Some interesting historical context on construction costs:
100 years ago the cost of construction was about $45/sqft when adjusted for inflation and today it is closer to $220/sqft, approximately 5x the cost. Blue collar wedges are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.
The 1914 sears Model 147 house was 900sqft and cost $872 for materials, estimated at $1,530 with labor.[1] Adjusting for inflation from 1914 to 2020, that is about $22,000 for materials and 40K with labor.
Looking at 1913 US national labor statistics, the average baker in 1913 San Francisco worked 54 hrs/wk and made $0.46 per hour for an annual wage of $1,291[2] (or 33K in 2020 dollars)
The median baker in 2020 California makes 36.5K/yr [3]. The cost of new housing construction is $220/sqft[4], or 200K for the same size house.
The standard of construction has also changed since 1914. Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book.
A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.
Yes its interesting example, but 1914 Sears house didn't have electricity, or hot water (was an extra), no shower, I'm guessing its single glazed and lightly insulated.
Certainly I think most modern houses are too luxurious with marble and complicated accessories that aren't really needed.
> Blue collar wedges (wages?) are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.
Blue collar wages as a whole may have, but construction workers' wages since 2006 have increased 47% when adjusted for inflation. This should come as no surprise, since that field historically has strong unions. You also have more rigorous safety codes for those workers.
On top of that, building codes have changed dramatically (thankfully) in those past 100 years. Whether it's structural, insulation, windows, electrical wiring and capacity, plumbing (older homes pipes were narrower, so couldn't handle things like a garbage disposal).
Did the 1914 house have electricity? With "acetylene lighting plant" being extra, I think not.
Did the 1914 house have more than one toilet? Cost per square foot doesn't cover what goes into the square foot, and fixtures cost a lot more than an empty room.
Baker is a strange salary to look at. Back then bakers were everywhere churning out a staple food by hand. Today a baker is likely to be an artisan of some kind, with a specialist product.
By how much and why the cost of labor has changed over time is an interesting question. I'd assume that the bulk of the cost of labor is wages, but there are some other direct and indirect costs that might contribute in addition to wage related factors.
Carrying workers' compensation insurance was not the norm at the turn of the 20th century; injured workers could instead sue their employer for negligence but usually lost. Legal challenges to state legislation that made participation in a workers' compensation program mandatory weren't resolved until the Supreme Court's 1917 ruling on N.Y. Central R.R. Co. v. White. In the modern day, Texas is the only state where workers' compensation insurance isn't mandatory.
In a similar vein, workplace safety standards have seen a lot of change. With the exception of a few states that passed legislation sooner, workplace safety was largely unregulated until the Occupational Safety and Health Act of 1970 established OSHA.
I know less of the specifics but consumer protection laws have also changed. Many states now impose statutory warranties on new construction that cover construction defects for a period of time. It seems plausible that builders had less liability for such defects in 1914.
Construction equipment and the cost of running and maintaining it is another thing that I would expect gets rolled into the cost of labor. I'd assume that equipment costs are usually offset by increased efficiency (paying wages for less time), so it wouldn't increase the cost of labor, but it would be interesting to see data on that.
As far as wage-related factors, while blue collar wages may not have changed in general there are some exceptions. Based on the sources you provided, plumbers in 1913 San Francisco worked 44 hrs/wk and made $0.75 per hour for an annual wage of $1716 (or $44.9K in 2020 dollars). The median plumber in 2020 San Francisco makes $110.9K/yr. (Since SF might be an outlier, in St Louis in 1913 plumbers made $1515 annually, equivalent to $39.6K in 2020, and had a median annual wage of $80.6K in 2020.)
It's also possible the number and types of workers required to build a home has changed. Constructing a new home might now require more "specialists" (like plumbers) who command higher wages to do work that was either not done at all or was previously done by general laborers paid lower wages. It would be interesting to see data on that as well.
They cost about the same. There's a few differences, like some better tech--also some worse tech, like preferring lasers and CPUs over older cheaper techniques that also work better[1]. There's more regulation too. And wages have swung upward and downward in the intervening time, right now we're barely past the bottom of the cycle[2] of the relationship between leaf-node employee wages and everything else.
But the real difference is that official inflation is a lie. Inflation since 1970 is closer to 38x (candy-jar guessing), not 7.25x. So the costs of construction are pretty similar.
[1] So once upon a time, to create a level line, and in Latin America to this day, you fill a clear hose held up in a U-shape with water up to a foot from the top on either end. Hold one waterline up to the mark that marks the height you want for the level line. Then extend the other end out to the wall you want the level line to extend to. The waterline will be at the same height on either end. Mark it. That's the endpoint of the level line. Costs like three dollars for the hose and that hose lasts indefinitely unless it is damaged, by getting stepped on pretty much not due to any other reason. Whereas apparently in USA there's laser levels that have all these buttons and a manual and a CPU and data and...yuck. And it starts at $29.99 for the basic model, of what I can tell--you can't look up prices online anymore much because they're tailor in many cases. That's what I think that crappy product costs--that's the "price point" they target. Plus there's price discrimination and rebates, points, programs, whereas with the clear hose you're clearly not getting hosed.
[2] Since about the seventies--a time when I daresay managers were underpaid--there has been opposition at multiple different levels against leaf-node employee wages. From opposing the minimum wage, to promoting immigrant arrivals who rarely manage anybody when they arrive, to busting unions and strikes, to right-to-work laws, plus noncompetes for the likes of sandwich makers, plus SCOTUS making paying union dues destined for political speech optional (but no such luck for the part of the price for a good that corporations destine for political speech), to women entering the workforce (more leaf-node competition, they don't start out as management), to college becoming impossible to pay for as a leaf-node worker, then endless distortions in the housing market to make rent a third of income (this is by design, it can just as easily be a tenth), plus the erosion of safety nets...it's a subject unto itself, but leaf-node wages are heavily opposed in America. After IIRC their peak in 1978, 44 years ago, they are coming back up from the trough. Tying it back to the subject of inflation, leaf-node wages are considered inflationary in a way that other wages are not. And according to the BLS, inflation and leaf-node wages are the sameself thing.
EDIT: I forgot the other main ingredients of inflation: commodities, cars and computers. Commodity prices are also strongly opposed politically, corporately, and "mediatically." Cars and computers are not politically opposed--on the contrary, they're good, that's why they're included, to make inflation look smaller, look it up on http://www.shadowstats.com.
It's all about consumer preference. It seems this article largely misses this.
People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. Policies can make this worse, but the problem will still manifest itself to some degree. (Potentially as affluent people, especially in suburban areas, buying up more land to create setbacks, or simply buying because they can afford it now, or HOAs setting limits, none of which help density, demand, and cost).
"reduce the costs of construction, particularly residential construction (ie: housing)"
Changing preferences are the best way to address this, yet is likely the most difficult to sucessfully influence. Houses being built today are mostly larger homes, and definitely much larger than the majority homes built generations ago. This means more materials, more labor, more regulation, etc. Now we might be using cheaper materials, or less per sqft, or using tools that increase speed of laborers. But I think this is mostly canceled out by just increasing the size of the house (ie we're growing into our fish bowl).
For a personal example, my wife complains that an 1800 sqft house is too small.
>People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases.
This ignores the world's giant pool of floating capital ravenous for returns that jumps on trends and amplifies demand by buying up what it thinks will have good resale or rental value.
I saw this happen in the area I grew up in recently. Some people I know who were struggling to gather a deposit saw their dreams of homeownership go up in smoke as they got consistently outbid on a series of properties by investors.
This would be a pretty harmless outlet of an for a glut of capital if A) land werent finite or B) land had not been slowly untaxed for decades.
Of the two, B is a more prudent way of making property prices sane again.
> For a personal example, my wife complains that an 1800 sqft house is too small.
A modern blueprint 1800sqft house, yeah, for sure.
But somehow a 1960s split level at 1800sqft is spacious.
We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small.
The recent trend towards 4 story narrow houses doesn't help. A literal 1/3rd of the house is taken up by stairs!
I'm in a 2300sqft house that has 4 bedrooms and 3 bathrooms and an office. There is still a bit of wasted space, but not much!
Meanwhile, I've seen new houses, 3000sqft, 3 bedrooms, 4 bathrooms, 1.5 million.
"Oh you want 4 bedrooms? Those start at 1.7 million" <-- Said by an actual house developer
I don't necessarily disagree, but I have been thinking about what it would take to hypothetically limit the ability for people to buy multiple properties within some geographical boundary, or even put some pressure on low density owners in that geographical boundary while the cost of housing/vacancy rates are within some extremely scarce range. It's a naive thought atm, but I would be curious if everyone basically had only one slot for residential ownership in the metro area of the city, how much could regional demand actually push prices?
For example, is it even remotely reasonable as a society to allow extremely wealthy people to own two or more condos in Toronto, when the minimum cost to get any condo is 3/4 of a million and salaries not remotely keeping pace? Is it unreasonable to settle on a definition of excess being that of the multiple residential property owner? Likewise for consideration towards residential property development companies. Maybe it's possible to own a lot of land specifically designated for development, but not for just holding more than one or a few properties.
A lot of it is cost of labor. What I suspect is cheap loans to homebuilders has propped up the price of trades and secondarily materials to the point most people can't afford to build their own house in any location.
Then, depending on where you are, you have fixed costs for building in an area like geological or ecological impact statements that can be $20k or more. Too much.
"Changing preferences are the best way to address this, yet is likely the most difficult to sucessfully influence. Houses being built today are mostly larger homes"
Surely people who are currently homeless would rather rent a small house than none at all? I haven't met one demanding '1800sqft or i'd rather live on the street!'
One important factor to increasing house size is that localities in the US tend to have fairly large lot sizes. To recoup the cost of building on more expensive land, builders build more house, because the opposite (building 2 or more houses and subdividing the land) is just illegal.
In areas with high supply or low demand, the price of housing approaches the cost of construction.
In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.
Can we be more precise in language on what “new housing” means. More urban sprawl versus densification both are “new housing” but very different. I’m pro densification but highly against sprawl.
London doesn't have this problem if I am not mistaken. But housing is very very expensive still. So much that a 3 bedroom 120sqm apartment can be more than 6 million dollars even outside Central London depending on the area.
Construction costs and land costs are not independent. A big part of the construction cost is the cost of labor. You can't do construction work remotely, so you need to hire workers who live relatively near the construction site. Which means they have to pay the high housing costs so you need to pay them more. It's a feedback loop where the more expensive housing is, the more expensive it will be to build housing.
On a macro scale this is likely true. Unless you ship in cheap workers for a season.
On a micro scale, where I live, it’s not. A $2M home in Toronto is maybe $400k where I live, an hour down the road. And I know a lot of local workers who commute to Toronto every day to work on sites. (They do 7-3 to avoid traffic and the neighbours hate their nail gun wake ups)
There's a sci-fi novel I want to write some time...
You know how some countries have mandatory military service?
Well, what if all of the "Essential" jobs, all had mandatory service?
I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-bodied person in a country would need to do each job, in order to satisfy all of the needs of everyone in that society (able-bodied, or not.)
And then build up a story around some people who are finishing their Essential Jobs, and are deciding whether to Retire into living off the dole, or whether to transition into some Skilled labor to live in more luxury.
And then there's the fact that automation is making it so that less and less actual manual effort is required for the Essential jobs. So, does the society start categorizing new jobs as Essential, or do people end up with more discretionary time?
I feel like this would have made a pretty okay Star Trek culture to encounter...
I agree with the tone in the comments here - and the article. It is the land prices that drive prices.
My income here in Germany is alright, according to statistics I am in the top 20% with my monthly income. Unfortunately, I will not be able to buy a decent apartment in the city to start a family if my gf/wife is not also in the top 20%, we get some support from parents and agree to pay off the debt for the next 35 years.
This is the only reason why I am not starting a family.
Times were different, housing was more affordable, but today everyone wants to live in the urban areas, the human population is growing, building standards increased, people can own land forever. In the city where I am living apartments were relatively affordable 20 years ago, today they cost twice as much.
If you ask me then I have to rather populist solutions for the housing crisis: 1) nobody can own land; land is property of the people and can only be leased for 75 year or so; 2) one apartment per head. Not more. 3) all profits from selling real estate are taxed 100%. Those 3 measures would quickly lead to a huge price drop and speculation would not make much sense anymore.
This article doesn’t even bring up construction unions which can hike construction costs by about 20%. IF they allow construction in the first place. SF and London Breed couldn’t get affordable housing off the ground because a proposal by non union modular housing company in Mare’s landing was not within the county.
+
[..] Builders say apprenticeship requirements drive up the already sky-high expense of affordable-housing construction in a state where it can cost as much as $700,000 a unit to build in dense, urban areas such as San Francisco. They also argue that the union-backed provisions could slow or halt construction of affordable homes in lower-income rural and inland areas where there isn’t enough available union labor.[..]
[..] California’s State Building and Construction Trades Council, which represents 450,000 ironworkers, pipe fitters and other skilled laborers, has blocked numerous bills it says don’t guarantee enough work for its members. It contributes tens of millions of dollars to political candidates and campaigns, engages in aggressive lobbying, and pays for advertisements that portray opponents as lackeys of greedy developers.
Legislative insiders say the success of the union known widely as “the Trades” is one of the main reasons Sacramento politicians have struggled to pass bills streamlining construction approval and easing zoning restrictions. Researchers say those steps are urgently needed to address skyrocketing real-estate prices and rents, as well as homelessness.
“They’re a gatekeeper for any significant legislation moving through Sacramento” on housing, said Ben Metcalf, managing director at the Terner Center for Housing Innovation at UC Berkeley and former head of the state’s Housing and Community Development agency.[..]
There was a fascinating conference filmed and on youtube at UCL on this subject (in my history, looking for it).
The upshot is roughly that the owner of farm (hedonic) land knows how much their land is worth both with and without planning permission and the minute housing is thought of the price of the land 10x.
And that's fair - no one wants to look like a chump. So any house building scheme to solve the housing crisis suddenly has this price built in, and thus any house building scheme immediately becomes too expensive to undertake.
There was a solution in UK in early 1950s. A 100% land value tax. If you bought land for 10k and sold it for 100k you owed the government 90k.
This quite simply took the heat out of the market, and allowed the government to invest in roads and schools and hospitals and so on. It mean that UK built two whole New Towns (widely seen as concrete monstrosities) but the point is they got built - enough new housing in a handful of years to create towns that still live breathe 80 years later.
If we want house building schemes we have the answer.
"A 100% land value tax. If you bought land for 10k and sold it for 100k you owed the government 90k."
I think this is fair - the land itself is a natural resource that the owner has (presumably) done nothing to improve - they are just hogging it so that nokne else can use it
Almost nothing, especially with the cheap materials used in current modern construction (unless requiring some hurricane code; ex. South Florida). It's all due to zoning limitations, and homeowners voting in their own interests to keep the supply down, and values to rise.
Low rates have created a mechanism where large amounts of housing are built by corporations and entrepreneurs for rent. Most of them borrowed market funds at 1% or even less, often on 100% credit, or ~~2-3% or less mortgages and built condos, houses and apartments. There was such a shortage that this drove up prices - yet since people needed a roof overhead, they were forced to pay 40-50% of household income for rent. Managed in bulk by management companies these costs were low and yields of 5-15% were achieved. In addition, many were rented as AirBNB's in low vacancy areas earning 50%, but seasonable.
This is the cause - what is the cure? Home inflation and the Covid stimulus has ramped up inflation. The usual remedy for this is rates hike, but they are afraid that this will create a huge underwater home effect. Once this starts it can become a race to the bottom. Corporations will write off their equity losses, owners will get friend like bacon - they inch them up.
The call it Scylla and Charybdis - between two evils, as they sit, the bacon piles up... https://en.wikipedia.org/wiki/Between_Scylla_and_Charybdis
Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?
Nope. If you can afford to live on the waterfront and enjoy the view, but never use your boat, are you morally obligated to sell your house to someone who will be out there fishing or skiing every day?
Land is bought and sold on an open market. Everyone can decide for themselves what is most important to them and what they can afford. One factor behind living in a major city is certainly easy access to in-person employment. But there are a ton of other factors (restaurants, culture, sporting events, community, etc.). If you are willing to pay a lot of money to be close to those things even if you don't use all of them, that's your choice and it's perfectly ethical.
No, because you as an individual are not morally obligated to provide housing to society.
If such an obligation exists, it's the government's obligation, not an individual one.
The best thing an individual can do to provide housing to other people (aside from build it) is to support the loosening of regulations which make it difficult to build new housing. Those regulations tend to be worst in the major employment centers.
Morality is too blunt of a tool for this kind of question. Right now we are way over-moralizing many issues and it's not helpful to a discussion.
Morality is useful to avoid rationalizing things that we know are wrong. For example, killing is wrong -- we don't want individuals making complex rationalizations about how the end justifies the means.
But something as complex as the place a person chooses to live? No, that's a morally-neutral choice. It may not be optimal for the benefit of society, but that's not what morality is about.
I'd argue that choosing to live in any area for any reason does not in any way make you morally responsible for the externalities of that choice. What you do while living there you are morally responsible for, but merely the choice to move does not bear any responsibility.
So, yes, NIMBYs bear some moral responsibility for the housing situation, but simply relocating does not create responsibility or moral hazard.
Not sure why you are being down voted. This seems like a legitimate question that I would like to see the opposite side of.
For example, if I was permanently remote, I would like to move to a cheaper area. I can't because my wife doesn't want to leave the current county (because "It's the best county in the world"). Although I'm also not in a heavily populated area, more so on the edge of being rural.
Prices on housing will not go down as long as people have access to money IMHO, and plenty are willing to pay up if it means 30-45 min less commute to work.
The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. That’s it. The cost of building is not relevant in any way to that. Nicer materials, better design, etc. can make people willing to pay more, but if it’s too much they won’t pay.
The only one who the cost of materials matters to is the builder. If it costs them more to build than they can sell it for (within whatever % profit margin they want), then they simply won’t build it.
The price of construction matters considerably whether you're planning on building mass market apartments or condominiums. Most cities have explicitly different building codes based on the intended use of the dwellings, interestingly most of the time to avoid civil litigation with the city. Condos generally have much higher quality duct-work / fresh air exchange not to mention thicker walls, more sound dampening etc. All of this is more expensive, but the cost is passed onto the buyer and ensures the contractor isn't on the hook for tenants levying lawsuits against the architect / contractor / city that conducted inspections.
This sort glosses over the real percentage of construction costs by giving only a 20 or so percent of profit. A large portion of construction though is the individual sub-contractors profits. I would guess that the large difference in costs vs 100 years ago is proportional to the increased number of subcontractors. A hundred years ago a lot of lumber was even at least partially milled on site too.
The actual costs of real labor and real materials is pretty cheap. Even with the elevated building costs today you could still build an average home for sub $40,000 dollars if you control all aspects of the process.
I like the name construction physics. There's a lot of value to be unlocked throughout the whole construction process by figuring out where the inefficiencies are particularly in financing IMO.
There's this company called Shepherd or something like that that does build insurance and it's a fantastic example of how to make something meaningful.
I don't know anything about construction, but I do know that my landlord is based in cayman islands.
Why do we allow tax-heaven based shell companies to buy housing in areas where we officially declared a shortage, especially when we know much of that money is either stolen, or comes from dictators, or is doing tax evasion? It can't be helping the problem
im building a house and i got a bid from a foundation guy. he wanted 40k for a job that costs 10k in material. and i can easily do it myself. once i finish the house i will be able to offer a full breakdown of just how much you can save by doing it yourself.
To answer the question of the headline: Not at all. Once a house is built, the cost of building is a sunk cost.
> if you could reduce the costs of construction, housing costs would fall as well.
Why? What drives prices down is competition. Lower costs of construction might help with that, but only slightly, and I would guess that it will only help enough to shift the prices if construction costs are lowered by a magnitude or so.
This whole argument sounds like arguing that we must reduce wages across the board in order to lower prices of goods. This never works.
[+] [-] s1artibartfast|4 years ago|reply
100 years ago the cost of construction was about $45/sqft when adjusted for inflation and today it is closer to $220/sqft, approximately 5x the cost. Blue collar wedges are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.
The 1914 sears Model 147 house was 900sqft and cost $872 for materials, estimated at $1,530 with labor.[1] Adjusting for inflation from 1914 to 2020, that is about $22,000 for materials and 40K with labor.
Looking at 1913 US national labor statistics, the average baker in 1913 San Francisco worked 54 hrs/wk and made $0.46 per hour for an annual wage of $1,291[2] (or 33K in 2020 dollars)
The median baker in 2020 California makes 36.5K/yr [3]. The cost of new housing construction is $220/sqft[4], or 200K for the same size house.
http://www.searsarchives.com/homes/images/1908-1914/1913_014...
https://fraser.stlouisfed.org/title/union-scale-wages-hours-...
https://www.careeronestop.org/Toolkit/Careers/Occupations/oc...
https://ternercenter.berkeley.edu/wp-content/uploads/pdfs/Ha...
[+] [-] kube-system|4 years ago|reply
A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.
[+] [-] rr808|4 years ago|reply
Certainly I think most modern houses are too luxurious with marble and complicated accessories that aren't really needed.
[+] [-] jjav|4 years ago|reply
Looking for kit-houses, I found: https://rethority.com/kit-homes/
Where it says "On average, expect to spend between $40 to $60 per square foot to complete your kit home build."
So that's right in the ballpark of the above inflation-adjusted cost of $45/sqft a century ago.
[+] [-] KoftaBob|4 years ago|reply
Blue collar wages as a whole may have, but construction workers' wages since 2006 have increased 47% when adjusted for inflation. This should come as no surprise, since that field historically has strong unions. You also have more rigorous safety codes for those workers.
On top of that, building codes have changed dramatically (thankfully) in those past 100 years. Whether it's structural, insulation, windows, electrical wiring and capacity, plumbing (older homes pipes were narrower, so couldn't handle things like a garbage disposal).
[+] [-] dockd|4 years ago|reply
Did the 1914 house have more than one toilet? Cost per square foot doesn't cover what goes into the square foot, and fixtures cost a lot more than an empty room.
[+] [-] chrisseaton|4 years ago|reply
[+] [-] vericiab|4 years ago|reply
Carrying workers' compensation insurance was not the norm at the turn of the 20th century; injured workers could instead sue their employer for negligence but usually lost. Legal challenges to state legislation that made participation in a workers' compensation program mandatory weren't resolved until the Supreme Court's 1917 ruling on N.Y. Central R.R. Co. v. White. In the modern day, Texas is the only state where workers' compensation insurance isn't mandatory.
In a similar vein, workplace safety standards have seen a lot of change. With the exception of a few states that passed legislation sooner, workplace safety was largely unregulated until the Occupational Safety and Health Act of 1970 established OSHA.
I know less of the specifics but consumer protection laws have also changed. Many states now impose statutory warranties on new construction that cover construction defects for a period of time. It seems plausible that builders had less liability for such defects in 1914.
Construction equipment and the cost of running and maintaining it is another thing that I would expect gets rolled into the cost of labor. I'd assume that equipment costs are usually offset by increased efficiency (paying wages for less time), so it wouldn't increase the cost of labor, but it would be interesting to see data on that.
As far as wage-related factors, while blue collar wages may not have changed in general there are some exceptions. Based on the sources you provided, plumbers in 1913 San Francisco worked 44 hrs/wk and made $0.75 per hour for an annual wage of $1716 (or $44.9K in 2020 dollars). The median plumber in 2020 San Francisco makes $110.9K/yr. (Since SF might be an outlier, in St Louis in 1913 plumbers made $1515 annually, equivalent to $39.6K in 2020, and had a median annual wage of $80.6K in 2020.)
It's also possible the number and types of workers required to build a home has changed. Constructing a new home might now require more "specialists" (like plumbers) who command higher wages to do work that was either not done at all or was previously done by general laborers paid lower wages. It would be interesting to see data on that as well.
[+] [-] cma|4 years ago|reply
[+] [-] conductr|4 years ago|reply
[+] [-] WalterBright|4 years ago|reply
[+] [-] daniel-cussen|4 years ago|reply
But the real difference is that official inflation is a lie. Inflation since 1970 is closer to 38x (candy-jar guessing), not 7.25x. So the costs of construction are pretty similar.
[1] So once upon a time, to create a level line, and in Latin America to this day, you fill a clear hose held up in a U-shape with water up to a foot from the top on either end. Hold one waterline up to the mark that marks the height you want for the level line. Then extend the other end out to the wall you want the level line to extend to. The waterline will be at the same height on either end. Mark it. That's the endpoint of the level line. Costs like three dollars for the hose and that hose lasts indefinitely unless it is damaged, by getting stepped on pretty much not due to any other reason. Whereas apparently in USA there's laser levels that have all these buttons and a manual and a CPU and data and...yuck. And it starts at $29.99 for the basic model, of what I can tell--you can't look up prices online anymore much because they're tailor in many cases. That's what I think that crappy product costs--that's the "price point" they target. Plus there's price discrimination and rebates, points, programs, whereas with the clear hose you're clearly not getting hosed.
[2] Since about the seventies--a time when I daresay managers were underpaid--there has been opposition at multiple different levels against leaf-node employee wages. From opposing the minimum wage, to promoting immigrant arrivals who rarely manage anybody when they arrive, to busting unions and strikes, to right-to-work laws, plus noncompetes for the likes of sandwich makers, plus SCOTUS making paying union dues destined for political speech optional (but no such luck for the part of the price for a good that corporations destine for political speech), to women entering the workforce (more leaf-node competition, they don't start out as management), to college becoming impossible to pay for as a leaf-node worker, then endless distortions in the housing market to make rent a third of income (this is by design, it can just as easily be a tenth), plus the erosion of safety nets...it's a subject unto itself, but leaf-node wages are heavily opposed in America. After IIRC their peak in 1978, 44 years ago, they are coming back up from the trough. Tying it back to the subject of inflation, leaf-node wages are considered inflationary in a way that other wages are not. And according to the BLS, inflation and leaf-node wages are the sameself thing.
EDIT: I forgot the other main ingredients of inflation: commodities, cars and computers. Commodity prices are also strongly opposed politically, corporately, and "mediatically." Cars and computers are not politically opposed--on the contrary, they're good, that's why they're included, to make inflation look smaller, look it up on http://www.shadowstats.com.
[+] [-] giantg2|4 years ago|reply
People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. Policies can make this worse, but the problem will still manifest itself to some degree. (Potentially as affluent people, especially in suburban areas, buying up more land to create setbacks, or simply buying because they can afford it now, or HOAs setting limits, none of which help density, demand, and cost).
"reduce the costs of construction, particularly residential construction (ie: housing)"
Changing preferences are the best way to address this, yet is likely the most difficult to sucessfully influence. Houses being built today are mostly larger homes, and definitely much larger than the majority homes built generations ago. This means more materials, more labor, more regulation, etc. Now we might be using cheaper materials, or less per sqft, or using tools that increase speed of laborers. But I think this is mostly canceled out by just increasing the size of the house (ie we're growing into our fish bowl).
For a personal example, my wife complains that an 1800 sqft house is too small.
[+] [-] pydry|4 years ago|reply
This ignores the world's giant pool of floating capital ravenous for returns that jumps on trends and amplifies demand by buying up what it thinks will have good resale or rental value.
I saw this happen in the area I grew up in recently. Some people I know who were struggling to gather a deposit saw their dreams of homeownership go up in smoke as they got consistently outbid on a series of properties by investors.
This would be a pretty harmless outlet of an for a glut of capital if A) land werent finite or B) land had not been slowly untaxed for decades.
Of the two, B is a more prudent way of making property prices sane again.
[+] [-] com2kid|4 years ago|reply
A modern blueprint 1800sqft house, yeah, for sure.
But somehow a 1960s split level at 1800sqft is spacious.
We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small.
The recent trend towards 4 story narrow houses doesn't help. A literal 1/3rd of the house is taken up by stairs!
I'm in a 2300sqft house that has 4 bedrooms and 3 bathrooms and an office. There is still a bit of wasted space, but not much!
Meanwhile, I've seen new houses, 3000sqft, 3 bedrooms, 4 bathrooms, 1.5 million.
"Oh you want 4 bedrooms? Those start at 1.7 million" <-- Said by an actual house developer
[+] [-] brailsafe|4 years ago|reply
For example, is it even remotely reasonable as a society to allow extremely wealthy people to own two or more condos in Toronto, when the minimum cost to get any condo is 3/4 of a million and salaries not remotely keeping pace? Is it unreasonable to settle on a definition of excess being that of the multiple residential property owner? Likewise for consideration towards residential property development companies. Maybe it's possible to own a lot of land specifically designated for development, but not for just holding more than one or a few properties.
[+] [-] R0b0t1|4 years ago|reply
Then, depending on where you are, you have fixed costs for building in an area like geological or ecological impact statements that can be $20k or more. Too much.
[+] [-] ClumsyPilot|4 years ago|reply
Surely people who are currently homeless would rather rent a small house than none at all? I haven't met one demanding '1800sqft or i'd rather live on the street!'
[+] [-] bobthepanda|4 years ago|reply
One important factor to increasing house size is that localities in the US tend to have fairly large lot sizes. To recoup the cost of building on more expensive land, builders build more house, because the opposite (building 2 or more houses and subdividing the land) is just illegal.
[+] [-] pinephoneguy|4 years ago|reply
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[+] [-] arcticbull|4 years ago|reply
In areas with high supply or low demand, the price of housing approaches the cost of construction.
In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.
[+] [-] timerol|4 years ago|reply
[+] [-] mint2|4 years ago|reply
[+] [-] actuator|4 years ago|reply
[+] [-] imgabe|4 years ago|reply
[+] [-] Waterluvian|4 years ago|reply
On a micro scale, where I live, it’s not. A $2M home in Toronto is maybe $400k where I live, an hour down the road. And I know a lot of local workers who commute to Toronto every day to work on sites. (They do 7-3 to avoid traffic and the neighbours hate their nail gun wake ups)
[+] [-] VikingCoder|4 years ago|reply
There's a sci-fi novel I want to write some time...
You know how some countries have mandatory military service?
Well, what if all of the "Essential" jobs, all had mandatory service?
I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-bodied person in a country would need to do each job, in order to satisfy all of the needs of everyone in that society (able-bodied, or not.)
And then build up a story around some people who are finishing their Essential Jobs, and are deciding whether to Retire into living off the dole, or whether to transition into some Skilled labor to live in more luxury.
And then there's the fact that automation is making it so that less and less actual manual effort is required for the Essential jobs. So, does the society start categorizing new jobs as Essential, or do people end up with more discretionary time?
I feel like this would have made a pretty okay Star Trek culture to encounter...
[+] [-] 88840-8855|4 years ago|reply
My income here in Germany is alright, according to statistics I am in the top 20% with my monthly income. Unfortunately, I will not be able to buy a decent apartment in the city to start a family if my gf/wife is not also in the top 20%, we get some support from parents and agree to pay off the debt for the next 35 years.
This is the only reason why I am not starting a family.
Times were different, housing was more affordable, but today everyone wants to live in the urban areas, the human population is growing, building standards increased, people can own land forever. In the city where I am living apartments were relatively affordable 20 years ago, today they cost twice as much.
If you ask me then I have to rather populist solutions for the housing crisis: 1) nobody can own land; land is property of the people and can only be leased for 75 year or so; 2) one apartment per head. Not more. 3) all profits from selling real estate are taxed 100%. Those 3 measures would quickly lead to a huge price drop and speculation would not make much sense anymore.
[+] [-] jelliclesfarm|4 years ago|reply
+
[..] Builders say apprenticeship requirements drive up the already sky-high expense of affordable-housing construction in a state where it can cost as much as $700,000 a unit to build in dense, urban areas such as San Francisco. They also argue that the union-backed provisions could slow or halt construction of affordable homes in lower-income rural and inland areas where there isn’t enough available union labor.[..]
[+] [-] jelliclesfarm|4 years ago|reply
[..] California’s State Building and Construction Trades Council, which represents 450,000 ironworkers, pipe fitters and other skilled laborers, has blocked numerous bills it says don’t guarantee enough work for its members. It contributes tens of millions of dollars to political candidates and campaigns, engages in aggressive lobbying, and pays for advertisements that portray opponents as lackeys of greedy developers.
Legislative insiders say the success of the union known widely as “the Trades” is one of the main reasons Sacramento politicians have struggled to pass bills streamlining construction approval and easing zoning restrictions. Researchers say those steps are urgently needed to address skyrocketing real-estate prices and rents, as well as homelessness.
“They’re a gatekeeper for any significant legislation moving through Sacramento” on housing, said Ben Metcalf, managing director at the Terner Center for Housing Innovation at UC Berkeley and former head of the state’s Housing and Community Development agency.[..]
[+] [-] lifeisstillgood|4 years ago|reply
The upshot is roughly that the owner of farm (hedonic) land knows how much their land is worth both with and without planning permission and the minute housing is thought of the price of the land 10x.
And that's fair - no one wants to look like a chump. So any house building scheme to solve the housing crisis suddenly has this price built in, and thus any house building scheme immediately becomes too expensive to undertake.
There was a solution in UK in early 1950s. A 100% land value tax. If you bought land for 10k and sold it for 100k you owed the government 90k.
This quite simply took the heat out of the market, and allowed the government to invest in roads and schools and hospitals and so on. It mean that UK built two whole New Towns (widely seen as concrete monstrosities) but the point is they got built - enough new housing in a handful of years to create towns that still live breathe 80 years later.
If we want house building schemes we have the answer.
[+] [-] ClumsyPilot|4 years ago|reply
I think this is fair - the land itself is a natural resource that the owner has (presumably) done nothing to improve - they are just hogging it so that nokne else can use it
[+] [-] ip26|4 years ago|reply
[+] [-] rabuse|4 years ago|reply
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[+] [-] Mountain_Skies|4 years ago|reply
[+] [-] Erik816|4 years ago|reply
Land is bought and sold on an open market. Everyone can decide for themselves what is most important to them and what they can afford. One factor behind living in a major city is certainly easy access to in-person employment. But there are a ton of other factors (restaurants, culture, sporting events, community, etc.). If you are willing to pay a lot of money to be close to those things even if you don't use all of them, that's your choice and it's perfectly ethical.
[+] [-] twblalock|4 years ago|reply
If such an obligation exists, it's the government's obligation, not an individual one.
The best thing an individual can do to provide housing to other people (aside from build it) is to support the loosening of regulations which make it difficult to build new housing. Those regulations tend to be worst in the major employment centers.
[+] [-] chmod600|4 years ago|reply
Morality is useful to avoid rationalizing things that we know are wrong. For example, killing is wrong -- we don't want individuals making complex rationalizations about how the end justifies the means.
But something as complex as the place a person chooses to live? No, that's a morally-neutral choice. It may not be optimal for the benefit of society, but that's not what morality is about.
[+] [-] tristor|4 years ago|reply
I'd argue that choosing to live in any area for any reason does not in any way make you morally responsible for the externalities of that choice. What you do while living there you are morally responsible for, but merely the choice to move does not bear any responsibility.
So, yes, NIMBYs bear some moral responsibility for the housing situation, but simply relocating does not create responsibility or moral hazard.
[+] [-] giantg2|4 years ago|reply
For example, if I was permanently remote, I would like to move to a cheaper area. I can't because my wife doesn't want to leave the current county (because "It's the best county in the world"). Although I'm also not in a heavily populated area, more so on the edge of being rural.
[+] [-] TheChaplain|4 years ago|reply
[+] [-] Scoundreller|4 years ago|reply
[+] [-] orev|4 years ago|reply
The only one who the cost of materials matters to is the builder. If it costs them more to build than they can sell it for (within whatever % profit margin they want), then they simply won’t build it.
[+] [-] 71a54xd|4 years ago|reply
[+] [-] hattmall|4 years ago|reply
The actual costs of real labor and real materials is pretty cheap. Even with the elevated building costs today you could still build an average home for sub $40,000 dollars if you control all aspects of the process.
[+] [-] IMAYousaf|4 years ago|reply
There's this company called Shepherd or something like that that does build insurance and it's a fantastic example of how to make something meaningful.
[+] [-] ClumsyPilot|4 years ago|reply
Why do we allow tax-heaven based shell companies to buy housing in areas where we officially declared a shortage, especially when we know much of that money is either stolen, or comes from dictators, or is doing tax evasion? It can't be helping the problem
[+] [-] abdel_nasser|4 years ago|reply
[+] [-] teddyh|4 years ago|reply
> if you could reduce the costs of construction, housing costs would fall as well.
Why? What drives prices down is competition. Lower costs of construction might help with that, but only slightly, and I would guess that it will only help enough to shift the prices if construction costs are lowered by a magnitude or so.
This whole argument sounds like arguing that we must reduce wages across the board in order to lower prices of goods. This never works.