7 ms·

this sounds alright in textbooks, but in reality housebuilders realise they make more money when house prices rise as they build..

s1artibartfast 3y ago
This artificial scarcity rationale is more of a conspiracy theory than realistic possibility. It would require hundreds of thousands or even millions of construction workers to coordinate, and also have a way to prevent new builders from competing. If you really think it is true, you should go into construction, undercut the competition, and get rich quick. The real answer is much more boring. High costs of land, labor, and regulation. If you ignore these three things, you can build your own livable starter home for ~100k in materials.
- aodntkem 3y ago
  I can only speak for the UK market where land with permission to build upon is scarce. Land in desirable areas is always scarce and I would imagine that includes many US cities. In the U.K. there are only a few housebuilders that operate at any scale, and they have the best links into gaining owrmission and buying land to develop. ‘Landbanking’ is the keyword for the phenomenon in the UK, but ultimately the housebuilders slow building when prices aren’t rising to maximise their return. It’s economically rational. My view is that government should step in and build competing social developments to house those that can’t afford market rent. The first order effect — less homeless, greater security — is nice, the second order effect is even more powerful in my opinion. Anchoring prices towards cost of production. The UK housing market is now, since we privatised social housing, another asset class and logically the operators of that asset only consider financial returns — not social ones. As I understand it planning permission doesn’t exist in many parts of the US and so ‘building your own’ is feasible. The only problem is that mass transit into desirable cities also doesn’t exist and so urban sprawl and you have to commute even more insane distances to leverage that land that can be built upon. This is the area where fundamentalist market thinkers miss the key role government can play because they’re that far down the ‘government is the problem’ rabbit hole they can’t imagine positive market intervention because the market itself is the holy arbiter of creation
  - pyuser583 3y ago
    How do you feel about taxing land, but not the structure built on it?
    - aodntkem 3y ago
      I’m probably biased against the idea and so I’ve not given it much thought. I owned a place and lived in an expensive part of London and over 10-15 years, through normal gentrification, I saw the centre of the city become far less fun as communities were pushed out due to rising prices. Everyone nearby had to be in a specific socioeconomic bracket to be there, which made it a bit, meh. I’d be worried a land tax wouldn’t be progressive and so whilst it might be an economically efficient to force highest $value use, that might push out character businesses. That happened in London as well. Chain coffee shops everywhere, no sense of community or neighbourhood. No families etc. It might be tweakable but the reason I’m also biased towards social housing is that’s what existed in the UK and it was only after that got privatised that housing became an issue / an asset class
  - itake 3y ago
    > step in and build competing social developments to house those that can’t afford market rent This makes me super nervous. This means private citizens will compete with government bids on land in desirable areas. > build competing social developments to house those that can’t afford market rent. The government participating in the market this way robs the middle class and gives it to the homeless. In my city in Seattle, the government found its cheaper to buy existing apartments and hotels than to build a brand new building (reducing the housing supply for middle class. Socialized housing is horrible to live in. Rampant indoor drug use (cigs, marijuana, fent, meth), gang and drug violence, and noise. The government can't/wont kick them out, so everyone trying to get back on their feet can't due to the horrible living conditions. Seattle also requires new private developments to allocate a % of units for low income people, in order to get a massive tax break. This sounds nice on paper, but it also hurt middle/upper class homeowners that have enough land to build 2-4 units on their property.
    - 3y ago
pfannkuchen 3y ago
Who generally makes more money overall - luxury brand with a small market or run of the mill brand with a massive market?
- itake 3y ago
  I think the margins are better for the luxury brand, so builders focus on luxury. It is much easier to focus resources ($$ and labor) on building 1 luxury building with 20% margin than building 10 buildings with 2% margin (and much higher risk that a single misstep results in a loss). In theory, this reduces pressure on the mass market properties, because it reduces the number of high-income people in the marketplace.

s1artibartfast 3y ago

This artificial scarcity rationale is more of a conspiracy theory than realistic possibility. It would require hundreds of thousands or even millions of construction workers to coordinate, and also have a way to prevent new builders from competing. If you really think it is true, you should go into construction, undercut the competition, and get rich quick. The real answer is much more boring. High costs of land, labor, and regulation. If you ignore these three things, you can build your own livable starter home for ~100k in materials.

aodntkem 3y ago
I can only speak for the UK market where land with permission to build upon is scarce. Land in desirable areas is always scarce and I would imagine that includes many US cities. In the U.K. there are only a few housebuilders that operate at any scale, and they have the best links into gaining owrmission and buying land to develop. ‘Landbanking’ is the keyword for the phenomenon in the UK, but ultimately the housebuilders slow building when prices aren’t rising to maximise their return. It’s economically rational. My view is that government should step in and build competing social developments to house those that can’t afford market rent. The first order effect — less homeless, greater security — is nice, the second order effect is even more powerful in my opinion. Anchoring prices towards cost of production. The UK housing market is now, since we privatised social housing, another asset class and logically the operators of that asset only consider financial returns — not social ones. As I understand it planning permission doesn’t exist in many parts of the US and so ‘building your own’ is feasible. The only problem is that mass transit into desirable cities also doesn’t exist and so urban sprawl and you have to commute even more insane distances to leverage that land that can be built upon. This is the area where fundamentalist market thinkers miss the key role government can play because they’re that far down the ‘government is the problem’ rabbit hole they can’t imagine positive market intervention because the market itself is the holy arbiter of creation
- pyuser583 3y ago
  How do you feel about taxing land, but not the structure built on it?
  - aodntkem 3y ago
    I’m probably biased against the idea and so I’ve not given it much thought. I owned a place and lived in an expensive part of London and over 10-15 years, through normal gentrification, I saw the centre of the city become far less fun as communities were pushed out due to rising prices. Everyone nearby had to be in a specific socioeconomic bracket to be there, which made it a bit, meh. I’d be worried a land tax wouldn’t be progressive and so whilst it might be an economically efficient to force highest $value use, that might push out character businesses. That happened in London as well. Chain coffee shops everywhere, no sense of community or neighbourhood. No families etc. It might be tweakable but the reason I’m also biased towards social housing is that’s what existed in the UK and it was only after that got privatised that housing became an issue / an asset class
- itake 3y ago
  > step in and build competing social developments to house those that can’t afford market rent This makes me super nervous. This means private citizens will compete with government bids on land in desirable areas. > build competing social developments to house those that can’t afford market rent. The government participating in the market this way robs the middle class and gives it to the homeless. In my city in Seattle, the government found its cheaper to buy existing apartments and hotels than to build a brand new building (reducing the housing supply for middle class. Socialized housing is horrible to live in. Rampant indoor drug use (cigs, marijuana, fent, meth), gang and drug violence, and noise. The government can't/wont kick them out, so everyone trying to get back on their feet can't due to the horrible living conditions. Seattle also requires new private developments to allocate a % of units for low income people, in order to get a massive tax break. This sounds nice on paper, but it also hurt middle/upper class homeowners that have enough land to build 2-4 units on their property.
  - 3y ago

pfannkuchen 3y ago

Who generally makes more money overall - luxury brand with a small market or run of the mill brand with a massive market?

itake 3y ago
I think the margins are better for the luxury brand, so builders focus on luxury. It is much easier to focus resources ($$ and labor) on building 1 luxury building with 20% margin than building 10 buildings with 2% margin (and much higher risk that a single misstep results in a loss). In theory, this reduces pressure on the mass market properties, because it reduces the number of high-income people in the marketplace.