But if you look at many cities you'll see that population has not grown significantly. What has happened is Airbnb which has made it viable to take a significant portion of the housing stock off the regular market. Just look at the inner cities of many places (e.g. Nice) in the off season, they are completely empty. The other thing is that rents going up dramatically is a global phenomenon, e.g. Australia's building industry is relatively unregulated and it experienced a housing boom (as did many places in Europe btw), and still rents shot through he roof.
The argument that high rents are mainly due to large regulations and lack of building is largely not supported by the evidence. I mean, in most Europe there was such a building boom (due to low interest rates) that sand for concrete was getting scarce.
> What has happened is Airbnb which has made it viable to take a significant portion of the housing stock off the regular market.
Suppose this is true. Then you replace that portion of the housing stock with new construction, and what problem is there? The problem is only if you're constrained from doing that.
> The other thing is that rents going up dramatically is a global phenomenon
There have been two major recent drivers of housing demand. One, the interest rates that until COVID were near-zero (which is a global phenomenon because capital markets are global). Two, since COVID, work from home causing people to move around and shift where the demand is. Also a global phenomenon.
Both of these can drive short-term increases in rents on the order of a few years, but they should also drive new construction, and then once the construction has caught up to the demand the rents would go back down.
Unless the construction isn't allowed to happen.
> The argument that high rents are mainly due to large regulations and lack of building is largely not supported by the evidence.
It very much is. You can take any two cities and account for things like median income and population density and when you're done you'll consistently find that the one with more restrictive zoning has higher rent.
> But if you look at many cities you'll see that population has not grown significantly.
You've got cause and effect backwards here. The population hasn't grown because the housing hasn't been built for them. The city population would have grown if more housing were available, but instead what happened is that the limited supply drive rents up and kept some people out.
Separately, there's also too few hotels in the city to accommodate tourists, so some housing was converted to that more profitable use. It all can be traced back to not building enough to satisfy increasing demand.
Short term rentals fulfil important function. There is real demand for it. The problem is that it's expensive or just impossible to build anything and that it's very cheap to own.
The solution is known: significant land value tax and looser regulations to actually use the land. This will not happen though because of lobbying of property and land owners who enjoy their rent seeking. They will always manage to find another scape goat. One day it's flippers, next day it's Airbnb. Anything but land owners being forced to pay taxes to fund the area they own land on.
Average household size has declined due to changing social dynamics (longer times before marriage, fewer kids, etc.) so even if population is static you need more units. Spain went from 3 in 1990 to 2.5, which is a pretty drastic change.
I think the idea that Airbnb is to be blamed is not valid, or at least it doesn’t explain much. Keep in mind that property prices have been rising massively in many parts of the world including the oft-forgotten East/Southeast Asia in these discussions. Airbnb are not at all prevalent or even illegal there.
Correct. A phenomenon that IS global is the financialization or property (of which AirBNB is an aspect). Could it be as simple as, "Housing is now an investment, rent goes up because investors want returns, the solution is to limit or prohibit using housing as an investment"?
The housing stock (HS) was taken off the regular market not for free. Travelers paid through the nose for this HS and for other services catering to travelers. That money should have been used to replenish the HS.
My very much European country has been building like crazy for the past two decades. Real estate still shot up in lockstep with the rest of the world because you can't and you won't build faster than people who see homes chiefly as an investment buy property.
It got to a point where construction isn't even really providing housing, because the units are unusable for regular people. There's an apartment block of just studios in my neighborhood which are not up to code (too small) but were grandfathered in as construction started before it changed. The change was enacted so that developers would stop making such useless buildings.
China built enough to house its entire population twice over. Didn't help them keep housing affordable just how the price of gold goes up and down despite a steady increase in supply.
We're well past the point where naive supply and demand is effective. There's infinite, induced demand.
If those buildings are “useless”, how is the developer going to make money on it? That doesn’t pass a basic smell test.
Your example about China is pretty bad. They moved most of their population into cities over the past 50 years by massively building housing and making it affordable to their middle class.
Young people struggling to afford their own place in a tier 1 city in China is not evidence of it failing, it’s evidence of tenants being picky.
China’s housing has also had several bust cycles where the prices came down. Government intervention and bailouts prevented it from being as obvious, but supply and demand most certainly work.
> There's an apartment block of just studios in my neighborhood which are not up to code (too small) but were grandfathered in as construction started before it changed. The change was enacted so that developers would stop making such useless buildings.
Apartments are expensive. Small apartments are great. How many square meters are you calling "too small"?
> Real estate still shot up in lockstep with the rest of the world because you can't and you won't build faster than people who see homes chiefly as an investment buy property.
Yep. There is no way Europe can cope with the real estate bloat introduced by the American money escaping the US investment market because of the 'less than optimal' returns there. We are just ending up with gigantic bloat because the American investors are bringing in their bloated cash and parking it on European housing. Doing a quick arbitration at the cost of pushing Europeans to homelessness - not unlike what they did to the Americans in the US.
> Real estate still shot up in lockstep with the rest of the world because you can't and you won't build faster than people who see homes chiefly as an investment buy property.
Excellent put. The bitter pill underneath that though, would seem to be that we may need to reconsider to what extent real estate should be assumed to be an investment that always appreciates in value.
Reconciling that with families very reasonably expecting to be able to build or maintain wealth through their largest lifetime purchases is... never going to be a pleasant discussion.
The catch here is that the people who first get to buy that property usually already have tons of money and just use it as an investment, either to resell, rent it out, or use it for AirBnB & such. Solving that problem isn't very straightforward.
Where I live, for example, the government has been debating taxing non-first properties up to 50% (the yearly real-estate tax). The idea of the proponents is to make it so unaffordable to own more than one property that people would stop buying it as an investment or sell off existing ones. But the issue is that the people who already own that estate (or have the money for more) would still be better off by just raising the rent to cover the increased tax instead of selling it. So it once again fails those who end up paying the rent.
The only real solution seems to be government-funded developments with restrictions put in place on who can buy them, rent them out, etc. But to do that the government has to afford it somehow. They also need to put size minimums in place, otherwise we end up with the same just studios situation, which seems to be a thing with a lot of public-funded developments (perhaps because then the politicians can claim they "built X flats"?).
> Europe will do everything, except build more housing supply, to lower rents.
I recommend you open Google maps, google Barcelona, and look at it. The whole city is a dense urban area, surrounded by steep hills. The whole city is covered with >6 story apartment blocks. This isn't the US, where you need to drive 8h to the nearest town.
You're repeating propaganda from the people who want rents to stay high.
The highest demand areas are high density areas. If you convert a medium density neighborhood to a high density neighborhood, the demand increases in that neighborhood, but the supply increases city-wide.
The reason rents increase in that neighborhood is that even though rents in high density areas have gone down and rents in medium density areas have gone down, that specific neighborhood has gone from a medium density area to a high density area and that limited amount of construction by itself isn't enough to cause high density areas overall to cost less than medium density areas had.
But notice what effect you're having on rents. The medium-density area had been $3000 units and high density units had been $4000. Now it's high density units, high density units city-wide have fallen to $3500, medium density units city-wide have fallen to $2600, the amount of housing stock has increased by thousands of new units, and you have people telling you that you've done something bad because the new $3500 units are more than the old $3000 units.
Then you do it again in another neighborhood. $2600 medium density units get converted to high density units, high density units go from $3500 to $3000, medium density units fall to $2300. The high density units are now as cheap as the medium density units originally were, but you're again accused of increasing rents from $2600 to $3000.
By the third time the high density units are now less than the medium density units originally were -- if you haven't already been assailed by local landlords using these arguments to prevent this from continuing -- but once again you're replacing $2300 medium density units with $2700 high density units and the claim is that you must be stopped to prevent rents from going up.
In some European countries population growth is only due to immigration. In Spain almost 19% of the population is foreign-born and annual population growth is >1%!
It's quite odd that everyone is concerned about the "housing crisis" but few people want to mention the biggest root cause, even here which is supposed to be about curiosity...
cycomanic|1 year ago
The argument that high rents are mainly due to large regulations and lack of building is largely not supported by the evidence. I mean, in most Europe there was such a building boom (due to low interest rates) that sand for concrete was getting scarce.
AnthonyMouse|1 year ago
Suppose this is true. Then you replace that portion of the housing stock with new construction, and what problem is there? The problem is only if you're constrained from doing that.
> The other thing is that rents going up dramatically is a global phenomenon
There have been two major recent drivers of housing demand. One, the interest rates that until COVID were near-zero (which is a global phenomenon because capital markets are global). Two, since COVID, work from home causing people to move around and shift where the demand is. Also a global phenomenon.
Both of these can drive short-term increases in rents on the order of a few years, but they should also drive new construction, and then once the construction has caught up to the demand the rents would go back down.
Unless the construction isn't allowed to happen.
> The argument that high rents are mainly due to large regulations and lack of building is largely not supported by the evidence.
It very much is. You can take any two cities and account for things like median income and population density and when you're done you'll consistently find that the one with more restrictive zoning has higher rent.
CydeWeys|1 year ago
You've got cause and effect backwards here. The population hasn't grown because the housing hasn't been built for them. The city population would have grown if more housing were available, but instead what happened is that the limited supply drive rents up and kept some people out.
Separately, there's also too few hotels in the city to accommodate tourists, so some housing was converted to that more profitable use. It all can be traced back to not building enough to satisfy increasing demand.
bluecalm|1 year ago
The solution is known: significant land value tax and looser regulations to actually use the land. This will not happen though because of lobbying of property and land owners who enjoy their rent seeking. They will always manage to find another scape goat. One day it's flippers, next day it's Airbnb. Anything but land owners being forced to pay taxes to fund the area they own land on.
bobthepanda|1 year ago
Average household size has declined due to changing social dynamics (longer times before marriage, fewer kids, etc.) so even if population is static you need more units. Spain went from 3 in 1990 to 2.5, which is a pretty drastic change.
frontfor|1 year ago
h2zizzle|1 year ago
EVa5I7bHFq9mnYK|1 year ago
youreth4tguy|1 year ago
[deleted]
Tade0|1 year ago
It got to a point where construction isn't even really providing housing, because the units are unusable for regular people. There's an apartment block of just studios in my neighborhood which are not up to code (too small) but were grandfathered in as construction started before it changed. The change was enacted so that developers would stop making such useless buildings.
China built enough to house its entire population twice over. Didn't help them keep housing affordable just how the price of gold goes up and down despite a steady increase in supply.
We're well past the point where naive supply and demand is effective. There's infinite, induced demand.
kortilla|1 year ago
Your example about China is pretty bad. They moved most of their population into cities over the past 50 years by massively building housing and making it affordable to their middle class.
Young people struggling to afford their own place in a tier 1 city in China is not evidence of it failing, it’s evidence of tenants being picky.
China’s housing has also had several bust cycles where the prices came down. Government intervention and bailouts prevented it from being as obvious, but supply and demand most certainly work.
Dylan16807|1 year ago
Apartments are expensive. Small apartments are great. How many square meters are you calling "too small"?
dumbledoren|1 year ago
Yep. There is no way Europe can cope with the real estate bloat introduced by the American money escaping the US investment market because of the 'less than optimal' returns there. We are just ending up with gigantic bloat because the American investors are bringing in their bloated cash and parking it on European housing. Doing a quick arbitration at the cost of pushing Europeans to homelessness - not unlike what they did to the Americans in the US.
1propionyl|1 year ago
Excellent put. The bitter pill underneath that though, would seem to be that we may need to reconsider to what extent real estate should be assumed to be an investment that always appreciates in value.
Reconciling that with families very reasonably expecting to be able to build or maintain wealth through their largest lifetime purchases is... never going to be a pleasant discussion.
trinix912|1 year ago
Where I live, for example, the government has been debating taxing non-first properties up to 50% (the yearly real-estate tax). The idea of the proponents is to make it so unaffordable to own more than one property that people would stop buying it as an investment or sell off existing ones. But the issue is that the people who already own that estate (or have the money for more) would still be better off by just raising the rent to cover the increased tax instead of selling it. So it once again fails those who end up paying the rent.
The only real solution seems to be government-funded developments with restrictions put in place on who can buy them, rent them out, etc. But to do that the government has to afford it somehow. They also need to put size minimums in place, otherwise we end up with the same just studios situation, which seems to be a thing with a lot of public-funded developments (perhaps because then the politicians can claim they "built X flats"?).
motorest|1 year ago
I recommend you open Google maps, google Barcelona, and look at it. The whole city is a dense urban area, surrounded by steep hills. The whole city is covered with >6 story apartment blocks. This isn't the US, where you need to drive 8h to the nearest town.
MysticFear|1 year ago
epistasis|1 year ago
So we do it inside US cities too.
betaby|1 year ago
BobAliceInATree|1 year ago
A few medium-sized cities like Austin are the exception to this.
regularjack|1 year ago
deepfriedchokes|1 year ago
whyever|1 year ago
gadders|1 year ago
cyberax|1 year ago
Your _only_ option is to make smaller cities (and suburbs) more attractive.
Sorry. Harsh but true.
AnthonyMouse|1 year ago
The highest demand areas are high density areas. If you convert a medium density neighborhood to a high density neighborhood, the demand increases in that neighborhood, but the supply increases city-wide.
The reason rents increase in that neighborhood is that even though rents in high density areas have gone down and rents in medium density areas have gone down, that specific neighborhood has gone from a medium density area to a high density area and that limited amount of construction by itself isn't enough to cause high density areas overall to cost less than medium density areas had.
But notice what effect you're having on rents. The medium-density area had been $3000 units and high density units had been $4000. Now it's high density units, high density units city-wide have fallen to $3500, medium density units city-wide have fallen to $2600, the amount of housing stock has increased by thousands of new units, and you have people telling you that you've done something bad because the new $3500 units are more than the old $3000 units.
Then you do it again in another neighborhood. $2600 medium density units get converted to high density units, high density units go from $3500 to $3000, medium density units fall to $2300. The high density units are now as cheap as the medium density units originally were, but you're again accused of increasing rents from $2600 to $3000.
By the third time the high density units are now less than the medium density units originally were -- if you haven't already been assailed by local landlords using these arguments to prevent this from continuing -- but once again you're replacing $2300 medium density units with $2700 high density units and the claim is that you must be stopped to prevent rents from going up.
J_Shelby_J|1 year ago
mytailorisrich|1 year ago
In some European countries population growth is only due to immigration. In Spain almost 19% of the population is foreign-born and annual population growth is >1%!
It's quite odd that everyone is concerned about the "housing crisis" but few people want to mention the biggest root cause, even here which is supposed to be about curiosity...
willsmith72|1 year ago
You mean like the USA? Or just about every developed nation on the planet?
ajmurmann|1 year ago