It’s pretty hard to make it up in volume with housing. So it behooves builders to build houses that are as profitable per man-hour as possible. The solution that worked before was government housing. It increases the supply, which lowers prices. It also can put in government-managed caps for price, which puts downward pressure on the prices charged by private homebuilders. This in turn puts pressure to not build as many luxury homes, because the market for them becomes people who want luxury homes and not people who want homes and are willing to buy a luxury home to do so. And that causes an increase in capacity to build less luxurious homes because the house you can sell now is generally more valuable than the house you can sell 3 or 6 months from now.
This isn’t an easy solution. It took us 40 years to get into this mess, and it’s going to take a good while to get out of it.
Edit: also, capitalism tends to put pressure towards profits now more than more profits later, and generally gives no incentive for making the world a better place. Capitalism directs you to charge as much as the market will bear, and the smaller the supply of new homes, the higher a price the market will bear. So this is absolutely a failure of capitalism, and it’s unlikely capitalism will fix it. Only a fool (or an altruistic, and capitalism paints both with the same brush) would go out of his way to devalue his own product. This doesn’t apply to Costco because, as I initially pointed out, making it up in volume is well within their capability.
Simple and easy are two different words. “Start doing something you used to do almost half a century ago and wait 5 to 10 years, and multiple potential changes of government, for tangible results,” is pretty simple, but I wouldn’t say it’s easy. I’m also certain none of the pundits will say, “Look at all the money they spent, and we still have a housing crisis,” followed by, “Sure we fixed one housing crisis, but look at all the people who lost money on the purchase of their homes!”
All excellent points, and you’re right, I really meant “simple”, not “easy”.
My comment was really intended to highlight the narrowing of the solution space regarding housing. When houses became products and investments, we collectively decided the government had no place in building them aside from indirect nudges: zoning, various forms of incentives, etc.
Maybe it’s time we accept that the free market has simply failed and we need to look beyond neoliberal orthodoxy for solutions.
That’s not an easy shift! Not at all. But IMO it’s a necessary one.
As an aside, it’s not like this is new. “It’s a Wonderful Life” highlighted this exact problem. Their only mistake is they assumed a benevolent capitalist (George) would come along and fix the problem. But that ain’t how the real world works.
You can drastically reduce man hour and material cost when you design houses with efficiency in mind though. It takes significantly less engineering to build a 4-floor building compared to a 40-floor skyscraper, which requires digging large holes, carefully installing a central structure, and the work becomes progressively slower when you are near the top. They are also a huge liability long term due to the complexity of the design, making its present value lower. In a real “free” market, all this would be priced in, but it’s likely that the industry is controlled by a small number of well funded groups with strong influence in politics (allowing them to get permits and contracts).
Well, this certainly explains why there are so many building below 4 storeys compared to taller ones, but since most people live in those smaller buildings, I’m not sure what that has to do with the discussion. Moreover, luxury and height don’t have any real correlation - there are any number of brutally utilitarian hi-rises as well as lavish single-storey homes. And yet, marble tiles aren’t much harder to install than Terra cotta, but will make the house fetch a disproportionately higher price on the market. Hence why granite countertops, for instance, are very popular in new homes and renos right now.
It’s pretty hard to make it up in volume with housing. So it behooves builders to build houses that are as profitable per man-hour as possible. The solution that worked before was government housing. It increases the supply, which lowers prices. It also can put in government-managed caps for price, which puts downward pressure on the prices charged by private homebuilders. This in turn puts pressure to not build as many luxury homes, because the market for them becomes people who want luxury homes and not people who want homes and are willing to buy a luxury home to do so. And that causes an increase in capacity to build less luxurious homes because the house you can sell now is generally more valuable than the house you can sell 3 or 6 months from now.
This isn’t an easy solution. It took us 40 years to get into this mess, and it’s going to take a good while to get out of it.
Edit: also, capitalism tends to put pressure towards profits now more than more profits later, and generally gives no incentive for making the world a better place. Capitalism directs you to charge as much as the market will bear, and the smaller the supply of new homes, the higher a price the market will bear. So this is absolutely a failure of capitalism, and it’s unlikely capitalism will fix it. Only a fool (or an altruistic, and capitalism paints both with the same brush) would go out of his way to devalue his own product. This doesn’t apply to Costco because, as I initially pointed out, making it up in volume is well within their capability.
No, there’s a very easy solution: the government should build housing the same way they build roads and bridges.
Housing is societal infrastructure. Leaving that entirely to the private sector never made any damn sense.
Simple and easy are two different words. “Start doing something you used to do almost half a century ago and wait 5 to 10 years, and multiple potential changes of government, for tangible results,” is pretty simple, but I wouldn’t say it’s easy. I’m also certain none of the pundits will say, “Look at all the money they spent, and we still have a housing crisis,” followed by, “Sure we fixed one housing crisis, but look at all the people who lost money on the purchase of their homes!”
All excellent points, and you’re right, I really meant “simple”, not “easy”.
My comment was really intended to highlight the narrowing of the solution space regarding housing. When houses became products and investments, we collectively decided the government had no place in building them aside from indirect nudges: zoning, various forms of incentives, etc.
Maybe it’s time we accept that the free market has simply failed and we need to look beyond neoliberal orthodoxy for solutions.
That’s not an easy shift! Not at all. But IMO it’s a necessary one.
As an aside, it’s not like this is new. “It’s a Wonderful Life” highlighted this exact problem. Their only mistake is they assumed a benevolent capitalist (George) would come along and fix the problem. But that ain’t how the real world works.
You can drastically reduce man hour and material cost when you design houses with efficiency in mind though. It takes significantly less engineering to build a 4-floor building compared to a 40-floor skyscraper, which requires digging large holes, carefully installing a central structure, and the work becomes progressively slower when you are near the top. They are also a huge liability long term due to the complexity of the design, making its present value lower. In a real “free” market, all this would be priced in, but it’s likely that the industry is controlled by a small number of well funded groups with strong influence in politics (allowing them to get permits and contracts).
Well, this certainly explains why there are so many building below 4 storeys compared to taller ones, but since most people live in those smaller buildings, I’m not sure what that has to do with the discussion. Moreover, luxury and height don’t have any real correlation - there are any number of brutally utilitarian hi-rises as well as lavish single-storey homes. And yet, marble tiles aren’t much harder to install than Terra cotta, but will make the house fetch a disproportionately higher price on the market. Hence why granite countertops, for instance, are very popular in new homes and renos right now.