Basic Human Need? Or Investment Asset? Housing Affordability in the US in 2023 and Beyond
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- Опубликовано: 10 янв 2023
- There may be no more important topic in urbanist thought today than housing affordability. Do you see housing as a monthly expense, or as an investment that will contribute to your net worth over time -- possibly the largest asset in your portfolio when all is said and done? Do existing single-family homeowners deserve to have more say in policy than renters or condo owners? Are all new apartments "luxury apartments" just because they're new??? So many questions -- some of which are actually addressed in this video!
How we think about the home ownership decision in the US has an enormous impact on housing supply, density, and affordability, with tons of downstream impacts on urban form, walkability, and the viability of high quality transit. I've only touched on housing tangentially so far on my channel, so consider this video a first attempt at defining the problem, with more to come in the future! Let me know which areas of this enormous topic you'd like to see me explore.
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Previous CityNerd Videos Referenced:
- The Cost of Car Ownership: • The All-In Cost of Car...
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Resources:
- Zillow Home Value Index: www.zillow.com/research/data/
- HIGHER URBAN DENSITIES ASSOCIATED WITH THE WORST HOUSING AFFORDABILITY by Wendell Cox www.newgeography.com/content/...
- The Wealth of Households 2020: www.census.gov/content/dam/Ce...
- fred.stlouisfed.org/series/MO...
- www.zillow.com/sellers-guide/...
- investor.vanguard.com/investm...
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Images
- Lloyd District tent camp By Graywalls - Own work, CC BY-SA 4.0, commons.wikimedia.org/w/index...
- Tent camp In Oakland, CA, near Laney College campus By NeoBatfreak - Own work, CC BY-SA 4.0, commons.wikimedia.org/w/index...
- Whoville Homeless Camp in Eugene, Oregon By Visitor7 - Own work, CC BY-SA 3.0, commons.wikimedia.org/w/index...
- "Mortgage" stock photo Image by Mohamed Hassan from Pixabay
- Lawnmower Image by Rudy and Peter Skitterians from Pixabay
- Renovating Photo by Rene Asmussen: www.pexels.com/photo/house-re...
- Updated kitchen Photo by Mark McCammon: www.pexels.com/photo/white-wo...
- Asphalt shingle roof By DMahalko, Dale Mahalko, Gilman, WI, USA -- Email: dmahalko@gmail.com - Own work, CC BY-SA 3.0, commons.wikimedia.org/w/index...
- McMansion By Stilfehler - Own work, CC BY-SA 4.0, commons.wikimedia.org/w/index...
- Ranch House Image by yourhomebylori from Pixabay
- Modern McMansion Image by Paul Brennan from Pixabay
- Rowhouses By John Phelan - Own work, CC BY 3.0, commons.wikimedia.org/w/index...
- Bungalow By Robert D. Hubble - Own work, CC BY-SA 4.0, commons.wikimedia.org/w/index...
- Bungalow By David Sawyer - Flickr: Craftsman House, CC BY-SA 2.0, commons.wikimedia.org/w/index...
- Bungalow By David Sawyer from Rancho Murieta, California, United States - Craftsman House, CC BY-SA 2.0, commons.wikimedia.org/w/index...
- House for thumbnail Photo by Curtis Adams: www.pexels.com/photo/american...
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I’m 26, I have a good job and good education, very hard working. My parents still believe that I can simply afford a house by not drinking Starbucks and not doing anything fun. They really deny that housing is any more expensive or difficult to access than in the 80’s or 90’s. The lack of empathy that older generations have towards us doesn’t help.
Ask them how much they paid for their house and how much they made when they bought it. Then do the math for the same job and the same house today. That's when my parents finally got it. They would have needed to make 200k+ in today's dollars, straight out of high school with no degree, for the math to be similar to what I'm dealing with today.
@@xandercruz900 Even those places aren't as cheap as they used to be. You clearly don't get it.
@@xandercruz900 hmmmm
@@xandercruz900 OMG, you are doing just what Paul is talking about! Why don't you mention avocado toast fcs!?
@@chazdomingo475 Exactly. My in-laws raised three kids and bought a brand-new house in 1960. My father-in-law never went to college and my mother-in-law stayed home until the kids got older and she worked to help send them to college. It was a totally different world.
This was even-handed, thoughtful, and well-said. You navigated the "minefield" with nuance and snark in a way that only the one true Citynerd could. Love your line near the end, "don't close the door behind you." Excited for a hopeful follow up! (Citynerd Econ 102??)
The answer is to build build build. The speculators can be left holding the bag. There's severe undersupply driving up prices. I earn more than I ever dreamed of but still can't afford a house in my area. There's a reason younger generations are completely disillusioned.
What about amenity effects? Building market rate apartments in low income areas can increase the price of surrounding rents for low-income apartments
I bought a house I couldn't afford in the SF Bay Area. My wife and 3 young children moved into one bedroom, so 5 people in 1 bedroom, and rented out the remaining bedrooms. We lived like goats for 2.5 years, at which point we were in a financial position to no longer need to rent rooms. I believe that it is OK to live like goats for 2.5 years as long as you know there will be an end to the pain.
There’s a solid body of evidence that supply effects (driving the price down) overwhelm amenity effects (driving the price up). Lemme go pull some papers and get you links.
@@donaldlee6760 Agreed. I had roommates both as a young adult and because my family shared housing with other families for a couple periods when I was growing up. I'm surprised more people don't do this.
This can help in part. But you would need to build an absurd amount of market rate housing and have it all come around the market at the same in order to bring prices down. It’s particularly hard to drive down prices in high demand areas. You also need housing that is explicitly affordable, which could be done by having inclusionary zoning in areas that see a lot of sense development. Otherwise, more money needs to go into the housing voucher program, and an effort needs to be made to have affordable housing outside of areas of concentrated poverty
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes. If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
@@LionTowercoporation I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
@@LionTowercoporation Thanks for the contributions, I will look her up online and do my due diligence. If She seem proficient. I`will write her an email outlining my financial objectives and scheduled a phone call.
Anything with the slightest whiff of financial content and the shills come out of the woodwork 🙄
Homes also have a dividend--the rent not paid to a landlord. They also provide insurance against rising rent. And they are the only mechanism that allows households to get cheap investment debt from the capital markets. So given a long enough holding period, homeowning is a good investment, conditional on not being in a declining city.
But this also creates a problem. The better return there is for homeowners, the worse the market becomes for those who do not own.
Yeah, if you can do a sober assessment and convince yourself you're going to stay put for maybe 8+ years, it makes sense. It's hard to have that certainty, though! I've been lucky enough to stay put for 10+ years and done well, and I've been unlucky enough for life changes to come and had to sell before it was smart to. If you had a crystal ball you'd rent when the market was about to enter decline, and you'd buy and hold when the market was on the way up. You can't really know when these regimes are going to happen, though! I do agree I glossed over some of the benefits, though. Good comment.
The homeowners and the non-homeowners are inherently in conflict with each other for exactly that reason. A good market for renters is a bad market for homeowners. We built America on SFH since the WWII so it's no wonder homeowners have been winning these political battles so handily.
this has created a unsustainable system where the younger generation is priced out entirely and is understandably pissed about it. this has a lot of knock on effects and will eventually result in voter base rebellion once enough of the electorate has no personal investment in homeownership
@@CityNerd one key thing here too - if you're selling in a down *market* other places are also likely cheaper too - so as long as you're staying in the property market you might have a loss on paper at the moment, but the new place you got will likely recoup that loss over time. This doesn't hold true if you're downsizing significantly, or switching to renting, or something hyperlocal caused the decline, but if you're staying in the same market or going to one affected by the same trends, you'll likely recoup the loss so long as you remain in the property market. I don't think it's so much time in *one* house that matters so much, as it is time in *any* house, so long as each subsequent house has a similar or nicer profile to the previous.
@@chazdomingo475 Homeowners are also older and they vote reliably.
Love the part about living how you want to live and not basing it on ROI! I sold my 2000 sqft detached house on the edge of town early last year after 3 years of being miserable in suburbia. Moved back into the city center in a small studio. Also replaced my car with an e-bike when my lease ended. Nice to hear I'm not crazy or that there's at least other people out there as crazy as me 😂. Regarding ROI, being able to drop, from my balance sheet, the car and cost of maintaining and fixing every issue that pops up in a 100 year old house has certainly helped in that regard.
Yeah there's a bigger discussion to be had about what constitutes "ROI." I don't even mean in a touchy-feely, quality of life way. I mean, you literally save $$$ by reducing your car dependency, in so many ways.
@@CityNerd Definitely! I'm saving ~$600 a month just not having a car payment, parking, and insurance costs. Not even counting gas, maintenance, or registration/inspection fees etc. It would be more money for me to move out of the city despite rent being cheaper once you add in all the vehicle costs that would come with it.
But for most Americans buying a house is as close as they are going to get to a 401
@@maumor2 I think that was true in the past, but I think most Americans are going to find in the coming years that their "investments" were not the guarantee they were made out to be. Homes were a good investment when they were built to last, were more modest, and wages afforded people the ability to maintain them. That's not the case anymore. The only thing that gets built are cheaply made, oversized, and overpriced McMansions that cause most people to be house poor and are only built to last 30 years and that's if the people who buy them are taking good care of them which many can't afford to do anymore. Fun fact: Did you know that 69% of Americans surveyed or 3 in 5 homeowners consider themselves house poor and didn't expect the costs of repairs, maintenance, and upkeep to be as high as they are? Did you also know that 40% of homeowners with mortgages said they work second, full time jobs to afford housing expenses? That's not a sustainable investment.
@@mattgalper5397 And don't forget the implicit costs of car-ownership, such as pollution, and the worst of all, putting yourself and others in danger. People forget how dangerous driving is inherently, and how dangerous it has become in our car-brained country where the typical freeway is now 8+ lanes wide.
Housing unaffordability is a symptom of our society treating housing as a capital financial asset instead of a necessity commodity.
Writing something to the same narrative. The problem is how housing is being traded on these days as an asset. Sort of the sane reason of the NIMBY problem
What’s really ironic is that so much more money could be made for longer with more dense mixed-use development
It’s a sign that the government jacked asset prices to buy support for its Covid policies from the white collar classes.
We tried state owned, regulated housing, and it’s too expensive for the state to maintain and fall into disrepair quickly. All over the world this has been tried without success.
@@TheSteinbitt
Right. Without success.
Like in Austria, Singapore, Vietnam, Finland, Britain?
Just because you don't know the examples of successful public housing policy doesn't mean the private market of housing hasn't completely failed us here in North America. And it's not like conservatives across the continent weren't trying to sabotage it from the start.
Please do more videos like this, because housing affordability is such an important part of making better cities! Growing up in just outside of Atlanta, I was always taught that owning a home was the only financially viable way to live. Currently, I live in an apartment in Germany and a majority of people rent homes here, encouraging better land use, much better transit (because of higher densities), and more affordable housing. If Germany built residential properties like the US, housing would be absurdly high...but fortunately that's not the case. Although the housing market isn't perfect here, it allows most people the opportunity to live comfortably in urban areas. In the US, it seems that the ideal walkable neighborhoods that people desire are only accessible for the well-off or lucky folks. Access to a grocery store you can walk to or bike to shouldn't be a privilege for people with higher incomes.
I've had a couple comments that strongly suggest I need to follow this up with something that compares and contrasts housing policy and legal framework between the US and an interesting international example. This was a great push in that direction, and a great comment to read. Thanks!
@@CityNerd If I may suggest looking into Swiss rental laws as an example of sound rental regulations that keep rent prices relatively affordable in arguably the world's wealthiest country. The Swiss also have some innovative funding structures to enable more homeownership. Of course, none of these measures would be effective without sound zoning laws.
Living in Germany too. Housing isn't perfect of course but it does feel nice that I'm not encouraged to block housing to protect my investment (because it isn't one) and that rental laws favor tenants. Considering how much the law favors landlords and homeowners, it's sensible (albeit toxic imo) that American policies encourage the behavior to look down on renters over there.
@@CityNerdcheck out the Strong Towns RUclips channel. A lot of great videos discussing things like how property taxes subsidize larger car based living.
@@CityNerd I would absolutely love to see a video US vs International housing policy and the surrounding legal system. US housing policy seems to play out through obtuse mechanisms, and there never seems to be an easy way to oppose the status quo, even when public opinion is massively in favor of more housing.
Potential topic: When new housing is proposed in a city with housing affordability issues, it's not uncommon for some homeowners to claim the new housing will lower their property values (because of crowding/traffic/shadows, not usually bringing up supply vs. demand), while others (often in rent-controlled apartments) claim it will increase property values (because of gentrification).
Only one of these things can actually happen, at least to any given property. What determines which outcome takes place?
Good question. That would make a good topic
I can tell you that good governance or any real sense of fairness does not decide the outcome. Anti gentrification movements are the greediest dirt politics ever. I’ve lived in rental property half my life, and likely will again. I’m sorry, but there was a reason renters didn’t get to vote for a long time, and it wasn’t all bad. Just mostly bad.
NIMBYism also gets out of hand. People will scream bloody murder over things which will very likely not negatively impact them or over which they should have no say. If you buy a home because it’s got a view of some private property, and that property owner then decides to develop it, you should sit down and rethink your life before trying to use the government to protect your view.
Housing affordability is almost exclusively a government caused phenomenon. And, most of the problem is actually home affordability programs. It’s basic economics.
while i acknowledge this topic is complex, and i'm no expert, i fall back onto property value graph's over the long term, which state as the population has increased, so too has the demand for housing, which has increased prices.
in other word's, the only way we have value stability in housing is to have population stability. that being said, since so much current value is predicated on future value(and thus future growth), any sort of even plateauing of growth, would then lead to steep corrections (hey, kind of like now!).
I mean I feel like if there's upzoning, that should increase land values, but not necessarily housing prices -- if dense housing actually gets built!
@@CityNerd spot upzonings raise property values, but if you upzone enough land, property values will fall.
It's much easier, from a process perspective, to build a subdivision of single family homes in the middle of a field than get zoning passed to build denser housing in many cities. You have to jump through all these hoops to prove the development won't have a negative impact on things such as traffic. We need to streamline denser buildings within our cities.
Also you only usually have to deal with a single land seller.
No, it's still isn't necessarily that easy even starting from farmland. It may be easier, but it still isn't easy.
@@jackieknits61 EasiER is the key word. Everything is relative, and being easier than the other thing does indeed make it easy on that scale.
The traffic argument is just ludicrous for me. You have more traffic because you have more vehicles, not more people. The secret is to build a community to encourage people to give up their cars.
I moved to Hongkong after living in DC, NY, Boston, now back to DC. Traffic in DC is far worse even though HK is >10 times as densely populated.
@@jeffreylee2993 Well to be fair Bureaucracy is ludicrous. But just like in many (most) North American cities you have to build minimum amounts of parking for a new building, you have to prove all the cars who's parking you're subsidizing don't clog the roads your also subsidizing.
Density isn't an all or nothing proposition,with either only one acre suburban lots or urban high rise condos and apartments. Many of the most walkable places I've lived were older neighborhoods with a 8 +/- lots per acre and a nice mix of single family, duplexes, and low-rise apartment buildings. In the Midwest, where I grew up, the streets were built on a grid , and there was an arterial no more than 1/2 mile from the center of the block which often had some sort of commercial/retail space. There were neighborhood schools within walking distance of most of the children who attended, neighborhood groceries, parks, and other amenities which made it possible to live a car-lite lifestyle.
Absolutely. Density is typically depicted as huge towers. The reality needn't be that way (especially if you don't have huge amounts of surface parking). A nice walkable neighbourhood with good density can, as mine does, consist of rowhouses/townhouses and apartment buildings of 6-10 storeys. We've got a nice park running down the street. But developers don't like to to build like that now. Go newer areas within walking distance and it's 40 storey towers.
that only works if you can get to work without a car. My neighborhood is a 9 out of 10 on walkability and amenities, but I have to drive all over the county and sometimes the state in order to pay my rent. There are also large fixed address employers that buses take hours to reach, even though they're only 10 miles or so away from here.
@@MrTaxiRob
...We used to have neighborhoods built around streetcars. Stupidly, we let car manufacturers buy up and tear up the streetcars.
Most major arteries could have light rail or trolleybuses running up the middle.
@@MrTaxiRob I think that for the high side of medium density, the strength of limiting parking area mostly lies in that reduction at the retail sections. Your house could have a 2 car garage, and a little yard for hanging outside, and the neighborhood could still be very dense with walkable amenities. Then you could drive if you need to go far, but also have plenty nearby to walk too without having to pass hundreds of acres of retail parking on the way.
@@jameslangstonevans I think there is no one size fits all solution. There are some destination neighborhoods that have paid lots that keep people from driving around looking for free spots, and also when they come there and spend a premium on parking they tend to stay longer and spend more while they are there.
The residents might have neighborhood specific parking permits, which is something any city can do if they're not lazy. That's just one approach, but as you can see even that requires more than one step to function properly.
I'd love to see a continuation of this regarding buying underutilized property for new homes or mixed use developments. Two contexts come to mind: (1) I live near Baltimore and a lot of blocks of vacant rowhomes could be built up, I don't know if there's a lack of demand or people still "own" the houses they abandoned decades ago and refuse to sell. (2) There are shopping centers and huge parking lots that are practically abandoned in my hometown that can't be developed because one store in the mall refuses to leave. In either case, it should not be legally/financially easier to chop down pristine forest to build new housing than it is to redevelop old areas (which already have utility infrastructure and greater transit potential).
The general rule is that all land/property is owned by somebody. If taxes are being paid on it, then it is not abandoned, even if it is vacant. The deed will name the owner.
Zoning is also a problem with turning parking lots into housing
I know, it’s so stupid that we even have homeless people and this much abandoned land
A lot of those homes are still in the hands of private owners- but have huge liens for water, mechanics lien, sewage, unpaid mortgages than have to be cleared in order for someone to have clean title and be able to improve the property. Others have been repossessed by municipal governments, and require the actions of politicians and/or bureaucrats to get the property into the hands of a developer- that has to be someone that meets their standards. Some cities are better at moving these properties through than others.
I haven't checked the numbers for Baltimore specifically, but if home prices are going up, I can assure you it's not from lack of demand.
On the topic of choosing whether to buy or rent, something I've been looking into recently that I think is under appreciated is how cities actually vary a lot in how the cost to rent compares to the cost to buy. People have the idea that renting must always cost more than buying because "you're paying the landlord's mortgage and then some" but it's more complicated than that. In Toronto, the same condo will typically cost less to rent than it would cost to buy (in other words, landlords who buy right now to rent out their property are typically losing money). Looking at price-to-rent ratios in the U.S., renting is probably better than buying in places like Seattle or San Francisco but buying is probably better than renting in places like Philadelphia or Cleveland.
Why would they choose to be a landlord in that case?
For me personally, even if I did have the ability to buy in my home region (Seattle metro area), I wouldn't. When the cost of housing outpaces median wages, it looks an awful lot like a housing bubble to my eye...and I don't wanna be the person who buys just before the bubble bursts.
The thing is not every landlord borrows money to buy rental property. If you already have assets and you turn those assets into rental property that you own free and clear then all you need to collect in rent is the cost of maintaining the structure plus the amount you have to pay in property taxes on it, everything above that is pure profit and effectively that's the return rate on your initial investment. So long as you maintain the property you also still hold the asset, and the expectation is the value of the property will go up over time so eventually you will be able to sell it for more, meaning that you can be a profitable landlord without charging much more than the cost of maintaining the property plus the taxes, it's not the rent that's driving your profit but the appreciation of the property.
@@Alenasup A lot of landlords just bought earlier when prices were lower, so they can profit at current rents. They might have even paid off their mortgage. If someone does buy a property now at current prices in Toronto (or SF, etc.) to rent out, it's possible that they're betting that the value of the home will continue to appreciate enough that they still end up profiting. Like any other financial bet, it's possible that they're right and possible that they're wrong. On one hand, you can say that these are high-demand cities where property prices will only continue to rise. On the other hand, buying *after* prices have risen a bunch should make people at least a little cautious!
@@Alenasup Money a landlord spends from rent towards paying off their mortgage is still profit to them in the long term. e.g. If you buy a house and rent it out at exactly mortgage + maintenance cost then you end up with a house for free when the mortgage is done. If the rent is slightly less than that then you still end up with a cheap house
I’ve lived in the SF Bay Area all of my adulthood and career. It’s home. I am committed at least until my kids are grown and college age (8 years) but I honestly don’t know if the lack of affordability makes sense in our empty nesting or retired years. Many friends come and go and even our kids know that people leave the area a lot due to affordability. A part of
Living here is accepting the transient nature of the area and what that means for people of all ages. I worry our kids will never chose this area when they grow up and we will have to decide between seeing them infrequently or them living a very challenging (and likely renting as the only option) life. So affordable housing is a big deal for friendships and families and quality of life in ways that are hard to measure. Thanks for the great video ❤
I lived in San Diego Ca for 40 years before moving to Dallas Tx. For what you can buy in the lowest middle class neighborhoods in California you can buy some really nice houses in the upper middle class neighborhoods in Dallas.
I talked to a guy who sold his house in LA that he still had over a decade left on his mortgage who sold his house and bought three houses in Idaho for cash not having any mortgages on any of the three houses. He lived in one and rented the other two out for a decent income. He was semi retired in his 40s from the income from the rentals and from peace meal work he did for extra cash.
It might be possible for you to sell your house and buy your self a house for cash and give your kids the down payment for their own house if not buy it out right. It all depends on where you chose to move to. An example you can buy a decent house in Oklahoma in the low to mid 200s. If you have the right skills and follow the rules they set down the city of Tulsa Oklahoma is actually paying people to move to Tulsa. There are other places that will literately give you free land to build a house just to move to their county.
i hear so many people who are homeowners talk this way. as someone who chose not to buy a place and instead rents and has most of my savings in the stock market.... boy is this bad timing. my investments are down something like 27% the past 18 months. a home wouldnt have done that.
what people forget is the unspoken negative impact of renting: noisier neighbors, younger neighbors, smaller units, older facilities like hvac.
im glad to hear you talk about ones investment as one's personal values .
I went from living in rural or very rural locations my whole life to living in a townhouse in a crazy walkable small city where costs are somehow super low. I really think replicating pre-car development of rowhomes, low rises, and mixed uses is the most efficient design. How to make building codes encourage this, I don't know. This creates a lot of opportunity for home ownership or rental, and makes mass transit make more sense. Great video!
Of course.
Chartreuse is a difficult colour to cover if you have to sell a house.
There is no one silver bullet. I think it's at least two or three:
1) rehab the vast amounts of housing stock that exist in many cities' urban and semi-urban areas that lie dormant; yes this includes detached single-fam houses as well as apartment buildings;
2) re-enforce how condos work, with emphasis on shared ownership of that land so people who buy them really feel like they have a stake;
3) allot housing in every neighbourhood for poorer and (currently) unhoused people; getting them into permanent shelter -- as what the VA is now doing with some vets and some countries such as Finland are doing -- has to be the very first step before addressing anything else.
I'm just an armchair goaltender, but this has been on my mind a lot. Thank you for the timely topic.
I wasn't kidding about having painted a room chartreuse, and I can't endorse your first comment enough. I like your thinking on point 3) -- will have to cogitate on it.
Here in Austin people complain about the same sort of things they complain about in most urban areas, but 2 things in particular are a> housing prices are too expensive, and b> how "they" are building all these ugly condos and apartments. Well, if housing costs are an issue, more housing is the sure way to help address it.
I really enjoyed this. I am pleased to see someone discuss difficult problems while (a) admitting that they’re difficult and (b) not proclaiming a solution.
I'd be fine renting the rest of my life if every landlord I've ever had has not done their best to extract as much money out of me while doing the least amount of maintenance as possible. Even if you find a good one you are back into the terrible landlord roulette again if they sell your building (if you don't just get straight up evicted by the sale). Owning a house is not an investment opportunity for me; it's an escape from abuse.
Another lifelong renter here and that is precisely it. Maybe if we had more tenant's rights but as it is for most of America, renting is predatory.
Renting isn’t inherently exploitative, renting in a system where landlords extract profit from rent is. If all housing was owner communally/by the governemt/whatever and ran as a non-profit amenity, renting could provide incredible freedom compared to the system of debt bondage we have today. I would love for housing to be simply a monthly amenity rather than an anxiety-inducing debt gamble. But in the current system, renting long-term screws you over.
Personally, I chose to buy a home because my monthly mortgage payments would be about half of my rent. I realize that it was a privileged option because not everyone has enough for a down payment, but, even if my home does not grow in value at all during my time here, I am already saving money when compared to the alternative. With the added bonus of doing whatever the hell I like without worrying about landlords. Sure, it is not for everyone, but it was definitely a great decision for me.
i would absolutely love to purchase a place (not even a home necessarily, a condo would be fine!) for stability but the problem is where I live (bay area) my $2500/mo rent would turn into a $4000-4500/mo mortgage + hoa + tax payment for an equivalent sized and laid out unit.
If it's that big a difference you're definitely saving money, but be careful when comparing rent to home ownership based just on price. If my rent is $2200/month and I could get a mortgage for $1800/month people assume I'd save $400 a month buying vs renting, but between PMI, property tax, repairs, and interest I'd probably save more money renting and investing the difference in the short term.
Definitely wish there were more newer towns and cities built in general to deal with the demand for such superior housing and transportation that density brings. It’s kind of sad how the only way to reasonably increase housing is to build around preexisting cities that already lack public transportation; all thanks to current zoning laws.
Yeah it's hard to figure out how to dig out of the conundrum. LA is building the most new transit, yet it's wholly insufficient. Atlanta has heavy rail --- but it's insufficient. It's frustrating that we aren't able to put the right pieces in place.
I've had this reccuring thought that, what is a city besides a place where people choose to live in proximity? So what if a bunch of people that wanted a city with good urban form and maybe without cars just built that together? It's not like we don't have any open land here in the US. If everyone in paying to build their own houses/ shops then no one person needs to be "wealthy" to make it happen 🤔
My guess is that it just needs a catalyst (the visionary that gets the ball rolling) and lots of other people would join in.
It would also end up serving at a catalyst for change in other cities once there is a solid living example in the US context; because I think a lot of the resistance to change is lack of being able to even imagine it.
The school factor in the housing decision equation would be another thing to add to this... for those of us with kids, that's something that plays as much of a role as proximity to work, type of neighborhood, and other factors.
Doesn’t really make much sense given that school factors contribute close to nothing for life outcomes. Evidence: Prestigious NYC schools often have admissions based on test scores with a hard cutoff- people just under that cutoff fare no differently going to a “worse” school than those above the cutoff. Genetic factors and culture likely contribute overwhelmingly. Even common sense dictates this- you took algebra and calculus in high school, but if I gave you a problem from the book it would be impossible to solve. How could something everyone forgets contribute to life outcomes independently?
Growing up in a suburb outside Chicago with a school system that was considered less than ideal (it wasn’t) our house was about $100k less than a similar home in the town next to us. What really was hilarious is that our scores on standardized tests were higher. Why was our school district rated lower? It was because we had different demographics and were more diverse. The school factor in housing decisions is suburban insanity/thinly veiled racism.
the "school factor" is pretty fraught around the portland metro area. the pattern of "good schools" seems to mirror exactly the white flight that's happened all around town. new suburbs, with new homes, and new property taxes tend to contribute to "better schools." however you want to measure that. while older neighborhoods closer in tend to fade in funding, enrollment and overall quality. you eventually end up with so many white families moving to the suburbs for the "good" schools that you'll end up the only native student out of a thousand students, while the downtown highschool is majority-minority.
it's pretty jarring. and it starts to make you hear "we're moving to a neighborhood with good schools" as "we want our kids to go to the white school."
Yeah, there are a lot of things that play different when you have kids of a certain age. Tough to avoid owning a car, tough to avoid trying to buy a house in a "good" school district. I've been there!
This could be solved of course by school choice, like Sweden does, and by letting students take transit rather than a school bus to get to school. (Some might call that free range kids, or what my generation just called kids. I can't remember anyone freaking out because I walked or biked to school, stores or elsewhere, sometimes several miles away, in a town that attracted research specifically because it was so average. A friend said that in her youth, on non school days, she and her friend would leave their houses after breakfast, play in the mountains, then return home fifteen minutes before dinner, all good.)
How about a video for people who want to downsize from a large city to a medium to small city. What are the best cities to downsize to.
Omaha
Omaha
Omaha
That kind of segment would be best split into parts, particularly for those folks who still work and those folks who are already retired as they have differing needs.
One thing I was surprised you didn't mention while discussing the maybe-illusion of home price appreciation is how local the housing market is. You're not buying or selling an average house in the U.S., you're buying and selling a house in your specific location. This has a huge effect, because places that are in demand are going to see a lot more land appreciation than places that aren't (which may even seen negative real appreciation). Or, to put it simply, housing looks like an awesome investment if you're offered the opportunity to buy in San Francisco in 1960 and sell in 2021. It looks like utter garbage if you're offered the opportunity to buy in Detroit in 1960 and sell in 2008. This is totally obscured by nation-wide averages.
Great topic. Not as entertaining as a snarky top ten, but more important. Please continue to explore this space.
Btw, I enjoyed the RUclips curated adds for golf clubs and Peloton, because golfing outdoors and riding indoors cater to my suburban-programmed urban terrors. 😉
Golf clubs and Peloton?????? I didn't agree to that!!
I know it was a silly remark but there are certain types of ads you can disable in your AdSense settings. nothing specific like blocking Peloton ads but you can disable stuff like political/religious stuff + more. Just thought you might get some use out of that, or at least some knowledge
🤣
Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol
@Amvrosy Sharonov Not at all, having monitored my portfolio performance which has made a jaw dropping $473k from just the past two quarters alone, I have learned why experienced traders make enormous returns from the seemingly unknown market. I must say it's the boldest decision I've taken since recently.
@Amvrosy Sharonov The adviser I'm in touch with is 'PATRICIA V VESELY, She works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else. for me her strategy works hence my result. She provides entry and exit point for the securities I focus on.
Thank you, I copied and pasted her name on web browser and sent a email waiting for reply.
Economist here - the idea of thinking of a home as a liability THEN an asset is correct. You don't have to buy, but the financial freedom that comes with owning property - especially if you pay it off quickly, so that you only owe taxes + utilities each month, is really nice, and can really help you to retire on a fixed income. That being said, there are maintenance costs that come in the form of money and stress, and it's not always as easy to hop around, if that's what you like to do (it can still be done, just be smart with all the fees that come from buying and selling a home.) If you have some extra time you and a friend/spouse can split getting a realtor's license and an MLO license, can save a lot of money this way.
I think I learn just as much vocabulary as I do urbanism from this channel - first it was luddite, now it's itinerant.
Itinerant was a new one for me too! 😂
What I find ... strange is that this housing crisis is seemingly so thoroughly global. You'd think that at least somewhere there should be some desirable, dense, modern cities that got "it" right and avoided the issue. But even if you look at generally positive cases like Vienna, or the concentrated efforts in Swiss cities these days, that's still not enough to say "it's not a problem here". At best it's mitigating.
Maybe there are cities that got it right and I don't just don't about them. But I still think it's a bit odd.
Can we talk about corporate ownership of single family homes? That is a significant factor in the pricing increases over the last several years.
An interesting topic may be the concept of "market failure" when it comes to residential real estate. It's mainly an economics theme, but you could make it work. A friend of mine who's an economics professor explained that when it is more profitable to build luxury housing than affordable housing, the massive demand for affordable housing will remain unmet. This is an example of how market economics doesn't always work. In cities like New York (where I live) there seems to be an inexhaustible supply of rich people from the US and overseas who snatch up luxury apartments, and then leave them empty, as these properties are often used as "pieds a terre," investments, or tax shelters.
What is a luxury home?
That’s not an example of market failure. The market is acting exactly as expected, because there is significant unmet demand for luxury housing in NYC. The reason that NY has such an affordability problem is *a* market failure, but it’s not that. The market failure is that the market is literally *unable* to match supply and demand, because the city doesn’t permit anywhere near enough new housing. (That’s not to say it isn’t permitting any, but that the amount that it does permit is not equal to the demand for new housing.) Since the city’s draconian zoning and historic preservation laws make vast areas of NYC effectively off-limits for construction of housing, the supply is unable to increase as fast as the demand is increasing, and so you end up with many tenants competing for the few available apartments. In a scenario like that, the one who offers the landlord the most money wins the apartment and everyone else loses. That’s why apartments in NY are so expensive. When you only build 10% of the apartments you need, the only people who get one are the richest 10%.
When you permit more housing, prices do go down. I live in Arlington, VA. We’re across the river from DC. Even though I live in a high-rise in an area saturated with defense contractor money and *literally across the street* from Amazon’s headquarters, it’s still several hundred dollars a month cheaper to live here than in DC, because there’s so much construction. My landlord can’t raise my rent too much because of the competition from the newer, nicer buildings nearby. If they raise my rent to equal the rent in the new buildings, I’ll just move to the new building because it’s nicer and has better amenities. So even though the newer buildings are a bit more expensive than my apartment, they still force my landlord to keep my rent reasonable. It’s a legitimate phenomenon known as a vacancy chain.
And a group of us YIMBYs have been helping to get the whole county upzoned, which will help even more. We’re actually on the verge of completely abolishing single-family zoning across all of Arlington County, which would open up 75% of the county’s land for missing middle housing types and vastly increasing the housing supply.
“Luxury housing” is a meaningless term. A luxury home in NYC would be a down market product in Houston.
@@michaelimbesi2314 It sounds like the main issue with NY is that there are too many rich people congregated in one place. That is the same problem that I see with a lot of the places with serious housing affordability issues. Too many of the higher-paying businesses congregate in one place causing the people to flock to those areas and increasing the demand to an unsustainable limit. If they were spread out more evenly across the country, then the supply/demand issue would also likely work itself out more evenly, too.
So making the most profit is a market failure? LOL. What economics does this guy believe in?
One of my points over time has been that the value of a house going up in value is somewhat irrelevant (*). When you sell you still generally need someplace to live, and surrounding houses will have also gone up in value (all depends on the new location local real estate economy). This is also the reason you need to buy when you can, so you don't fall further behind. Couple decades ago (when I was home shopping), I was miffed that that houses price went up higher than the amount I could save for a down payment in a given year...but no idea what the right answer is here.
The only time I've seen demand drop enough for rents to drop was at the beginning of the pandemic when the top-earners in this city (the ones who can actually afford most of the market-rate developments) all fled the city and suddenly developers lost their target demographic. The number of new building permits and construction jobs also sharply declined in NYC as developers slowed or in some cases stopped building the second demand dropped enough for rents to go down.
I personally I just wish we built more public housing to compete with market-rate instead of relying solely on private developers or subsidizing private developments to make a certain percent of the apartments "affordable".
we absolutely should use public housing to tighten the thumbscrews on the market. public housing should be given the mission (and funding) to expand the housing supply, house the unprofitable to house, and directly compete for customers in the market
The Singapore model is absolutely something that I wish we could see happen here - massive public housing projects across all income levels, not just "poor people housing". Mixed-income developments, basically.
The 'silver bullet' that I like is to shift income taxes to land value taxes. People unable to afford real estate could be given little or no tax liability, in turn making it easier to save enough to eventually buy a place. People who want a single family detached dwelling in a high value area would have an enormous tax liability so that wealthy landowners will have to pay a proportional tax rate, and co-op/condo development becomes an attractive way to spread the tax liabilities of high land value amongst multiple households. People who own second and third homes effectively pay the equivalent second and third income taxes. Our current system actively rewards homeowners with favorable tax rates and it is arguably done at the expense of renters, at minimum I think that if your primary residence is a rental the dollar amount of your annual rent should be 100% tax deductible and subtracted from your annual income for the purposes of determining your tax bracket
Look, a Georgist spotted in the wild! (jk)
I agree with your assessment of what the problems are, but in your solution wouldn't landlords just shift that tax burden to renters? It could encourage fewer people to live in SFHs in the suburbs though, if they were taxed proportionally to how expensive it is getting infrastructure to those places.
Qqhy hello there Georgist
@@CortezEspartaco2 I'm not a card carrying Georgist, but I think they have an economic justification for why the burden won't be shifted. I think it has something to do with landlords being unable to extract monopoly rents because of LVT damaging their ability to operate at scale, thus they're not able to charge any more, but I might be wrong. I remember reading the explanation and finding it convincing though. If someone else knows it I'd be happy to hear.
The property tax rate in parts of Texas are very high, the system hurts a lot of people especially when the house value theoretically double or triples in the matter of a few years. Even when you own your house you pay eternal rent to the state. I couldn't do it.
This might be a topic beyond the scope of your channel, but have you ever considered discussing housing + zoning in different countries?
Specifically, Japan has a very interesting housing market where houses actually depreciate in price, similar to how cars depreciate in price over time. Japanese zoning seems to contribute a lot to this, and also seems to encourage highly dense, walkable neighborhoods. You can find some great info on Japanese zoning online, I find that it's a pretty interesting topic.
Japanese home prices have been depreciating for a while not because of the zoning laws in Japan but because the Japanese population has been growing at close to 0% since the 1990s and it has been shrinking since about 2015. And the number of young couples in Japan--the prime buyers of new homes--has been shrinking since at least the late 1980s. So, that won't be happening here. Japan is a bad example of this. I would try to compare zoning laws to Canada, the UK, France or other comparable developed nations where the population is slowly growing, like here in the U.S.
True. Housing costs are a BIG miss for a lot of the "urbanist" community online. A lot of platitudes about cycling and walkability, very little content on how affordability would effect who gets access to that walkability.
I think Austria would be a much better model. Just consider housing as a public good and make it super easy to change/convert current properties. Japan's zoning is interesting, as they utilize a pyramid system which also encourages conversion, but their houses depreciate more due to economic bursts rather than innate policies.
@@Luboman411 While you are correct on the shrinking population of the overall country, when you look at more specific local areas, you'll find that population is actually increasing (specifically, the Tokyo metro area). In spite of that, housing in Tokyo also still generally follows the "depreciate in price" trend, or at least, prices aren't rapidly rising.
@@Luboman411 That argument doesn't really hold water. While the population of the country as a whole is not increasing, it is still urbanizing, so many cities are still experiencing growth. Yet, even in growing cities the housing depreciates. So there's clearly something going on there that you can't just brush off.
Two things increasing housing costs: 1. corporate ownership of rental properties, and 2. laws (or lack of laws) which regulate rental increases. Years ago, I rented an apartment in Austin, Texas. After the one year lease was up, they raised my rent ~30%, making it as high as NYC rents! This was long before the Austin real estate market became hot. A few years ago, I lived in Europe. Buying apartments there was crazy as the prices kept going up and up. But I rented a place the first year, which was reasonable because of laws regulating rent increases. Same thing in the blue state where I live now.
So long as we rely on private investment to build housing, rent control will not work an is a bad policy.
@@neolithictransitrevolution427 It worked for me. I was much happier paying less rent in areas that had rent control than paying much more rent in areas which did not. But that is just me. Perfect is the enemy of good.
@@georgeh6856 Ya, rent control works for the people who can find a place. Its all the people who can't find somewhere that get hurt. Which is why it usually correlates with higher housing prices
@@neolithictransitrevolution427 we should have rent control but if you increase the number of housing units by 100% or more the rent control doesn't apply anymore. use it to incentivize the redevelopment of low density into high density and limit the profitability of passivity sitting on an old property collecting rent off of it. off course you need zoning reform first but this could work.
@@PlaystationMasterPS3 Rent control strongly DISCOURAGES new construction. It also discourages landlords to spend money to maintain the property properly. In the end, you get a few people who get to live in cheap, falling apart apartments, and a lot more who have to pay even more than they would for a non rent controlled unit, if there even are any.
Silver Bullet Idea: reduce minimum lot sizes for single family zoning! Instead of a minimum of like 2 acres, make it like 1/8 of an acre. This would allow for more housing immediately without reducing the value of existing homes.
I like that idea. You increase density and reduce the effect of land value.
Most single family homes are already less than 2 acres. The new average for most lots for single family homes is 1/3 - 1/2 acres.
Right idea, the key is to ensure that lots can be densified to meet market conditions. In my neck of the woods1/8 of an acre lots go for $1.5-2m because they really should be apartment blocks however, the zoning does not permit apartments, condos etc (it does include duplexes about $1.3m) so the prices are still insane. Since its hard to densify, condo prices are also crazy because there isn't enough of them because of the cities zoning practices.
I really love small SFHes and would love to see more of them in low density areas (zoning shouldn't mandate it but in many places towers won't pencil out)
Where are you at that has minimum lot size of 2 whole acres? That's like actually quite a bit of yard. Where I live, they put houses within a yardstick of each other. It still is very inefficient instead of MFH or mixed use. Oh and the houses are still ridiculously expensive because they can't build enough of them. And the land use is still awful. And the property tax still doesn't cover the cost of services from the city.
the largest reason I ditched renting and aimed for a single family home. predatory land lords.... bad land lords, and land lords that create significant and illegal barriers to renting. even in Washington it's difficult to challenge those landlords who are going above and beyond to make it impossible for reliable tenants to sign a lease. and wanting to keep that lease once you realize just how crooked they are, and your state and/or city is unable to help due to manipulation at the legislation level.
Yep. Wanting to avoid bad landlords is my number one reason to want to buy a place here once various family die, since assuming the relative values stay steady, my share of their houses should cover a place just like I’m renting currently. Of course I’m incredibly privileged to even have that future prospect, and even then it’s not exactly nice that that’s my only “hope”.
The link between your usual theme of transportation and that of housing is that federal tax laws have had a great deal to do with both. The federal tax subsidy that makes mortgage interest tax deductible goes hand in hand with federal subsidies that favor road building over other transportation. Both have led to unsustainable car-dependent suburbs. The effect of the difference between U.S. tax structure and that of European countries can be seen with Google Earth.
Yeah, the mortgage interest deduction is a pretty big deal (depending on your situation). I glossed over a lot in the effort to make this a 15 minute video haha
An irritating thing is that my state also encourages homeownership among the elderly, as it pays half the local real estate tax above age 65, but only if you've owned and occupied the same house for ten years (at an age when people should be at least considering downsizing (for less to maintain) or senior living (for assistance)). Nothing for renters.
@@bearcubdaycare what a frustrating incentive
Video suggestion: 10 most populated U.S. (or North American) cities ranked by livability
P.S. you’ve changed the way I view city infrastructure. Love the content!
It would be really nice if the USA and Canada built more non-market housing to alleviate these issues
or actually just rezoned to allow for construction of enough market-priced housing to alleviate these issues
Being a newer home owner I can attest to the time needed to maintain a home. There is a lot that goes into the decision. For us it still made sense to buy, but not for everyone.
There is a great NY Times calculator that helps determine buy vs rent. It includes a bunch factors to help.
Ooohhh I'm gonna have to look for that.
Wish that I could make use of that calculator...
Yeah, I'm in a similar boat and I tell everyone I can that home ownership is a scam, lol. From mowing the yard to various projects all the time, I barely have time to think, let alone live my life.
The only problem is that where I live there really isn't any type of walkable, livable community, at least not that's within my budget, so single family homeownership is the way forward for me.
@@jamalgibson8139 I am a new house owner for the first time, new for me but the house is not new. I’m sort of regretting the situation because so far this year I’ve had plumbing problems, roof problems and someone drive across the little bit of yard I have in the front with their big truck and since we have restrictions for us Hoa to keep the yard looking good and that’s a lot of work to do
A big advantage of buying vs. selling is that a bank won't typically evict you at random. In Auckland renters get evicted on average every 1.5 years or so, and on a fairly short notice too. Until recently a landlord could evict tenants for reason of selling the home, with a notice period of 6 weeks. It is now 3 months, but still. And properties get sold quite often.
That's crazy and it's happening in NZ too. I thought you guys were supposed to be a sane country.
@@chazdomingo475 NZ sane? haha, no New Zealand is Australia's _Australia_
Here landlords could do that with a month’s notice. Thankfully they reformed it so you need 3 months, and in some situations 6 months. Then there was another amendment banning evictions in the winter months, and instituting rent-increase control for the first time. It’s been really surprising since I had a lot of trauma from being forced to move even when my disability was doing really badly. I still haven’t quite adjusted to the feeling of much more security in renting.
@@Claudia-hr5ei It could, but that is a double-edged sword because it increases their motive to up the rent to pad against the loss when a tenant can't be moved for months.
@@Claudia-hr5ei Yes fingers crossed. This is already a thing in Europe. It is perfectly normal there for people to rent a home and just, live in it, like normally.
But in other places this is a very real, and huge difference between renting and buying. Think of how many things in life don't work if you can't count on still being in the same home, or even neighbourhood, 3 months from now.
Awesome job on living your values! Very few people get to do that versus people who look down on you for having different values (hey, we're not all built the same or have the same experiences. That's life). I think we have a tendency to forget that we're all in such different situations at different points in our lives while what we encourage is relatively monotone. Rising home prices seems great for people who already have homes but causes affordability to worsen for people not already in that group. Ex: an immigrant who just came to the country with no assets, a divorcee who didn't get the house in the end, a student fresh out of school with more debt than assets. These are all people I'd like to see succeed but it's much harder if they can't afford a roof over their heads. It's what drives me to be very dubious on treating housing as a primary investment. I don't want to screw those people over on the quest for my own stability but much of the current system seems to encourage me to do that.
It all comes down to the simple fact that something can't consistently outpace inflation AND also remain affordable.
You have to either side with the landowners who want their property to infinitely increase in value or with people who want a place to live. You CANNOT do both. Given that the latter group wields considerably more political power, prices go up.
I appreciate your approach to teaching.. To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough, we just need to hold onto our hopes and wait to see how things turn out because market movements are almost always unpredictable. In my portfolio, I'm noticing more red than green.
So what I do is buy companies that are doing good things, executing on business plans and then short companies that are missing earnings, it’s as simple as that.
@@berwickperu7683 Lol Berwick, we’ve been in a rally for the last decade, you just gotta accept not everyone is as knowledgeable in the market to handle the opportunities a crash market presents
and unfortunately for me too, I got in 2019 right before the market’s melting point, I just hope I recover soon enough before retirement. Stay strong.
@@kellyhoang1483 I think the market will suffer more downtrends before full recovery, esp. with the inflation, hiked interest rate and looming recession bound to happen 2023, you should understand the market is not just finance and valuation, it’s history, it’s market psychology, it’s understanding how the world moves, which is why at this point in time, it’s ideal to work with an Investment-adviser with an
unparalleled track record, from first hand experience, I could say they stand a better chance than most of us ever would and it has been reflecting on my portfolio. I made over $850k in net gains and I’m unbothered about the market outcomes cause I’m certain I’ll make a killing, it’s all perspective guys.
@@hollandhoff975 Sure, investment coaches are outperforming the market and raising good returns but some are charging much, seeing that their services are currently in high demand more than ever....seems more like taxing to me.
@@cliftonkelly3812 You maybe right, but I've shuffled through portfolio coaches and personall, Karen Marie Emma, turned out to be best, you may have come across her on financial blog, she's quite pronounced. I haven't met anyone with as much conviction and her fees in comparison to my portfolio return is cheap.
One of the biggest problem in north American cities concerning housing is that they pretty much stopped building plexes like duplex, triplex and quadruplex and residential semi-commercial. Older neighborhood that have alot of plexes and semi-commercials are usually denser in population without being disfigured by condo towers and they allow a better social blend of people. In my city the last very last plexes where built in the early 90ies, after that the city only allowed single family home or big condos towers despite the fact that no one wants to live in the big condo towers, hence these towers are empty even in home shortage. The other problem is that condos are a scam, they are all the inconvenient of apartment living with all the inconvenient of owning a home. So in the end if you want to own something you're better off buying a home. Not Just bike did a very nice vids about the problem of housing and density in north america. cheers to all!
It would be great to hear your thoughts (or more of them if you've touched on this briefly before) on rezoning downtowns given that a lot of office space is sitting empty for more urban dwellings. It seems like this could be a great solution for high-density housing close to public transit in high cost of living areas, though obviously there are challenges to renovating office space to housing. In college (Omaha, NE), I lived in the old telecommunications building since there's a company that specializes in renovating old office buildings there--a bunch of the housing stock downtown was built by them. It's always surprising to me that this isn't as much of a thing in larger cities.
It's the way that the structures are built that make office buildings of any height extremely difficult due to the lack of plumbing and heating and air conditioning differences for habitable space. Adding all of that plumbing and heating and air conditioning adds to the live load of the structure and then there's major engineering concerns and one reason why you don't see quick turnover to residential
Pittsburgh has had a lot of this- properties in downtown being converted from retail or office into residential properties.
I think its great, as a growing number of people want to live in central cities and a lot of the office workers would rather do their tasks remotely or in suburban office parks which have better amenities for shopping and that.
@@ihateregistrationbul this explains why so many of the office to condos flips we see are luxury $$$$ per square foot. Only way to make up the costs.
Yeah, I don't know if it's a zoning issue as much as a feasibility issue -- office buildings are often built to different standards as far as windows, plumbing, etc. But maybe the zoning or comprehensive plan designation is a big deal? I don't know! It's definitely a chewy enough topic for me to dig into. Thanks for the prompt!
Keep in mind that the office buildings are why most people live in the metro area in the first place. If you convert too much office space to residential, there'd be no reason to live there. It's a balancing act.
Great video. I think home ownership creates a delta between what is good for the individual home owner (in terms of home value, or at least how the homeowner perceives their value to be affected) and what is often better for the city as a whole (more housing, more social services and affordable housing, etc.). If we could snap our fingers and have less home ownership with very high levels of rent-control, we'd probably be in a lot better place. But I think that ship sailed a long time ago.
working in property management, i would say the main issue is greed, everyone wants to put the minimum in and get the maximum out, so if they have an opportunity tp make it harder for new supply to be built, they do that, like the california association of realtors (the guys you have to be licensed with) spend loads lobbying to make housing harder to be made, where only big investors can get everything done to start building, making it harder for smaller companies or individuals to use their single family lot and make it into a small investment, because if everyone did that big companies would lose potential gains on their investment. btw your average landlord is just a nimby, no doubt, but even they see the need to build adus and stuff, because its an investment, they already own the land so why not
Getting rid of R1 zoning. If the only way to build more housing due to zoning is to increase sprawl, it also increases traffic, uses huge amounts of land due to the low density and loads of other run on effects. Making an area mixed use allows for the creation of new walkable neighbourhoods with corner stores, cafes, restaurants and other small businesses. There's a reason areas that have grandfathered in corner stores and cafes in residential areas are some of the most sought after areas to live in. It's an improvement to the quality of life to not have to get in a car and drive for half an hour in traffic just to get some milk. I much rather being able to get off the train I take to and from work, walking back home and pick up some milk on the way. Instead you've got freeways that they keep adding lanes to, thinking that it will fix the traffic problem, when it just makes it worse. And you sit in traffic in your car by yourself every single day to and from work spewing out car exhaust.
There is a place for single family homes, because people like to live in them, but the lack of other options for so much of the area around cities is costing them financial solvency, because taxes on single family homes don't cover the cost of replacement infrastructure in many areas. Most cities are dependent on their downtowns and inner city high density housing making up for it. But when they just add more and more sprawl, eventually it just doesn't work anymore.
Whichever action results in more walkable neighborhoods, less general waste, and more affordable housing. I'm for that.
I appreciate your skeptical approach to sharing your own opinions. Too few people know how to balance conviction with humility.
Really well measured commentary on a difficult and personal subject, kudos!
One thing you didn’t mention on the financial ROI of homeownership is that it is a highly leveraged investment. That 5% compound growth has a much much larger impact when you invest in housing with 5x leverage vs index funds. 50k down payment on a 250k house, 2% growth is 5k gains. 50k in stocks with a 7% growth is 3.5k gain
I do get that new housing appears to reduce the net worth of existing owners - but in reality an existing owner doesn't really benefit from higher prices unless they are older and looking to downsize. Because if your home is more expensive, so are all other homes you might want to move to, and you're always going to need somewhere to live. So it's not exactly money you can actually lay your hands on.
Unfortunately, this is not how homeowners think about this as a rule
HELOCs
This is only my opinion, but housing is a place you live and that's that. Buying a house is an option like any other and in this environment can be cheaper than renting but it is a terrible investment compared to so many, and when you sell this "investment" you still have to live somewhere else. That somewhere will be all expensive too because everyone else has the same idea about keeping supply low to keep their investment high. Another huge problem is that high rent/ownership costs increases fixed costs for both residents and small business owners, making it much harder to negotiate economic downturns.
I believe that there has been a fundamental change in our economy, one meant to keep the working and middle classes barely hanging on, coupled with housing supply that have created this compound problem. I see it as a much more predatory economy that we had in the latter half of the 20th century which pretty much killed the "American Dream" for most people. That's why younger generations are not getting married, buying homes, and having kids until much much later in life.
However, there is still a lot of land in our cities. Most malls are dead or dying yet take up a lot of space in choice areas. Most downtowns will not return to the same office occupancy as before the pandemic. Most cities have lots of surface parking lots that will go unused in their downtowns as well. I read recently how distribution centers have exploded in CA's Inland Empire w about 10,000 warehouses larger than 1 acre in size. The amount of industrial zoned land in the Inland Empire is almost as high as residential zoned land. Cities in the Inland Empire are choosing warehouse development over housing development despite the lack in affordable housing.
The main benefit of a house from an investment standpoint is leveraging...you're paying $50k initially but getting returns (potentially) for the entire $500k value. The largest financial benefit from a "home" standpoint might be certainty...your mortgage will stay the same forever, until it goes away entirely, vs. rents that keep rising. That's aside from ownership costs of course.
Yes leverage has to be taken into account when doing rent vs buy analysis. (Of course so does property tax. )
You can get leverage in the stock market too.
@@57125 Yes but can you get 10x leverage at 30 years fixed 3% xD. Just gross....
Housing, as in the building, is an investment. It literally costs resources upfront for long term return. You can want it to be a social investment, but that doesn't change what it is. In any case, a house is a depreciating asset as it ages.
Land is where the increased value of "housing" comes from. Its a limited good people speculate on. It should have a higher price in city centers, we want to to be used for high value uses. But the gains in value should be taxed. That reduces speculation and acquisition costs to ensure development.
I just wanted to say that you always do an incredible job in all of your videos. Thank you for bringing the info
Tampa Florida
Disclaimer: I am from the upper South now residing in the center of Tokyo.
I want to bring this back to mass transit. As I mentioned in a previous episode (?) I have a 'yes and' mindset. I also believe that the government needs to ensure that its people can obtain Maslow's basic needs. Here in Japan, public transit ownership takes various forms, even in the Tokyo region. The central government owns some portion of the heavy passenger rail network, JREast, but the Tokyo metropolitan government also runs some train, subway, trolley, people mover, and bus lines. In addition to that you have private rail, subway, and bus companies. All of these networks laid on top of one another create a great system that can move people wide and far. It's the workhorse of the economic system. Getting permission to close a train line, bus route, or transportation link requires a bureaucratic process that sees the central government and its ministries getting involved. So transport providers are very attuned to market changes and are always looking to build demand and revenue sources beyond ticket sales. The transport operators here have gotten themselves involved in real estate development and sales. They buy up vacant land around their lines and routes and turn them into office, retail, or residential towers. They own supermarket chains that are either located within the station property or nearby on land owned by the transport operator. In conclusion, my point is housing and public transport in the US are horrendous because we tend to not think broadly or creatively about problems. It's 'either or' not 'yes and'. Why aren't public transit operators forced to find revenue sources to support their routes and lines? Why are we so quick to close down routes and lines vs making the process so onerous that it becomes easier to innovate a solution to declining revenue or ridership? I think that becomes the key to housing affordability, incentivizing public transit into the market.
Great video, really appreciate your take, analysis and humour.
I've been trying to tell people renting isn't the ultimate evil especially if you don't plan of staying in that property 10 or so years but this video does a good job of showing that owning a home isn't the true sign of financial success
Renting isn't evil but landlords sure as hell are.
@@chazdomingo475 I"m not sure why all landlords get painted with such a wide brush. I have had the good fortune to rent from people who own the house or a very small building (I'm in an old 6 unit building now). I've pretty much avoided the large complexes run by corporations as that doesn't suit me at all. But I've had really good luck with my landlords... I pay them to live in their properties... and in exchange I have a roof over my head, security, and-most importantly-I don't have to make repairs. I work from home and once in a previous apartment the sewage lines backed up or something and something awful came up through the kitchen sink. Called my landlord, told her what was happening, packed my computer up, and said, "I'll be at Starbucks getting some work done... call me when it's fixed." I move a lot and this is the hassle free lifestyle for me!
@@EricaGamet I wish I could get my landlord to make repairs. I call and call and nothing ever happens.
Would love to see a video on accessory dwelling units!
Thankyou for taking about a growing problem in many countries! There is something fundementally wrong when habitable space, or space to exist is unaffordable or prioritised as a financial investment instrument. Hope theres more videos exploring this topic.
Another great video. This is a very busy topic being discussed across RUclips nowadays and I am glad to hear your point of view on the subject. Great work!
Considering what a "silver bullet" would look like, there are only two things which come to mind for me. The first is replacing state and municipal taxes (especially regressive ones) with a land value tax, which would discourage land speculation or other forms of underutilization of valuable urban land, as well as promote densification where it is allowed. The second is to deregulate housing densification itself by abolishing single-family zoning and other unneeded land-use restrictions, as well as to allow mixed-use development. Of course, increasing density would require further investments in infrastructure to support that additional development. However, one of the beauties of a land value tax is that municipal revenues increase in proportion to the value that society places upon a particular lot, which naturally provides the revenue needed to pay for the infrastructure renovations. This is known as the "Henry George Theorem."
As a side note, this reminds me of video that I once saw on Japanese zoning, which differs considerably to the Euclidean zoning that is common in the West. In short, it is possible to build housing units in every type of zone with the exception of heavy industrial zones that are environmentally hazardous. It is worth checking out:
ruclips.net/video/wfm2xCKOCNk/видео.html&si=EnSIkaIECMiOmarE
Congratulations, you've developed a plant to create more unaffordable housing.
I have never heard of "land value tax" is it significantly different from what is called property tax in NY/the northeast which is based on the value of your home/buildings and the dirt under them. Along the St. Lawrence river the difference of being on the waterfront of inland side of the road can make a huge difference in your property taxes because water access is that valuable.
Do most places not have some form of property tax that incorporates the assessed value of your lot plus all the structures on it? (Admittedly properties aren't assessed frequently if they aren't being sold or quoted for insurance or something.)
It seems to me that the 2500 sqft homes being built now vs the 1000 sqft homes of the '60s and '70s is sort of the missing middle problem of suburban housing. Those 1000 sqft homes were built on generous lots of a quarter to a third of an acre in size and were often added onto and modified into 2000+ sqft homes. That allowed them to be very affordable starter homes which you could literally build wealth by investing in some modifications. The newer 2500 sqft McMansion style homes are much more difficult to add onto and are built on much smaller lots (a fifth of an acre or smaller) which don't afford as much room for expansion regardless of the ability to do so.
In a lot of places getting permits to put an addition on an existing home can range from a giant PITA to an impossibility. Not a lot of point of getting a small home on a large lot any more if no one will ever let you expand it.
True. The homes today are already built to their max potential which makes them unaffordable for folks starting out.
These days, a starter home is usually a condo or townhouse. No getting around that.
thanks so much for addressing this subject!
I think the people pushing housing as an investment are generally people in the real estate industry. Your average American owns a home for one reason and one reason only. Stability. If you own a home, you know what you will pay every month to stay in that home, for 30 years, then it's free except for upkeep for the rest of your life. If you want to raise a family, that's a really good assurance.
I know you mentioned life happens and people have to move. But the truth is most people don't want to. They want to settle down into a stable life. And most do, if they can.
If you rent, you know that your rent is likely to go up every year. Some years, like those of COVID, 20% or more. You will constantly be paying above market rate if you are not willing to move. Moving is financially and physically draining and it's not conducive to having a stable life. Having everything you've built in your home threatened every single year is emotionally damaging as well.
The living conditions are also worth talking about. You will often hear people say they have never had a problem with landlords. I don't know what planet they are living on as I have never had a good landlord. You depend on a landlord for maintenance. And I've never had one that didn't try to pinch pennies or defer much needed maintenance. I've never been well off mind you. If I had, I would be in a house. So sure, my landlords were all slumlords, but that's all that exists for most Americans. And if I had a choice I'd buy a house in a heartbeat. Just so I would never have to deal with a landlord again.
It should be noted I am in the Deep South. Maybe in other parts of the country tenants have rights. But you never have a right to anything here except to eff off. So I'm sure that's part of the problem. But then libertarians get up in arms over rent control. I think that's the only solution to the problem. It is essentially equity for renters.
Perhaps some tenant union is better but I don't know much about that and good luck when renters are so transient and stressed by design.
So yes of course this is a supply/demand issue, but it's not just larger cities. The lack of supply in smaller metros very likely contributes towards the flight of people out of those areas into places that have more a more walkable and urban experience. Maybe if we were to increase supply of walkable/urban neighborhoods in medium-to-small metros, then the unreal demand we see in larger metros won't be as bad. Obviously, there will always be demand in large cities, but maybe it can be tempered if we can turn places like Huntington WV into something similar to Madison WI. Do this for 100 small metros and maybe the supply issue isn't as bad.
(Note: This is probably an oversimplification, but I hope I got my point across.)
Unfortunately, part of the Republican Party's national agenda is to chase (via abortion restrictions, anti-LGBT laws, etc.) young, progressive-minded people away from smaller areas and into the big urban metros. Since those who stay behind are older and more conservative, that flight makes red/purple states redder and blue states bluer, which helps the Republican advantage in the Senate and the Electoral College. So conservative-controlled areas have every incentive to maintain the suburban/car-centric status quo.
I own a condo in the Bay Area. I don’t want the value to go down, but I support all new housing and am willing to risk that loss in the hope that a denser neighborhood will serve the community better, draw investment, and house more people. If that happens to make my property more valuable, then that’s a happy bonus too.
personally I don't think homeowner's best interests should be prioritized because even if their property went to $0 they'd still have a place to live in rent-free, something the less privilaged o us don't get to have
@@PlaystationMasterPS3 how long is not exactly rent free since they have to pay property tax, homeowners insurance, often mini repairs to the house etc.
Seeing all that I’m still for lesser burbs more density.
I wish I could she got how to correct my mistakes, I meant to write having a home is not exactly rent free since they have many other expenses
Two personal data points.
1. I own and live in a duplex in a nice, but very mixed walkable urban neighborhood. I have a small amount of land, plus a rental in an area where rents are increasing. [I charge average rent for the neighborhood.] I don't view my flat as an investment, but as a whole, the duplex is an investment.
2. Being in a mixed housing and retail neighborhood, I and my neighbors are not NIMBYs. But there was one project we did oppose ... a building with 50 studio and one bedroom apartments, and 100 parking garage spots! I could see maybe 40-50 spots, but this neighborhood is incredibly walk/bike/transit friendly; a car is a liability. The builder must have been crazy.
Fortunately, construction never happened ... the builder got too eager and tore down the old building before getting his permits in order. So the city caused him to forfeit the land .. last time I looked, they were thinking about using it for garden plots.
I’m glad you are starting this conversation on this channel. I’m looking forward to the next chapter.
Looking forward to discussion of land value taxation. It is normal in Australia - and that doesn't particularly seem to be a housing utopia. So I'm keen to see tge arguments.
i think we toss a lot of facts at issues that are ultimatley values conflicts. there's a lot of people out there that just don't believe human life and well-being is actually all that valuable, aside from theirs, of course. in some cases they're even willing to accept a lower quality of life for themselves if it means the people they don't like will suffer even more.
i love how realistic this guy is , keep the good job
Best video on your channel! A+
What are your thoughts on land trusts, similar to the one Bernie established in Burlington, VT? Taking the burden of buying land out of the cost for owning a home is not a bad idea.
I think that just encourages SFH even more doesn't it? I don't know anything about the land trust. I do love Bernie though.
13:42 Love this. I bought an attached townhouse in a walkable neighborhood because of this very same reason. I wanted to live this way, even though I could afford a SFH with a huge yard in a gated community. To me part of the R in ROI is the number of times a day I smile while walking around my neighborhood 😄 Also, as a remote worker, being able to actually walk somewhere for lunch or to the grocery store or to a few parks has been great for my mental health.
I've gotten comments from a few people, baffled that because I "can work from anywhere" and don't have a daily commute, that I don't buy some cheap semi-rural property.
Though as a strong introvert, and a bit of a hermit, it does have an appeal - I still like being a part of my community, and having multiple burrito options within walking distance.
(And years ago when I did travel a few times a year for work, driving to and flying out of a regional airport *sucked so much*...)
@@geoff5623 I totally understand. Personally I am more of an ambivert, so it’s refreshing to me being able to feel part of the community by saying hi to neighbors and small business owners, while at the same time having the privacy of a home office to work from home.
I own my home, but I'm definitely a YIMBY. I don't view it as a long term investment, and I think advancing policies with the explicit purpose of raising home values is actually evil.
What a great video! I agree with your premise before watching, actually. Afterward, I felt like I had another dimension of understanding the problem.
I love all the content you make but looking forward to more content centered around housing affordability as the main focus.
I had never considered how multitenant housing isn't as good as an investment as single family housing. You've opened my eyes city nerd!
Now you know why Blackstone just spent the last two years buying tens of thousands of single family homes!
My favorite “silver bullet” is to just get rid of restrictive zoning laws and let the market take care of the rest. Because it will. That appreciating land isn’t how developers get a return in their investment. They make their money from rent, and so for them, that land isn’t an investment, it’s a cost. The way they maximize their profit margin is to build as many housing units as possible on that land to get as much rent as possible. Essentially, developers make their money by selling housing as a service, not by speculating on the value of the land. That means that they will build as much housing as possible, as densely as possible. And because of this, they’ll be forced to compete with each other for tenants, keeping rents low. It’s not an accident that in the days before zoning laws, cities and towns were very dense and walkable, and the transit accessible urban cores were actually cheaper than living outside the city.
Thank you for this! It's hard to explain to others your personal/ethical considerations for the housing decision you make, when the most common advice usually is "Nothing will make you more money than owning a house." People make you out to be foolish--it's a shame!
Interesting as always. One thing we struggle with in vancouver bc seems to be how home prices have fully detached from local incomes. Your video talks about homeowner-investors, but some of us would like to see an analysis supporting (or debunking) the effects of (global demand: like realty investment funds?) and can supply-side economics really solve this if demand is so significant?
Who came up with that article that towerhouses actually increase house prices, not fixing it?
That must be some low level trolling, butseems people take the bait.
But its not the houses, its the package that comes with the area:
- jobs
- leisure
- transportation
- other infrasturcture
Would you live in a family home, but travel 20 miles in rush hour traffic and the nearest grocery store is another 8 mile detour
or
pay more for a flat that has PT to your job, and some retail park in walkable distance?
Let the bidwar begin!
I would love to see a video on access to ski resorts in North America. Specifically, I-70 access west out of Denver and access east up Big/Little Cottonwood Canyons out of Salt Lake City. In Salt Lake a $550 million gondola is currently being proposed to access one of the canyons all the while UTA has cut bus access in half this year. What will it take to convince lawmakers and the general public to start supporting better public transit options?
$10/gal gas!
@@rashakor Skiers are some high-income people. I think they would willingly pay $10/gal.
I loved this video and I would love to see more like it.
As others suggested, would you please do a video comparing home ownership/housing policies in the US with other countries? Things like type of housing built, how much new housing is being built, how much old housing is being lost and not rebuilt, and how it has affected home prices in those countries. Thank you!!
Love the takeaway here. I could care less if my home is an “investment”, I just want a place I can live my life comfortably, and where I have options for mobility. And I also think the society we live in is better if more and more people have that opportunity.
One aspect to consider about home ownership, is that it is about the only place an ordinary Joe can get leverage on any of their "investments".
Banks will not lend you money to play the stock market.
In a rising housing market, buying a house is a shot a building wealth. In a falling market, ...
I agree this is an extremely underrated point. Investing in land is the least productive investment and also the only one we incentivize strongly.
WhY DId ThE MaNUfActUrInG LEaVe
Yeah the effect of leverage is not factored into the returns as calculated. Borrowing 80% of value really juices your returns over time.
Its really funny to me how you "have not talked about housing." I was surprised to hear you say that, because you spend so much time talking about land us, that I had assumed... but you're right! You haven't spoken to that specific thing! Great video, lots of insights
oh and I forgot to mention this, but something I find really insidious how in many cities like Baltimore where I live, there are cases of people selling land out from under the houses they buy. This means that whoever buys the home gets a cheaper house and doesn't have to pay as much property tax, but most of the appreciation goes to the land-owner, who can do various things to whoever owns the land the house is on.
U.S. zoning & land-use laws are an example of market interventions destroying more satisfactory urban landscapes in this country. Similarly monetary interventions by the fed aimed at raising asset prices, are a big component in the post-war inflation of housing prices. So keep that in mind when talking about market interventions, & there are different, much better ways to think about liberating households, developers & businesses , to come together to build what they want to build, where they want to build it, & what kind of community & commercial spaces they would prefer to inhabit. The fact Americans love to vacation in walkable places, gives a pretty good indication of what more natural, less restricted development would tend toward.
I live in The Netherlands and we are a small but very populated country. We have zoning plans (and charts) made by the provinces (the US equivalent of a county or state) wherein the red contours of towns are drawn. Within the these red contours a municipality can give permits for building new homes, businesses, sports facilities, hotels and restaurants, schools, shops etc. according to the function/destination given to the plot of land on the zoning charts. That mostly means that old building (not being historical monuments) will be demolished and new buildings are being built, or old buildings transformed into housing or shops, before expansion is allowed. We call it ‘inbreiden’ or inpanding, the opposite of expanding or ‘uitbreiden’ in Dutch. So first replace existing buildings or fill the gaps within built-up areas before you expand. It prevents sprawl. There can be new developments outside the red contours but it is more difficult and permit procedures takes far more time, sometimes years or even decades.
Two different countries with two different mindsets. You have 1316 people per square mile, the US has 93 people per square mile. The US is steeped in a history of sprawl….manifest destiny.
I currently rent, but I would like to own a property. A primary reason is that in the US, it's hard for tenants to make small to medium size changes to units. I'm really allergic to dust, which means that I can't rent a place with carpets. Most landlords are not open to removing carpets, even if the tenant were to pay for it. Finding a place with a garage (for projects, not a car), no carpets and AC in a desirable location was impossible, so I compromised on AC.
Unfortunately, the townhome I'm renting right now has a black roof and no AC. It was consistently 85-95 degrees inside the house through the end of October this year.
I'm trying to get my landlord to install AC when my lease renews but it's tricky-- they don't have to live with the heat, and so far it seems like they do not want to deal with the hassle of installing AC even if it would mean a rent increase. And I don't want to pay for the AC outright because then they might increase the rent because AC is an amenity and it makes the property more valuable, so they could just increase the rent on me once it's installed.
My grandparents live in a rent controlled apartment in NYC, and they were able to make all sorts of changes to the apartment because they knew they'd be there for a long time and would actually get to enjoy those changes.
Yeah, I wish most apartments didn’t have carpets, I’m not allergic to dust, but most carpets were all of them are at least in apartments are made of synthetic materials and I don’t like that
The increased ROI on single family homes is also in part due to people's attachment to their home and efforts to improve it. Part of the suburban single family home lifestyle is the yardwork (like you mentioned) and home improvement which would increase the value of the home as the owners make improvements.
What a waste of time and resources having to maintain that chore. I don't miss that at all. I would rather have the maintanence crew tydy up the green spaces in my building and being close to walk to the nearby shops and park.
I think one thing on the side of single family is the ability to perform upkeep on the property. A homeowner can repair, replace, or upgrade based on their means instead of moving, while multi units need to do so through the HOA which is problematic at best. I think that helps even older smaller homes appreciate.
I went from a large city apartment to a small single family. Its farther from the main city, but closer to transit so it's a wash (I prefer being close to the woods anyway) my monthly payment stayed close to what it was for rent. Now 17 years later, rents have doubled, but my mortgage has only gone up @$150/mo due to taxes. If you can plan to stay in a place, buying, whether a single family home or a unit in a complex is better. The going thinking is 5 years...but it could be as short as 2, or as long as 10 based on the market. The goal is not getting in over your head.
And yes, we need more housing. And I applaud new development. The biggest problem I see are smaller communities building large units without taking care of infrastructure. The town I grew up in built a few 300+ unit complexes and has water supply issues even during rainy periods, doesn't even give a bus route to them, and wonders why nearby intersections are a mess. Better overall planning is key to make more housing more successful.
And yeah, my little house is 1000sqft and is almost as old as my parents. But we're keeping it up...
Great outlook on things CityNerd!