Who's responsible for affordable housing?

[Eleeski]

Is that a bad thing?

Only if you are looking at real estate from an investment perspective - for someone who simply needs a "home" price falls don't change anything other than on paper. It's only because people start to look at their home as a source of cash and capital that there begin to be problems perceived from a housing price crash. Arguably even a price crash aids essential moves up the ladder as the cost to change becomes less, though equally it also means a bigger pool of people have the capacity to meet that cost to change.

I hope you guys are kidding. The pain of recessions is real and pervasive through society. Prices may go down but affordability gets worse. I certainly don't want to go through another massive devaluation and recession.

Other solutions like allowing granny units and incentives to create units have lots of potential.

Eric

 

[David Chaus]

In my region, housing costs (both home purchases and rentals) have increased because there continues to be an influx of business development, with corresponding pressures on available housing throughout the region, and new housing is expensive to build with current housing and land use codes. Also there just isn’t a lot of space to build new housing without encroaching on rural zoning. Even if there weren’t restrictions on rural development, not that many people want to move that much further away from where jobs actually are.

This is a consequence of a growing economy in tech and biotech, which provides lots of benefits to some but not to others. It’s simply not a case that a rising tide lifts all boats. The unemployment rate may be low, but that obscures how crappy many of those service sector jobs are paid. So where do you house them when their rental costs have increased beyond their ability to pay? And this is true for older, smaller homes that resemble what previous posters have described.

Another factor is the increase in businesses and people who buy up any “affordable” or fixer-upper properties, pay cash, do a few minor remodels and make a killing selling for a tidy profit to people who actually need a place to live. The house-flipping industry may feel just as justified in doing what they do as any other business, but you have to wonder at what point the housing industry needs to be slightly more regulated to prevent this and to serve a greater public good.

Given the growth of wages/salaries hasn’t kept pace with the growth of the cost of housing, education and medical care (including drugs), I find it hard to believe that at this point a preponderance of single income families would somehow bring housing prices down. Besides, it’s irrelevant what led to the current situation, the issue now is what to do about it. Build tiny home villages, yurt villas, taller/higher density residences over a wider area? Live in cars like in Americathon (the movie from 1979)?

In Vancouver BC they have allowed the development of “laneway houses” or ADU’s (additional units) which are basically building a separate residence on an existing lot that faces a lane or alley rather than a street. For example:

 

[Kneale Brownson]

But both working allowed for the pricing to rise. And then it also affected the smaller market homes too. Its also why renting is so darn expensive too. Most average folks now cant buy a home in a non depressed neighborhood unless both parents pool the two incomes together or mom and dad were able to help provide the financial foundation to the young folks. Just think for a moment if majority of woman dint enter the professional workforce (like was the case decades ago) houses couldnt sell for the prices they do because most average family wouldnt be able to buy them.at these prices.

Both working allowed them to purchase a more expensive house. It did not raise the price of the kind of house they would have purchased otherwise.

 

[Goose]

Both working allowed them to purchase a more expensive house. It did not raise the price of the kind of house they would have purchased otherwise.

I guess we just have to agree to disagree on that part
Women becoming much more a dominant thing in the workforce has lead to double income families which allowed the price of houses to go up. Yes a percentage of couples would both work in order to buy a bigger and better house. But most the middle class was (for the most part) always pretty satisfied living in an average size home in an average neighborhood imo. And they did that with one primary income (usually from dad) while most moms stayed home and took care of the kids and the house and school stuff etc.. Yes a certain percentage of the moms took on a career in order to then have a larger and or more expensive home. But honestly that wasnt the majority. Infact many moms took on odd and part time jobs just make end meet or to have a little extra. Not until woman truly began to more heavily dominate the work force did (at some point later) the middle class become forced to start over paying for homes. And that happened in the very same homes they were living in before.

Im not sure where you think most people live in. But most average middle class is not living in some sort of luxurious homes yet just to afford the ones they do live in both parents need to work. And imo thats in large part because being two income families is now a norm it has allowed the housing market to become over priced even at the far less than luxurious (or even basic) middle class home. What wwe are debating is almost a chicken or the egg scenario but imo it was more the the two income norm that drove the housing market up much more than it was the smaller percentage who wanted to live larger than their neighbors. If the housewife role was as dominant a normal thing as it was decades ago the housing market wouldnt have ever been able to rise the way it did.

in the US, female college grads in the mid 70's were about little more than half the male rate. In 2018 female grads actual passed male grads by about a percent. The gender catch-up began to slowly and gradually happen happen through the 80's. Corporate downsizing and corporate greed and excess which began in the 80's was a huge player in not only rthe amount of population who would need to go to college but also the need for families to begin to have two career parents and incomes. A decade or two later and now women in college and career minded is the new norm. Part of this two income family at first was out of necessity to survive and raise a family. But a lot of it ended up being more than just survival and as a result of a lot of it and with so many woman in the work force it also allowed a lot of families to outbid each other for homes and drove up the pricing. So imo the housing market had a huge increase by default of something that wasnt actually directly related to it.

 

[jack97]

IMO..... Nothing has been said about economic and social conditions that has brought us up to this point. Economist have shown the inflation of the 70s and 80s increased the value of owning homes. By owning a home, your money is protected from the erosion of inflation. Once everyone realized this, it caused a massive rise in property value. In addition, throw in that credit has been easier to establish from the 80s up to 00s. I recall a time when getting a credit card or a pre approve mortgage was extremely difficult and now I get it as junk mail. Lastly, because college is a promise all new parents makes to their child, throw in that towns with good school systems are usually the ones with highest property values. We choose to live in such a town for that main reason and we managed to get by.

BTW, below is a link to a great book which chronicles how the Fed got us out of that inflation before the era of easy credit.

https://www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/0671675567

 

[scott43]

School district pressure here is remarkable. You can see hundreds of thousands of dollars difference from one side of the street to the other based on school districts. And the amount of people trying to get their kid attendance out of district to get them into the better school is crazy. We have a school that has a catchment of 850 students. 650 managed to attend at a different high school out of district, leaving 200 to carry on for a bit..now they're closing the school. The other schools they are applying to are overloaded and they are building portables to house the students. It's madness. But...you can thank our public religious board, as opposed to our public secular board, for pulling away a lot of students and capital for that...and our gutless politicians..

Anyway..I guess my point is, and with all due respect to Kneale and others who have seen some water go under the bridge and for sure know a thing or two, we don't live in isolation..if you want the best for your kids you kinda end up having to buy into that higher rent district.

 

[scott43]

I hope you guys are kidding. The pain of recessions is real and pervasive through society. Prices may go down but affordability gets worse. I certainly don't want to go through another massive devaluation and recession.

Other solutions like allowing granny units and incentives to create units have lots of potential.

Eric

Boom and bust is part of the economy..in the absence of steady policy you're bound to have periods of low growth or negative growth. Make hay when the sun shines and save for a rainy day. Buying on margin, or with great leverage, is not a sensible investment policy...

 

[Wasatchman]

Lots of interesting discussion here, and there are no easy answers.

Interestingly, I believe the tax advantages of housing helps to create inflated home prices. I disagree with the tax policy favoring houses, as it is not fair to the poor (much of which don't own a home) and increases the cost of buying a house to begin with.

As others point out, regulatory costs (building permits, etc) is a big reason why a lot of builders don't build affordable homes. There is no profit in it.

Interesting discussion on women in the workforce and potential impact it has had on housing. It actually brings up an interesting dilemma I often think about. If you had told the average household 60 years ago about all the technology and modern conveniences that are around today, they would have said holy cow, they're going to have so much free time in the future it's going to be awesome. And yet, it seems we have less free time, and economically, women now have to work to make ends meet versus what occurred 60 years ago.

And don't get me started on low interest rates. It's jacking up the prices of houses and other major investments. I feel like the Fed in recent years is creating an enormous asset bubble and when it pops, things are going to get really ugly. Housing bubble that caused the last recession was the Fed artificially juicing up the economy in response to prior recession in 2001/2002. And now they're doing it again. Interest rates by now should have been raised much higher than where they are today, and now they're actually talking about the Fed lowering interest rates again after they barely started creeping up. There is no tolerance for any kind of pain anymore, but the problem with that is that I think all this does is actually create even bigger bubbles that turn super ugly when they finally burst because of an unwillingness to take any kind of short term pain. In today's climate, I'm not sure the Fed would jack interest rates to combat 70s inflation. There would be no stomach for the resulting early 80s recession in today's world.

Are there any others out there like me that worry that our economy is structurally broken, and the only thing keeping it going is piling on more government debt to keep the wheels turning? Sorry to digress, but it's all connected, and housing is only one component of structurally bigger economic issues facing this country.

 

[scott43]

Are there any others out there like me that worry that our economy is structurally broken, and the only thing keeping it going is piling on more government debt to keep the wheels turning? Sorry to digress, but it's all connected, and housing is only one component of structurally bigger economic issues facing this country.

I'm not an economist...so I'm handicapped a bit on the discussion..or possibly, maybe not..since they don't seem to be able to understand what's going on with any certainty either. But yes, I do wonder. I looked at inflation-indexed products not long ago expecting that, jesus, 10 years of near-zero rates HAS to produce inflation. And yet.. My wife who is much smarter than I am said no way. There won't be inflation over 2% for YEARS in the US. The economy is so reliant on cheap money that can't generate real wage growth. I'm not a doom and gloom guy..the US economy and wealth can overcome the problems..it's a huge economy and a little pain would fix a lot..however..is there political will to do that? Or just keep kicking it down the road..

We just invest sensibly and take advantage of the things that are going up but still in a way we can get out if it crashes. I'm just happy we're in decent shape economically..I don't know how I'd feel if we had a $500k mortgage like a lot of people..

 

[DoryBreaux]

Currently? My other halfs parents

In all serousness, between the cost of fuel, food and housing, combined with the dismal pay of the industry, it's a wonder anyone can afford to live in ski towns any more. I've exhausted my ranting about these issues for the next 80,000 seasons, so that's al I'll say.

 

[Goose]

From what i understand (apologize if mistaken) banks dont even have to have the physical money to back up all the mortgages they sell but only a percentage of it. Basically the only thing being loaned is files of paperwork that state the homeowner owes the bank whatever amounts of hundreds of thousands. Somehow paper files translates to currency out of thin air. I dont really understand that whole part but I will go out on what I think is a pretty safe limb by saying a select few have been getting very rich from that for a long time while the general masses gets taken. Mortgages imo are almost no different from organized crime loan sharking and extortion. The amount of money being made on mortgage interest through the typical 30 yr loan is huge and thats even with the lower rates. And its even worse when we consider some the money they loan us isnt even real. But its paid back with real money.

Dont even get me started on what a scam college tuitions are. How can it possibly cost 30, 40 or 50,60 thousand a year for each of the 30 students per class for college. Something is very wrong with that picture.

And fwiw a number of people seem to mention builders cant afford to build affordable housing? building homes or town homes or condos doent cost any more whether they sell high or low. They are still built with the same labor and materials (to a degree).

On another note (I have a lot of diferent notes here..lol) homes are now our new banks. In many cases among the midle class most all the money is the home itself. Its not like the avreage family has enough to invest significant sums of money in money making accounts and the stock market etc... nor does keeping money in a savings account do anything for anyone. Most people have thier job pensions and/or retirement funds via thier jobs then a little savings. Outside of that what does majority the average middle family really have? but thier home if they were able to afford to obtain one. Thats about the extent of it for so many. And...Hopefully they can afford enough disposable income to take the family skiing...lol

need I even get strated on where so much my tax dollars go to support so many who feel they are entitled to my money when all I (like so many do) is just survive to begin with? The new norm nowadays is to support everyone who thinks its perfectly swell to have children out of wedlock and witth no means to support them. How about so many having children while in college? Going to college on my tax dollars and also having children while on my dime and then having my dime support the child as well. where is anyones responsibility anymore? people applaud this stuff. I pay into the system my whole life. My wife and i over 50 yrs combined paying into the system and as we age and start having some issues we are very concerned how bad things could so easily get should either one of us have big medical issues (knock on wood). Over 50 yrs of paying into the system living paycheck to paycheck for the most part and (ive seen this happen to people i know) would be screwed if we truly needed help. Never got anything from anyone for anything ever for ourselves or for my kids. But yet I have to pay for the affordable housing for others. And for not only others schooling but also then pay to support thier children they had no business having while they are in school. My wie and i stopped after two. You know why? because we were concerned to afford a third. we wanted another but we stopped because its called responsibility. nowadays thats out the window. So many just have kids nowadays with no though of how to support them, even multiple partners and multiple kids, etc.. when does this crap end? people actually applaud this irresponsible stuff. Are they stupid? dont the applauders understand whats happening?

A firend of mine retired a couple years ago after over 35 yrs of paying into the system and his wife 25 yrs of paying in. Now she has been very sick and he had to go back to work just to support her medical needs. They paid for everyone elses for a combined 60 yrs and now that they need the help they cant get it so he had to go back to work in his golden years in order to support his ill wife which he cant even be with half the time because he has to work again. And the craziest of all is that his taxes on his salary are still paying for others while this is going on. My niece graduated college and law school two years ago and owes out enormous amounts of money. At her graduation a migrant young lady fellow graduate gives a 20 minute speech about how she had 4 children while in college and law school. basically a single mom and you know what the student body did? they gave her a standing ovation. can you believe that? A freaking standing ovation for irresponsibly having 4 children with no one to support them while attending college on my dime and these idots give that a standing ovation. My niece was taught not to have kids till she gets married and is able to afford them. yet shes the one with enormous loans to pay off while this other graduate did it all on my sister and brotherinlaws dime and also had 4 kids on thier dime. But somehow its my sisters family that owes the enormous money while the other person gets the standing ovation. I now this is gotten way off topic though does it really because its all tied together. Im al for helping the needy and doing whats right for people but a whole ton of this is just so very wrong. Sory for the rant. Im tired of it.

 

[fatbob]

Poliasshattery much?

 

[Corgski]

Are there any others out there like me that worry that our economy is structurally broken, and the only thing keeping it going is piling on more government debt to keep the wheels turning? Sorry to digress, but it's all connected, and housing is only one component of structurally bigger economic issues facing this country.

Housing is inflated in the USA but a lot less than elsewhere. There is a lot more tangible value in a house in the USA than in other countries where the prices are more a function of building restrictions than anything else. Firstly, there is the physical value, on average American houses really are bigger. In areas where the housing value is not primarily dominated by construction costs you will find high income economies with considerable amenities or high demand natural areas with real constraints on building additional housing. If you are in New Zealand right now, take a look at house prices there. The prices are much higher than in the USA but what is the value? There is literally not much construction value, the houses are small and poor quality. Limited access to high income jobs. A few places where there is high demand and physical restrictions but not many. The value of the house there is caused by the local governments aggressively limiting new housing from being built and people being forced to bid up prices on the limited stock made available. Take away that restriction, the country's entire housing stock would probably lose 2/3 of its value.

If prices of houses decrease to "affordable" levels (50% drop in price?) won't the people who own real estate be hurt? That's a large part of the population (over 60%). Those most affected will be the people who have been diligently paying off their houses for years (so they can't just walk away like a recent buyer). Older and retired people will get most of the burden. Is that fair?
Eric

This is partly why internationally governments are very serious about propping up the housing market, no matter what the costs. This is also why the whole "developers are to blame for the lack of affordable housing" thing is such a joke. Firstly governments have worked very hard to pump up the prices of housing in most countries. What happens if developers find a way to provide large numbers of nice houses/apartments in Toronto or Auckland for half the going cost? Housing crash, because if you can get something nice for cheaper why are you going pay an inflated price just so that another seller can recover their purchase price? I'd suggest to any developer that they not even try, they are more likely to find a horse's head in their bed than find themselves becoming a hero.

I wonder to what degree no recourse loans have helped protect Americans from the worse of these games? The fact that a home owner can walk away from an underwater mortgage means the banks and the government have a greater stake in mortgages reflecting real value.

 

[scott43]

This is partly why internationally governments are very serious about propping up the housing market, no matter what the costs. This is also why the whole "developers are to blame for the lack of affordable housing" thing is such a joke. Firstly governments have worked very hard to pump up the prices of housing in most countries. What happens if developers find a way to provide large numbers of nice houses/apartments in Toronto or Auckland for half the going cost? Housing crash, because if you can get something nice for cheaper why are you going pay an inflated price just so that another seller can recover their purchase price? I'd suggest to any developer that they not even try, they are more likely to find a horse's head in their bed than find themselves becoming a hero.

I wonder to what degree no recourse loans have helped protect Americans from the worse of these games? The fact that a home owner can walk away from an underwater mortgage means the banks and the government have a greater stake in mortgages reflecting real value.

I can tell you the Canadian gov't has backstopped massive amounts in mortgage risk. If people default or mortgages are suddenly underwater, the gov't is footing the bill. As a matter of fact, it was for a long time easier to qualify for a mortgage with zero down than it was with 20% down, because under 20%, the gov't would actually guarantee your mortgage. Over 20% the bank had to backstop your mortgage and you can bet they were asking for pay stubs and income verification at that point. Fortunately, up to now, Canadians generally rigorously pay their mortgage debt.

And the limited supply thing is a bit of a ruse..developers here have many units in the pipeline they are not building..it's not necessarily gov't limiting the supply..it's the developers artificially propping up prices. I'd go so far as to say there is a cartel in construction in Ontario.

As for US underwater mortgages, I often here that and probably that's true. However, let's remember that the US government basically gave the banks a massive government handout in 2007. That is the money of all Americans..so probably it didn't protect them..everyone is going to pay for the banks failure to loan intelligently and secure their loans appropriately. It's funny, a police officer friend of mine was telling me about the ummm dancing trade...and how some of the girls own multiple condos..and I couldn't help but think of The Big Short...

 

[jack97]

Interestingly, I believe the tax advantages of housing helps to create inflated home prices. I disagree with the tax policy favoring houses, as it is not fair to the poor (much of which don't own a home) and increases the cost of buying a house to begin with.

I did not mention tax policies since that would lead to a slippery slope as far as venturing into politics, so here goes. The recent tax law reforms tends to place ownership of McMansions at a disadvantage. The income deduction from State and Local Taxes (mainly property tax) is cap at 10K, so having a bigger house in a nice town is no longer a tax advantage. When that got passed, I heard of so many complaints while riding on the lift chair, most were contemplating on moving to a cheaper town and a smaller house. Also, the standard deduction nearly doubled (6.35K to 12K), this will take away any tax advantage in carrying a debt. These two changes takes away the use of an expensive house as a tax shelter.... ironic that this came from a Republican Congress and the Trump administration.

 

[Wasatchman]

If you are in New Zealand right now, take a look at house prices there. The prices are much higher than in the USA but what is the value? There is literally not much construction value, the houses are small and poor quality. Limited access to high income jobs. A few places where there is high demand and physical restrictions but not many. The value of the house there is caused by the local governments aggressively limiting new housing from being built and people being forced to bid up prices on the limited stock made available. Take away that restriction, the country's entire housing stock would probably lose 2/3 of its value.

I am in New Zealand now and agree the houses are atrociously priced. Government has a hand in it, but I don't think it is related to aggressively limiting new housing from being built. Quite the contrary; the new government in NZ is trying to get more houses built as the cost of housing is a hot button issue. However, the issue isn't so much government aggressively limiting new housing as it is the cost of complying with all the building consent requirements/permit. The building consent costs are ridiculous. Then tack on that a lot of the materials need to be imported, two building materials distributors control just about the entire market, lack of skilled builders, high land costs, and until recently a huge amount of Chinese investors (also helped fuel the very high prices in Vancouver).

You're right, Auckland wages don't support anywhere near current house prices. But cheap money available globally, and in particular a huge influx of money from Chinese investors really played a factor in addition to the other factors noted above. But like I said, the government actually wants to build more houses (see kiwibuild) but are finding the problem very difficult in addition to taking the completely wrong approach, in my view. EDIT: shockingly, even as the government is trying to get more homes built they don't seem to be doing anything related to the ridiculously high costs of getting building consent/permitting.

 

[Goose]

Poliasshattery much?

Trying to figure out what that means. IDK

 

[fatbob]

Just a reference to the term used for political ranting on another popular ski forum.

I find this thread curious because of who created it and the inevitable forseeable result that it would lead to political ranting on a site that tries to be apolitical.

 

[scott43]

Just a reference to the term used for political ranting on another popular ski forum.

I find this thread curious because of who created it and the inevitable forseeable result that it would lead to political ranting on a site that tries to be apolitical.

Heh..I see what you're doing here..

 

[fatbob]

Heh..I see what you're doing here..

That's good because I'm not sure what I'm doing other than cruising for a ban

I think I'm just making the point that most of healthcare, education, housing , energy, climate, food supply heck even the act of procreation per the above etc ends up being political and that civilised debate is needed from all sides in order that we may all refine our opinions and views and in particular see if there is anything in the other perspectives that has merit if there were to be compromise. I'm not sure where the dividing line on where a debate becomes "too political" and therefore mods act is - it seems that things in this thread have been allowed to go more than say in the average climate discussion. I'm also not saying it because I want to stifle or censor Goose's post - but then I come from a PoV that political debate is healthy. I don't however feel comfortable trying to make counterpoints to any of his points.

US housing issues are far from a hot button for me but I do have rather more pressing concerns closer to home brought about by a failed political system and a hijack by extremists in which there is almost no compromise debate. Everything becomes a matter of this is my emotional opinion based on my immediate (or anecdotal) experience and once it gets locked in as an emotion then reason and evidence are powerless to move it.