.. If you buy a home in San Francisco today, the last thing you want to happen is for the housing affordability problem to be solved next year. If apartment prices become reasonable, you’d find yourself with a huge financial loss and an underwater mortgage.
.. High rents are like poverty at the Brookings Institution, a problem we claim we desperately want to solve but don’t really want to solve because the things we would have to do to solve it would be costly and disruptive to the people whose interests get termed “we” in a sentence like this one.
.. People purchase property, rather than renting, largely to gain security and control, to escape the vicissitudes of the market. The worst place to emphasize “deregulation” is in dense urban environments, where almost every sort of action has spillovers. Construction in dense cities will always be heavily regulated, and should be.
.. The Econ 101 case against rent controls only holds if the threat of controls prevents the market value of newly produced rentable properties from substantially exceeding the cost of development after regulatory hurdles have been overcome. [1] This is not what we observe in real life. Impaired prices are simply not the binding constraint on new development.
.. As Daniel Hertz has observed (ht Ryan Cooper), there is a fundamental contradiction at the heart of housing capitalism. We encourage people to take on highly leveraged, undiversified exposure in homes with promises that they are good “investments”, meaning they will increase or at least retain their values over time. We also claim that housing is a consumption good that should be efficiently provided, a good for which competitive markets should expand supply to drive prices down to a technologically declining marginal cost of production. Housing cannot be both of those things at once.
.. Surprisingly from an Econ 101 perspective, the best way to encourage housing supply might be to cap home prices, at a level sufficiently above physical construction cost to keep development profitable when consumption demand is strong, but no higher than that, to discourage the use of homes as speculative financial investments and to prevent scarcity rents from getting capitalized into prices
Brazil’s Unaffordable Homes
SÃO PAULO, Brazil — I live in Mandaqui, a district six miles from downtown. The nearest subway station is roughly two miles away, or about 30 minutes by bus, since they’re slow and scarce. It’s not the best place to live if you don’t have a car. Even so, the average price per square foot here recently soared to $250. Real estate in prime areas of the city can now cost as much as $465 per square foot.