> A better current solution that likely has wide-spread support would be to limit the demand rather than throw more money into the demand side.
black markets spring up to serve demand when there's law and regulation that tries to prohibit such demand. I don't see how making the real estate market this way is gonna get it better.
The only way to make prices drop is to increase supply. trying to tax a fringe group, or to penalize investors etc, is not going to do well at all. And doing so will also dry up investment for growing supply.
> help alleviate some acute symptoms.
A short term symptom abatement, if it even does abate anything, is not going to make any difference tbh. Concentrate on solving the fundamental issue - lack of supply due to various interest groups resisting supply growth.
My point elsewhere in this thread is a that demand is not entirely a function of demand for homes (what I would call 'natural' demand). Finance and tax incentives play a large part too - encouraging demand for investment properties that are often not used as homes (what I would call 'artificial' demand).
This is not to say that addressing supply through more building is not helpful, just that there are other things to consider that may not require as much effort and can have broader economic benefits (e.g. changes to the tax system to encourage productive rather than unproductive investment, credit guidance, etc).
> Maybe I'm being overly simplistic, but surely building enough dwellings to exceed the immediate demand would lead to prices dropping?
I thought Toronto was doing a good enough job at building lots of housing, and it still hasn't worked.
The issue is that in order to actually have prices dropping, you need to overbuild by a bit. But prices dropping is an undesirable outcome for real estate developers, who are almost exclusively responsible for building new housing in a city. Naturally they don't want to shoot themselves in the foot, so they will only ever build as much as to satisfy the current demand, but not quite, and try hard not to exceed it.
Even with government-issued social housing, there's no way to solve this: as long as there's any space for developers in a market, their new supply is going to adapt elastically to just underserve current demand.
The only thing that has practically lead to supply-related price drops is an irrational boom followed by a realization that developers have actually (unintentionally!) overbuilt this time. Unfortunately, irrational booms are also accompanied by prior fast price increases and a lot of pain on all sides, so we probably shouldn't advocate for one.
So, I'm not sure what a good solution is to actually provide more supply than needed and have prices dropping, but the free market is not it. Especially as real estate developers get better with forecasting demand.
Maybe demographics will help a bit in 20 years or so.
>putting pressure on the already cripplingly bad housing situation.
No amount of demand suppression will ever fix a supply issue.
“We’re better off not building up housing infrastructure subsidized by short term leases and just trying to suppress any demand that changes the market clearing price”
> In fact I think what happens when there is more supply is that investors buy more houses to put renters into.
Solve that with more supply. Those people only have finite money. We can keep building inexpensive housing and selling it to them at insane prices for longer than they can keep buying them at insane prices.
The problem is that, once we break them, then we almost certainly overshoot. The price seriously craters, and everyone who bought a house in the last N years takes a huge bath.
> demand side of the equation (i.e. making property less attractive than it currently is relative to other investment opportunities).
I won't deny that making real estate a worse investment won't reduce prices. In the short term. Most of the mitigations I've heard will at best knock a few percent off the current price but do nothing to stop or even slow the even rising prices and poor availability. Basically it works as quick hand-out to people who able to buy today, but not fix anything for anyone else 5 years down the line.
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 problem is once you're deep in the problem, how do you get out? If you let prices collapse then a lot of homeowners will face negative equity.
Easy. You tax the shit out of non-primary and empty residences. This puts negative pressure on 'investing' into a house/apartment and waiting for it to appreciate, then selling it, without ever living in it or renting it. This also doesn't disadvantage people who bought to live.
> Fun fact, if you want to reduce the price of houses, increase the supply instead of instituting rent control and hoping for spooky action at a distance.
Though if you want to reduce the prices of housing quickly, I don't think anything could beat rent control plus an aggressive use of eminent domain to build lots of public housing quickly. Even though public housing was done extremely poorly in the US and earned a very bad reputation, other countries have done it much more successfully.
A market solution would naturally take far more time (at a minimum, there'd be no reduction in prices until new development project finish and their supply hits the market), and the equilibrium price may still end up being lower but still unaffordable to too many people.
> It’s a demand issue, so the solution has become price increases
That’s more of a capitalist solution than a real solution. Instead of building additional housing we just move the access from millions via price increases.
We can resolve it by creating more supply, we already do by way of copious amounts of cheap plastic home goods that flood the purchasing landscape.
>The idea that an extreme minority is going to panic the majority into selling at bargain basement prices is absurd
While I have no clue how the housing market is going to turn out, I'd point out that edge conditions control prices quite often. When demand is higher than supply prices can increase very quickly, and the converse is true also.
What does that even mean? In Canada the issue is that most places have 10 houses for 20 buyers to it ends up being a game of who can pay more as it should be.
Restricting price increases just means buyers are restricted on something else, it does not magically create 10 new houses to meet demand.
We should not be rent-controlling assets, instead you need to take actions that match the number of houses to the number of buyers. You can do that by:
1. Incentivizing builders to build
2. Reducing immigration (at least in Canada)
3. Changing zoning laws to build more densely
1. is not appealing because in Canada there is a strong sentiment against growing the urban sprawl.
2. is not something the government wants to do
3. is what they've been doing for the last 10 years but turns out people don't want an apartment, they want a detached house with a yard and they are willing to put more money on it to meet their expections.
Price control is not any kind of solution to the Canadian housing problem. It would create private listings and all sorts of parallel systems so that people who can pay more can still pay more.
Prices are set by the balance of demand and supply. The demand isn't going away. The supply is what we can do something about.
Even building expensive luxury apartments helps, unless no one can afford them at all (which is not what the builder wants to happen). The people who rent those aren't taking up spaces others could have afforded.
> I wish. The problem with housing is that the returns are not low, they're reasonably high and really safe.
Where? In high demand areas? Sure. Supply is limited in NYC or SF. But those areas are becoming outliers where buying in (so to speak) is less available.
Or what about trying to sell in 2009 or 2010? People weren't foreclosing because they were in the black.
It's a demand-side policy to what is a supply-side problem. If the demand is already there, and you induce more demand by providing subsidies, prices will go up. If you want to reduce prices you must either increase supply (building housing) or decrease demand (remove someone, hopefully speculators, from the market).
However, given housing has become a defacto investment asset for Americans and Canadians, I don't see this issue ever being resolved without a political revolution or an economic depression.
> This is more the fault of NIMBYs and supply&demand-denialists who work hard to prevent new housing from going up.
I wonder if the supply-and-demand model you're referring to is insufficient in this scenario. It sounds like political factors are at play here as well.
> let reality hit a few folks in the face, wait for those prices to drop.
I don't think house prices will drop until there's a pressure on home owners to sell.
The two biggest reasons I can think are:
- People with ARMs unable to make payments
- People losing jobs
I remember well that, despite the many foreclosures in 2008, people that had no explicit reason to sell would hold on their homes for years until they were above water again. I distinctly remember houses going on sale, then going off market, over and over again until the owners could walk away at least without a loss.
As long as unemployment is low and not too many people got an ARM, I don't forsee this market undergoing a rapid correction.
black markets spring up to serve demand when there's law and regulation that tries to prohibit such demand. I don't see how making the real estate market this way is gonna get it better.
The only way to make prices drop is to increase supply. trying to tax a fringe group, or to penalize investors etc, is not going to do well at all. And doing so will also dry up investment for growing supply.
> help alleviate some acute symptoms.
A short term symptom abatement, if it even does abate anything, is not going to make any difference tbh. Concentrate on solving the fundamental issue - lack of supply due to various interest groups resisting supply growth.
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