK as a shining example of ease of building.
But then councils can compete with each other, the ones outside even do so. There are tons of high rises coming far from Central London but still reasonable commute to center, but that doesn't necessarily reduce the price of properties inside.
Area has a lot to do with prices and unless these outer areas become self sufficient so much that Central London or rich boroughs lose lustre, the inner areas will command a high price.
While demand outstrips supply as now, prices increase. These have a ceiling of the maximum people can afford. If everyone is given a £10k payrise, then rents will increase by £10k, and buying will increase by whatever an extra £10k a year will get you on the mortgage.
Until supply increases enough so that demand is no longer artificially constrained that will be the case. Now there are places where supply is higher than demand, like inner cities in places like Stoke, and prices there are low enough that even a single earner on minimum wage with 6 months salary as a deposit can afford a 2 bed house [0]
This is true, zoning in Japan [0] makes a lot of sense. Instead of single family homes they allow triplexes, even a percentage of space dedicated to a low-impact business (like hair stylist, etc). They have setback rules so that you can't put second/third floor up against your neighbors property line blocking the sun all day. They dedicate nearby spaces for commercial and hi-rise buildings, making it possible to live near where you work. And there is dedicated space for factories and other industrial buildings.
Single-use single family zoning is being eliminated in some areas of the U.S., allowing accessory dwelling units to be built, etc. Even California just passed a low changed R1 to R3 for all cities in the state (pending court cases, I assume).
As well as a general culture which is very willing to build new buildings, the population of Japan has been pretty stable, even falling a bit, since the early 90s. I wonder if that hasn't had a really impact on the fact they've more-or-less escaped the rampant house price inflation seen in other countries.
Since 1990, Japan's population has risen by 2%, the UK has grown 17%, the US by 32%, Canada by 37%. That growth is bound to put a significant pressure on property prices.
this is partially because of the earthquake codes.
a major earthquake tends to happen once every generation, and building codes tend to get updated after them. If you buy a house not compliant with the current rules it is more likely to kill you; most damage in the 1995 Hanshin earthquake, for example, occurred to buildings predating the 1981 building code.
In London, if someone purchased all the properties on a block could they level the block and build something 15 stories tall? No: it has lots of regulations that restrict construction.
(Not saying that allowing this is necessarily good or bad, but it's definitely something London has)
No, and for good reason: if everything is high-rises then housing becomes too dense. The problem isn't lack of housing density. The problem is too many people wanting to live in a small area. We need to reduce demand (by spreading over a wider area - more cities and rural areas too) rather than increase supply.
I dont think there's any justification for this position, really. Density in Macau is 20,000 people per square kilometer. Parts of the NY/NJ metro area like Guttenberg are 22,000. San Francisco is 6,600. Hong Kong is 6,300. London is 5,700. There is a ton of room to increase density before we start reducing demand.
High density is not desirable to affluent families when the alternative could be a 3,000sqft single family home with a sizeable backyard in San Francisco, and these people tend to make the rules.
You can get a 3 bedroom SFH in Noe Valley for under $4m. Outer Sunset for under $2.5m. I'd be hard pressed to find any family that would ever want to buy a new condo anywhere near downtown SF - that's a very particular type of buyer.
Yes, this definitely wouldn't be allowed there in some areas but isn't this true for most cities. I am all for more housing. But all areas in a city don't need to be redeveloped with high rises.
Construction costs and land costs are not independent. A big part of the construction cost is the cost of labor. You can't do construction work remotely, so you need to hire workers who live relatively near the construction site. Which means they have to pay the high housing costs so you need to pay them more. It's a feedback loop where the more expensive housing is, the more expensive it will be to build housing.
On a macro scale this is likely true. Unless you ship in cheap workers for a season.
On a micro scale, where I live, it’s not. A $2M home in Toronto is maybe $400k where I live, an hour down the road. And I know a lot of local workers who commute to Toronto every day to work on sites. (They do 7-3 to avoid traffic and the neighbours hate their nail gun wake ups)
It's still relatively true. A $400k home is only cheap in comparison to a $2M home. That's quite a lot compared to the average laborer's wages. Maybe if those homes were $200k, the homes in the pricier area would be only $1M (not exactly obviously). $400k to live with an hour commute is not that great a deal IMO.
Right, but the costs in their market are still going to be affected by the high prices in the market where they work. It’s not feasible for them to live far enough away to escape the influence.
Houses an hour from Toronto are still going to be more expensive because they’re an hour from Toronto and people can work there at higher paying jobs (but not enough to afford the $2M house in the city) and it’s worth it with the commute.
The high prices in the city are going to drive up prices everywhere within commuting distance.
There's a sci-fi novel I want to write some time...
You know how some countries have mandatory military service?
Well, what if all of the "Essential" jobs, all had mandatory service?
I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-bodied person in a country would need to do each job, in order to satisfy all of the needs of everyone in that society (able-bodied, or not.)
And then build up a story around some people who are finishing their Essential Jobs, and are deciding whether to Retire into living off the dole, or whether to transition into some Skilled labor to live in more luxury.
And then there's the fact that automation is making it so that less and less actual manual effort is required for the Essential jobs. So, does the society start categorizing new jobs as Essential, or do people end up with more discretionary time?
I feel like this would have made a pretty okay Star Trek culture to encounter...
The Expanse briefly mentions this in one of the books. Earth has universal "basic" income but if people want to go to university they have to do 2 years of working less desirable jobs to show they can handle working.
I heard that Starship Troopers book had something like what you described but I haven't read it.
In Starship Troopers, as I recall, you had to serve for some period in order to be a citizen/vote. I don't remember if this was necessarily military service (although that is certainly what the book highlighted).
You could approach this idea from the opposite direction: Put all essential jobs under military jurisdiction. There's real-world precedent illustrating some of the ways this would (and wouldn't) work.
>Put all essential jobs under military jurisdiction.
Under that scenario the relative fairness of paying for jobs to be done would be replaced with the relative unfairness of being friends with the right people in the "plumber corps" to fix your toliet.
Adding another sci-fi book recommendation that explores these themes; in The Quantum Thief by Hannu Rajaniemi there is a moving city on Mars where citizens that run out of time, their currency allowing them to live in the city, have their consciousness transferred to machine servants that maintain the city. Being a servant for a number of years earns them enough time to return to their bodies and the city.
I agree with the tone in the comments here - and the article. It is the land prices that drive prices.
My income here in Germany is alright, according to statistics I am in the top 20% with my monthly income. Unfortunately, I will not be able to buy a decent apartment in the city to start a family if my gf/wife is not also in the top 20%, we get some support from parents and agree to pay off the debt for the next 35 years.
This is the only reason why I am not starting a family.
Times were different, housing was more affordable, but today everyone wants to live in the urban areas, the human population is growing, building standards increased, people can own land forever. In the city where I am living apartments were relatively affordable 20 years ago, today they cost twice as much.
If you ask me then I have to rather populist solutions for the housing crisis: 1) nobody can own land; land is property of the people and can only be leased for 75 year or so; 2) one apartment per head. Not more. 3) all profits from selling real estate are taxed 100%. Those 3 measures would quickly lead to a huge price drop and speculation would not make much sense anymore.
Cities have always been a place to make money, so people go there. We're at the point where not doing that, makes it impossible to live. SO that drives wages down and prices up.
This article doesn’t even bring up construction unions which can hike construction costs by about 20%. IF they allow construction in the first place. SF and London Breed couldn’t get affordable housing off the ground because a proposal by non union modular housing company in Mare’s landing was not within the county.
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[..] Builders say apprenticeship requirements drive up the already sky-high expense of affordable-housing construction in a state where it can cost as much as $700,000 a unit to build in dense, urban areas such as San Francisco. They also argue that the union-backed provisions could slow or halt construction of affordable homes in lower-income rural and inland areas where there isn’t enough available union labor.[..]
[..] California’s State Building and Construction Trades Council, which represents 450,000 ironworkers, pipe fitters and other skilled laborers, has blocked numerous bills it says don’t guarantee enough work for its members. It contributes tens of millions of dollars to political candidates and campaigns, engages in aggressive lobbying, and pays for advertisements that portray opponents as lackeys of greedy developers.
Legislative insiders say the success of the union known widely as “the Trades” is one of the main reasons Sacramento politicians have struggled to pass bills streamlining construction approval and easing zoning restrictions. Researchers say those steps are urgently needed to address skyrocketing real-estate prices and rents, as well as homelessness.
“They’re a gatekeeper for any significant legislation moving through Sacramento” on housing, said Ben Metcalf, managing director at the Terner Center for Housing Innovation at UC Berkeley and former head of the state’s Housing and Community Development agency.[..]
There was a fascinating conference filmed and on youtube at UCL on this subject (in my history, looking for it).
The upshot is roughly that the owner of farm (hedonic) land knows how much their land is worth both with and without planning permission and the minute housing is thought of the price of the land 10x.
And that's fair - no one wants to look like a chump. So any house building scheme to solve the housing crisis suddenly has this price built in, and thus any house building scheme immediately becomes too expensive to undertake.
There was a solution in UK in early 1950s. A 100% land value tax. If you bought land for 10k and sold it for 100k you owed the government 90k.
This quite simply took the heat out of the market, and allowed the government to invest in roads and schools and hospitals and so on. It mean that UK built two whole New Towns (widely seen as concrete monstrosities) but the point is they got built - enough new housing in a handful of years to create towns that still live breathe 80 years later.
If we want house building schemes we have the answer.
"A 100% land value tax. If you bought land for 10k and sold it for 100k you owed the government 90k."
I think this is fair - the land itself is a natural resource that the owner has (presumably) done nothing to improve - they are just hogging it so that nokne else can use it
Almost nothing, especially with the cheap materials used in current modern construction (unless requiring some hurricane code; ex. South Florida). It's all due to zoning limitations, and homeowners voting in their own interests to keep the supply down, and values to rise.
The rebuild cost, as estimated by my insurance company, is more than half the total value of my house. And I live in Seattle, where land is relatively expensive. Construction cost is not "almost nothing" by any means.
Also, land is not scarce in the south and midwest which is we haven't really seen a rise in price per square foot in 40 years [0] as it is basically all construction costs as you can build a new home in a new suburb at the edge of the city.
In a city, most construction is going to involve demolishing the previous structure. So you could argue there isn't much value in pricing construction sans the cost of demolition.
> The old houses still around are the exception to the rule, not the norm.
So true. In fact, you could teach the concept of survivorship bias by looking at old homes, and the statement "they don't build them like they used to".
>The old houses still around are the exception to the rule, not the norm.
You need to get outside the beltway or at least go to some of the "bad" neighborhoods within it.
The only place your statement is close to true is very wealthy areas that are constantly being redeveloped. Other than the occasional prime lot or desirable commercial site new construction fills in around the old or adds on to it. Big lots get subdivided and a new structure goes on the empty chunk and buildings get additions. Basically nobody is demolishing any building that is sound because buildings are expensive and why would you waste a perfectly good one.
Generally speaking you only see good buildings get demolished when the land becomes worth so much relative to the structure that it makes economic sense to knock it all down and do a clean sheet because the little extra optimization you get from doing that is worth more than what you would have saved by keeping the sub-optimal structure.
> Generally speaking you only see good buildings get demolished when the land becomes worth so much relative to the structure that it makes economic sense to knock it all down and do a clean sheet because the little extra optimization you get from doing that is worth more than what you would have saved by keeping the sub-optimal structure.
My city has passed so many building code requirements on remodels that now days it is, from what contractors have told me, about the same price to remodel as to tear down and replace.
I was quoted over 150k to add a new bedroom to the 2nd floor, most of that is because the city would require me to completely replace my roof structure with a brand new one to bring it up to modern insulation standards.
I imagine, without doing the math, that the carbon footprint of tearing down a house and building a new one is much higher than whatever energy is going to be wasted by having amazing-but-not-the-best-insulation in my attic.
Alot of new development is that architecture from the 80's and 90's is not tailord to modern life, was adapted to the car revolutions of the late mid century, and is agressive towards pedestrians. All the new construction in my area is tearing down old warehouse, office buildings and parking lots, to be replaced with wide sidewalks, brick paved streets with clear crossings, and high rise young adult "luxury" apartments with amenities. It's making the neighborhood nice and connecting all the bike routes and walk routes.
Being right outside the city core helps justify the price of redevelopment. However, I think the larger buildings are getting facelifts rather than rebuilds.
>Almost nothing, especially with the cheap materials used in current modern construction (unless requiring some hurricane code; ex. South Florida). It's all due to zoning limitations, and homeowners voting in their own interests to keep the supply down, and values to rise.
Low rates have created a mechanism where large amounts of housing are built by corporations and entrepreneurs for rent. Most of them borrowed market funds at 1% or even less, often on 100% credit, or ~~2-3% or less mortgages and built condos, houses and apartments. There was such a shortage that this drove up prices - yet since people needed a roof overhead, they were forced to pay 40-50% of household income for rent. Managed in bulk by management companies these costs were low and yields of 5-15% were achieved. In addition, many were rented as AirBNB's in low vacancy areas earning 50%, but seasonable.
This is the cause - what is the cure? Home inflation and the Covid stimulus has ramped up inflation. The usual remedy for this is rates hike, but they are afraid that this will create a huge underwater home effect. Once this starts it can become a race to the bottom. Corporations will write off their equity losses, owners will get friend like bacon - they inch them up.
The call it Scylla and Charybdis - between two evils, as they sit, the bacon piles up... https://en.wikipedia.org/wiki/Between_Scylla_and_Charybdis
National company built subdivisions like you mention (often 80-200 homes each, all cookie cutter mini mcmansions) are popping up where I live, but there isn't a shortage of other options. People arent moving there "just to put a roof over their heads" as if it were a choice of last resort.
People are moving into them because they want to. Lower crime than the city, less lawn to maintain than the country, plenty of room indoors for the whole family during bad weather, looks posh (even if any craftsman would scoff at the crap construction).
I wouldn't ever buy one myself, but some people wouldn't have it any other way.
Yes, house construction methods need to get modern. Most construction automation is labor savers, drill, nailers, gluers, foam extruded baseboards - but, people HAVE to have a place to live. The move to online work has helped many.
Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?
Nope. If you can afford to live on the waterfront and enjoy the view, but never use your boat, are you morally obligated to sell your house to someone who will be out there fishing or skiing every day?
Land is bought and sold on an open market. Everyone can decide for themselves what is most important to them and what they can afford. One factor behind living in a major city is certainly easy access to in-person employment. But there are a ton of other factors (restaurants, culture, sporting events, community, etc.). If you are willing to pay a lot of money to be close to those things even if you don't use all of them, that's your choice and it's perfectly ethical.
I dislike this particular example because waterfront views aren't necessarily tied to boat accessibility. I have relatives in Long Island that live five houses from a marina and have absolutely no water view what-so-ever, however they have exceedingly good access to their boat which they sail regularly. I like the gist of your argument but the specifics are pretty questionable to me and I'm struggling to think of a similar fair argument that doesn't also have the "under-utilizer" reaping some direct benefit from the same quality that the "proper-utilizer" would fully exercise. The easiest example for me to think of is public transit, a lot of people make no use of public transit for their work commute but still use it when going out for the evening or get a benefit from it through their children's usage. City nodes tend to specialize pretty efficiently, the fact that people who want to live near a movie theater often compete with people wanting to live near transit is due to the fact that those attributes aren't nearly as independent as you'd think. Theaters and entertainment venues in general tend to clump around good public transit accessibility. The waterfront view and the ability to easily fish are two different services, but they're supplied by the same object so it isn't particularly easy to separate the two[1].
1. I mean, unless you're talking about Boston in the 90's where the Charles was a pristine beautiful river that only an absolute madman would ever dare to fish on or some other similar pollution driven limitation of services... but that also shifts the original point since fisherman have no desire to live close to the Charles (and might actually be harmed by having to boat up and down the Charles every day when compared to living in Chelsea or Southie.
No, because you as an individual are not morally obligated to provide housing to society.
If such an obligation exists, it's the government's obligation, not an individual one.
The best thing an individual can do to provide housing to other people (aside from build it) is to support the loosening of regulations which make it difficult to build new housing. Those regulations tend to be worst in the major employment centers.
Morality is too blunt of a tool for this kind of question. Right now we are way over-moralizing many issues and it's not helpful to a discussion.
Morality is useful to avoid rationalizing things that we know are wrong. For example, killing is wrong -- we don't want individuals making complex rationalizations about how the end justifies the means.
But something as complex as the place a person chooses to live? No, that's a morally-neutral choice. It may not be optimal for the benefit of society, but that's not what morality is about.
>For example, killing is wrong -- we don't want individuals making complex rationalizations about how the end justifies the means.
Humanity justifies it in self-defense and war. A long time ago, civilizations justified human sacrifices. It doesn't take a complex rationalization. Only a convincing one.
While the platitude of "killing is wrong" is repeated by everyone, if you dig deep enough, people will still provide carveouts for themselves and their country or religion. Whether killing is good or bad is assessed by people objectively in terms of motives and consequences, and, on a subjective level, manner and "proportion". There wouldn't be a distinction between homicide and murder if humanity as a whole practiced what it preached.
>But something as complex as the place a person chooses to live? No, that's a morally-neutral choice. It may not be optimal for the benefit of society, but that's not what morality is about.
I agree entirely. However this seems like a massive departure from what I've had to argue against in this forum. Plenty have claimed the opposite, that morality is all about society and any correlated externality IS obliged to be solved by government or the people through a half-baked redistribution scheme.
I'd argue that choosing to live in any area for any reason does not in any way make you morally responsible for the externalities of that choice. What you do while living there you are morally responsible for, but merely the choice to move does not bear any responsibility.
So, yes, NIMBYs bear some moral responsibility for the housing situation, but simply relocating does not create responsibility or moral hazard.
Not sure why you are being down voted. This seems like a legitimate question that I would like to see the opposite side of.
For example, if I was permanently remote, I would like to move to a cheaper area. I can't because my wife doesn't want to leave the current county (because "It's the best county in the world"). Although I'm also not in a heavily populated area, more so on the edge of being rural.
I do agree it could be worded better. I kind of doubt a single word would change the tone that significantly (given that many people don't know the difference).
> I can't because my wife doesn't want to leave the current county (because "It's the best county in the world")
For some reason that comment really piqued my curiosity. Obviously lots of us might choose different areas for various reasons (schools, weather, scenery, politics, recreational opportunities, cultural sites, etc). But to make a declaration of world's best must mean a lot of confidence in the greatness of one's county! It also reminds me how little I identify with the county I live in, perhaps because I've lived in a few, and perhaps because I currently live almost directly on a county border and can see the neighboring county from my back windows.
Still, I'm curious what about your home county makes your wife so enthusiastic about it compared to well, everywhere else?
"Still, I'm curious what about your home county makes your wife so enthusiastic about it compared to well, everywhere else?"
I asked her that during the discussion. She wasn't able to give any explanation. My guess is that it's because she's never lived anywhere else. I've lived multiple places. They each have their good and bad characteristics.
You mean am I morally obligated to take my kids from their school and friends, as well as all the relationships I've made with the community, so that someone else can have an easier commute? nope.
If you are judging morality based on, taking more than what you need or deserve, or squandering a gift, then maybe. But that would be a high bar. How much space you take up and how you interact in your neighborhood would factor in much more than your presence. For example, if you lived in the slums of the city, but was a net positive for the community and caused some gentrification, that certainly should not count against you. How about people who can walk to mass transit but don't use it? That would be similar.
Practically speaking, the areas you speak of will always have high demand, no matter the type of demand. It's never going to be affordable. Accept it.
Second, somebody living in a small super expensive apartment whilst fully working remotely is likely to have a miserable time (COVID situation). If they would have the type of job security guaranteeing they can continue working remotely for a long time, surely many of them might leave. Those that stay likely have non-work reasons to stay, like proximity to family or other attractions of the city.
As for home ownership, it's a market, and there's no such thing as morality in markets. If you think that sounds cruel and selfish, try this simple thought exercise: the people currently priced out of owning a home, imagine they somehow do acquire a home. Now add 10 years and their homes appreciating 50% in value. Now they sell, do you honestly believe that these people that were all about social fairness and morality now apply a 50% discount to the buyer, out of the goodness of their heart?
I don't think so.
Likewise, if something happens to your home (expensive repairs, mortgage issues) do "moral" people come to help and compensate you? No. Your problem, you're the owner.
Anyway, I do empathize with the point, and I think we need a systemic change. The spreading of work/cultural locations into more places/hubs. The idea that you can cram ever more people in a tiny area and somehow keep this stable and working is just a ridiculous illusion.
Extra supply doesn't really work in these areas, so indeed...reduce demand, by moving it.
Is it okay to sell people? Do you own your children? If you own land, do you also own anyone who lives on that land?
At various point in history answers to all of the above were yes.
Should we have a market for organs? There is a market for intellectual property, but what is intellectual property - maybe there should be a patent for everything that exists, say a pencil, and they should never ever expire. So noone except that owner should be allowed to make pencils.
Should we have laws against Dumping, self dealing, wash teading, antitrust, insider trading, tragedy of the commons, negative externalities, collusion, cartels, misselling?
All those behaviours arise naturally from markets.
Currently, a home is personal property and thus a market. The ownership of assets is a fundamental building block of a modern capitalist society.
The point of owning a home is to have a house to live in, which you like and can customize to your liking. Another point/benefit is to take control of your living expenses and to be independent from a landlord.
The fact that real estate prices are skyrocketing has nothing to do with the idea of home ownership, it's a side effect of an imbalance in supply and demand. Yes, some investors will abuse this imbalance to build wealth but the true root cause is the imbalance in itself that makes it possible.
It's not rocket science. You cannot keep cramming ever more people in the same area. Supply will never meet demand. No amount of policy or taxation will solve this. The only structural long term solution is to address the demand side. It should not be required for half the population to move into a handful of cities just to have a decent job.
Yes, I do think so. There are plenty of ways we could make selfish decisions about here we live. I also think where a person lives is also highly personal and private and should not be subject to the decisions or judgments of others. Many people cited a pressure to provide/maintain a social environment for their family, so it's not a 1-dimensional decision by any means...
Those employment centers are where resources are. The alternative is setting up resort towns with shipped in and strained labor serving the leisure and remote work class. See the mountain towns. Living remotely outside of towns starts to get isolating and inefficient unless you are getting all your resources from around your house and living off the land. Forget modern amenities.
Prices on housing will not go down as long as people have access to money IMHO, and plenty are willing to pay up if it means 30-45 min less commute to work.
The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. That’s it. The cost of building is not relevant in any way to that. Nicer materials, better design, etc. can make people willing to pay more, but if it’s too much they won’t pay.
The only one who the cost of materials matters to is the builder. If it costs them more to build than they can sell it for (within whatever % profit margin they want), then they simply won’t build it.
>The price (of anything) is determined by one thing alone: how much someone is willing to pay for it.
Which, as a catch-all condition, is next to useless to examing why the price of something is what it is.
The question then moves to the next turtle: why are people willing to pay X for a house in area Y.
>The cost of building is not relevant in any way to that.
Well, that's not true. In a place were land is plentiful and cheap, the price to get a house is dominated by the cost of building. Doesn't matter if there's an existing house that someone is willing to pay 100 for it. If people can trivially buy land and build for 20, that would be the cost to own a house in the area (note: a house, not THAT particular house).
> Well, that's not true. In a place were land is plentiful and cheap, the price to get a house is dominated by the cost of building. Doesn't matter if there's an existing house that someone is willing to pay 100 for it. If people can trivially buy land and build for 20, that would be the cost to own a house in the area (note: a house, not THAT particular house).
Definitely true, just look at home prices in the south and midwest where there is plenty of land [0].
It's not about there being cheap land in the state in general, it's about being cheap land where people want to live.
Or, inversely, sure, home prices in the south and midwest might be high in expensive areas (e.g. major city), but they're much lower where land is cheap.
Except how much someone is willing to pay for something depends on, among other things, prevailing market prices, which are influenced by marginal costs.
I may be happy to buy a house for anything less than 200k but if all houses are selling for 100k, then that (or something like it) will be the amount I am actually willing to pay.
If construction costs rise and now builders are only selling houses for 150k, I will now be willing to pay that price.
Well, except that the cost affects how much people are willing to pay, because if people are not willing to pay more then the cost then there won't be enough supply -> it will cost more -> people will either pay more or go without.
You seem to be ignoring my second paragraph. Supply only goes down because the builder has decided it’s not worth it to build any more to sell. That’s the market force that equalizes the price to remain above cost. At that point, as prices begin to rise, the buyer’s decision is once again only related to “how much are they willing to pay”.
The price of construction matters considerably whether you're planning on building mass market apartments or condominiums. Most cities have explicitly different building codes based on the intended use of the dwellings, interestingly most of the time to avoid civil litigation with the city. Condos generally have much higher quality duct-work / fresh air exchange not to mention thicker walls, more sound dampening etc. All of this is more expensive, but the cost is passed onto the buyer and ensures the contractor isn't on the hook for tenants levying lawsuits against the architect / contractor / city that conducted inspections.
This sort glosses over the real percentage of construction costs by giving only a 20 or so percent of profit. A large portion of construction though is the individual sub-contractors profits. I would guess that the large difference in costs vs 100 years ago is proportional to the increased number of subcontractors. A hundred years ago a lot of lumber was even at least partially milled on site too.
The actual costs of real labor and real materials is pretty cheap. Even with the elevated building costs today you could still build an average home for sub $40,000 dollars if you control all aspects of the process.
Yes, we built an extension to our home ourselves, material and tools was about $40k. We heard later that to contract this to a California builder would have cost us $150-200k
I like the name construction physics. There's a lot of value to be unlocked throughout the whole construction process by figuring out where the inefficiencies are particularly in financing IMO.
There's this company called Shepherd or something like that that does build insurance and it's a fantastic example of how to make something meaningful.
I don't know anything about construction, but I do know that my landlord is based in cayman islands.
Why do we allow tax-heaven based shell companies to buy housing in areas where we officially declared a shortage, especially when we know much of that money is either stolen, or comes from dictators, or is doing tax evasion? It can't be helping the problem
im building a house and i got a bid from a foundation guy. he wanted 40k for a job that costs 10k in material. and i can easily do it myself. once i finish the house i will be able to offer a full breakdown of just how much you can save by doing it yourself.
To answer the question of the headline: Not at all. Once a house is built, the cost of building is a sunk cost.
> if you could reduce the costs of construction, housing costs would fall as well.
Why? What drives prices down is competition. Lower costs of construction might help with that, but only slightly, and I would guess that it will only help enough to shift the prices if construction costs are lowered by a magnitude or so.
This whole argument sounds like arguing that we must reduce wages across the board in order to lower prices of goods. This never works.
I think you are missing a subtlety. You are quite right that the cost of housing is determined by supply and demand. However, neither side of the equation is fixed. You can create more supply by building more houses. However, construction has a cost. This effectively creates a floor price below which supply will not increase. You cannot realistically drive the price below this floor unless demand is falling.
100 years ago the cost of construction was about $45/sqft when adjusted for inflation and today it is closer to $220/sqft, approximately 5x the cost. Blue collar wedges are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.
The 1914 sears Model 147 house was 900sqft and cost $872 for materials, estimated at $1,530 with labor.[1] Adjusting for inflation from 1914 to 2020, that is about $22,000 for materials and 40K with labor.
Looking at 1913 US national labor statistics, the average baker in 1913 San Francisco worked 54 hrs/wk and made $0.46 per hour for an annual wage of $1,291[2] (or 33K in 2020 dollars)
The median baker in 2020 California makes 36.5K/yr [3]. The cost of new housing construction is $220/sqft[4], or 200K for the same size house.
http://www.searsarchives.com/homes/images/1908-1914/1913_014...
https://fraser.stlouisfed.org/title/union-scale-wages-hours-...
https://www.careeronestop.org/Toolkit/Careers/Occupations/oc...
https://ternercenter.berkeley.edu/wp-content/uploads/pdfs/Ha...