Ethics of Real Estate Investment, NIMYism and the Housing Crisis

frenchyd said:

93EXCivic said:

IMO I do have to say that I think that some places could do with a zoning update. I don't see why smaller houses/lots and townhouses aren't allowed more places (particularly big cities). There are definitely people that would chose to live in neighborhoods that allowed for walkable and bikeable neighborhoods even at the expense of room. But those neighborhoods often can't be built in current day America. I am pretty sure there is demand for this style neighborhood because in many cities, older neighborhoods like this are in pretty high demand. Also it allows for more efficient building. That is not saying that it should be required or encourage by tax code but I don't see why these neighborhoods can't be built more frequently in urban areas.

 

Recent housing developments do have walkable/ bikeable  neighborhoods. It's just the streets after the evening rush. Because they are basically vacant from traffic. 
  Do you mean walk to the local grocery store, or restaurant?  Well those have pretty much been replaced with big box stores and fast food even in the city centers. 

I don't even get what you are saying in your first point.

And yes. I do frequently bike/walk to restaurants/breweries/grocery stores.

In reply to GameboyRMH :

That graph appears to show year over year change, so it looks like its pretty stable but it compounds. If the average is about 4 percent, eyeball guessing, and you take out the covid spike, costs would have more than doubled over that period. 

In reply to yupididit :

I dont disagree with you at all. People should do whatever they want. I was simply trying to illustrate that the market isnt driven by logical choices, or driving down costs. People want big houses with lots of space for their stuff, good for them. I fully admit my home is too big and I bought it emotionally, like i do project cars, but I also recognize It would have been a better choice for me to buy a smaller older home and updated it. Id probably be in a cheaper (upfront and ongoing) and have enough space to live.

PS Id take an older home with good bones and  deferred maintenance over almost any new build if I was making a strictly logical choice. Ive been in and around the home building industry since I was a little kid.

pheller said:

GameboyRMH said:

RX Reven' said:

Any mechanism to get the properties transferred from the "haves" to the "wants" is just some form of redistribution...we've heard all kinds of schemes proposed in this thread but, in my mind, it all comes down to "you have something I want, hand it over cheap". 

 

If you're hoarding land that is valuable to someone else, and the only reason you own that land is because your father's father's father acquired that land hundreds of years ago, you are denying the use of that land to future generations unless they pay you for it. That's negatively impacting society. We could essentially "progress" if it weren't for your rent seeking.

So answer this for me. 

If I were to buy 100 acres of land and build myself a modest home and workshop on it. Then just live there for the rest of my life and pass it onto my son's afterwards. Ontop of that, let's say I'm not even paying property taxes because I'm a 100% disabled vet in a state that let's you not pay taxes on your residence. Let's say 20 years into my ownership my land is deemed valuable to someone else but berkeley them I'm not selling it. Am I negatively impacting society because I'm not letting future generations use the land? And will my grandkids be considered land hoarders because of the land they inherited from their fathers father? 

Your way of thinking is big reason why black people in America weren't able to build generational wealth. Because, all of the land we inherited from our fathers father father was taken from us in the interest of developing the land for someone's idea of "progression". 

What do you think about all the inherited land in Hawaii that was snatched up because they weren't using it in a way that govt and others saw fit? 

Opti said:

In reply to GameboyRMH :

That graph appears to show year over year change, so it looks like its pretty stable but it compounds. If the average is about 4 percent, eyeball guessing, and you take out the covid spike, costs would have more than doubled over that period. 

You would have to factor that against inflation however, that graph isn't inflation-adjusted and 4 percent is only a bit above normal inflation levels. This graph shows rock-solid stable prices for the 2 years before the pandemic:

And from what I can find, plumbing + insulation materials for a modern average new house comes up to maybe $10k right now, which is background noise in the context of home prices.

In reply to frenchyd :

Ok. No one is forcing you to live somewhere like that. I am just saying that zoning should allow for neighborhoods that allow that to built new.

yupididit said:

pheller said:

GameboyRMH said:

RX Reven' said:

Any mechanism to get the properties transferred from the "haves" to the "wants" is just some form of redistribution...we've heard all kinds of schemes proposed in this thread but, in my mind, it all comes down to "you have something I want, hand it over cheap". 

 

If you're hoarding land that is valuable to someone else, and the only reason you own that land is because your father's father's father acquired that land hundreds of years ago, you are denying the use of that land to future generations unless they pay you for it. That's negatively impacting society. We could essentially "progress" if it weren't for your rent seeking.

my land is deemed valuable to someone else but berkeley them I'm not selling it. Am I negatively impacting society because I'm not letting future generations use the land? And will my grandkids be considered land hoarders because of the land they inherited from their fathers father? 

You way of thinking is big reason why black people in America weren't able to build generational wealth. Because, all of the land we inherited from our fathers father father was taken from us in the interest of developing the land for someone's idea of "progression". 

What do you think about all the inherited land in Hawaii that was snatched up because they weren't using it in a way that govt and others saw fit? 

You make a good point. 

yupididit said:

A few points I like to point out. That old house vs new house thing is certainly dependent on each family's needs and wants. You can't decide for others how much space they need vs wasting. That's such a narcissistic way of thinking. 

Where I live new houses and old houses are the same price. Often old houses being more expensive because they're closer to downtown or in downtown. I could move my family of 3 into a 1400 sq ft home for $750k and we'll fit but all our E36 M3 won't. OR I could move them into a 3500 sq ft home for $800k that's 18 miles away. Do what works for you. 

My issue with old houses: They are almost always 2 bathrooms short. 1.5 bathroom for 3 bedrooms,  NO.  2 bathroom for 4 bedrooms, ABSOLUTELY NOT. For me it's a must to have a toilet for each shiny happy person living in the house plus one if possible. Also, they are not energy efficient as new houses, very annoying to me. The they were built better 80 years ago argument doesn't really hold up. Yeah they were built well but now they have 80 years of wear and tear, 5 families, and who knows in deferred maintenance and neglect. They often have questionable floor plans and noisy windows. And pest tend to have already claimed their portion of the property.

I think we should practice minding our business.

We have some sayings:

"don't be counting another mans pockets"

 "worry about your own bag"

 "stop hatin"

 

I don't think anyone is saying you should live in an old house cause they certainly aren't for everyone. My house is drafty and the downstairs is cold in the winter, upstairs is hot in the summer, the downstairs bathroom is small, the main floor (kind of three floor split level) has no bathroom on it, there really aren't enough outlets, I wish there was more counter space in the kitchen. I however wouldn't move for anything because the location is prefect. Easy access to downtown without a car, mountain bike/hiking trails maybe .5 mile from my house, most of the activites and places I like are close by, friends in the neighborhood. So basically I did the opposite of you but I don't think there is anything wrong with doing the opposite.

In reply to GameboyRMH :

You're also missing labor costs. Which, in general, is double cost of materials. Except, tradesman now have massively increased costs compared to 50 years ago, driving that number up even higher. 

Come build my company a secure database, with instant access to every states sales by sku. I won't pay a dime over $500 because that's what it cost 45 years ago. Keep in mind, every problem and data leak is a lawsuit against you. Computers are cheaper now, storage is cheaper now, what's the problem with the price?

93EXCivic said:

In reply to frenchyd :

Ok. No one is forcing you to live somewhere like that. I am just saying that zoning should allow for neighborhoods that allow that to built new.

Help me understand what you're saying please.  I understand and agree I'm not being forced to live like that.
     But my city should be zoned  to put a restaurant or grocery store in place?   Someplace I could bike to and from?  
    If I've got it correct ( please correct if not)  we need bike paths ( or sidewalks?)  restaurants and grocery stores?  Or at least zoned for?  

Opti said:

In reply to frenchyd :

I also have a too big house, its like a project car to me though. I do miss my small old home sometimes though. Id be nice if more houses were built like this though.

My consolation is that I won't live forever.   Likely in the next 20 years maybe a large multigenerational family  will move in and make good use of what I built. 

frenchyd said:

In reply to yupididit :

Clear argument  about the needs of the many versus the  rights of the individual.

   White settlers took land from Native Americans. Often killing them or sometimes infecting  them with diseases they weren't prepared to resist.   Any way you slice it that's wrong.  
     On the other hand let's say Native Americans remained on the land until 1940.  Would Native Americans  be in a place  to resist the Nazi's or Japanese from taking their land?  I doubt bows and arrows would defeat machine guns and tanks.  
   Society does have validity and sometimes over individual rights. 

I have some issue with that last sentence. people say it when "society" agrees with them, and fight it when it doesn't. Individual rights should be pretty much at the top of everyone's list, or it degrades and eventually the power you gave up for society gets yielded against you.

You should be able to do whatever you want with your property, including developing it and adding covenants/hoas/restrictions for potential buyers, or just have an empty lot untouched by civilization for 150 years.

RevRico said:

In reply to GameboyRMH :

You're also missing labor costs. Which, in general, is double cost of materials. Except, tradesman now have massively increased costs compared to 50 years ago, driving that number up even higher. 

Come build my company a secure database, with instant access to every states sales by sku. I won't pay a dime over $500 because that's what it cost 45 years ago. Computers are cheaper now, storage is cheaper now, what's the problem with the price?

Jobs have had generally stable pay related to inflation for many decades now, the price of work with computers in particular has dropped like a rock over the last few decades. I don't know much about tradesman pay in particular but the people I know who work construction, plumbing etc. make good money but nothing exceptional.

I would legitimately be overjoyed to build that database today for its inflation-adjusted cost 45 years ago, Ferrarichat here I come!

In reply to GameboyRMH :

This is in the last year.  Steel was up 112% between 1/2021 and 1/2022.  There were also spikes in the mid '90s and the early '00s, and general inflation between: Link

Those prices may come down a little when things get more normal... but I guarantee they ain't returning to what they were in the '70s, even adjusted.

This is a little more work to interpret, but it's showing the annual inflation rate of major influences on construction costs between 2014-2022.  It's pretty much showing double-digit annual inflation of major construction materials (and related goods) across the board for the last 8 years: Link

Here's are a couple for home building:  Link 1 Link 2

I realize most of those are more recent, but it's really not that different in the long term.  As I mentioned, there have been at least two large spikes since 1980, which prices never fully retreated from.

Here's a couple nice long ones: Link 1  Link 2

I can tell you for certain that a middle school I built for $260 / sq ft in 2010 is going to be $605 / sq ft in 2022.  Projects are approximately the same size, same school district, same standard of construction, both all-new, and located within 5 miles of each other.

That's 232% inflation in 12 years compared to general inflation of about 36%.

Opti said:

In reply to Duke :

My 150 year old wood windows I can pop off and repair in a day or two, and with copper seals on the side and the addition of some weatherstripping they meet the most recent (last I looked) energy efficiency specs.

I guarantee you they do not, if you live anywhere north of Florida.

Typical single-glazed wood windows have U-factor (thermal resistance value) of anywhere from 0.80 (at best) to 1.10.  U-factor is the inverse of R value, so lower is better.  So that's the equivalent of R-0.9 to R-1.25 at your window.  If you have really good storm windows that are in very good repair, that might go as high as R-1.75 to R-2... but I doubt it.

2018 energy code requires 0.32 maximum for anywhere from Mississippi to Pennsylvania.  I didn't even look at the 2021 code, which is probably worse, because that hasn't been adopted everywhre.  North of PA it goes down to 0.30.   That's equivalent to R-3 to R-3.3 for minimum required performance - many modern windows are better than that, whether all wood, clad wood, or extruded fiberglass composite.

But the other factor is air leakage.  Older windows in good shape tend to leak anywhere from 0.5-0.7 CFM of air (at a standard of 25 mph wind pressure).  Modern windows can be anywhere from 0.1-0.3 CFM (normalized for size of window).  That's just through the window unit itself.  Old windows are also far less likely to be installed properly, with all gaps sealed and the perimeter of the window properly taped into a continuous air infiltration barrier (because that is almost certainly completely absent on an older house).

Admittedly, reducing that air leakage means you probably need to provide additional fresh air into the house.  But doing so in a controlled way is much more energy efficient rather than just letting the outside air in all over the place.

In reply to 93EXCivic :

Yup we're saying the same thing

FYI you'll see "rents" here used frequently, which is Georgist lingo for Land Value Tax. 

"What does this mean for our education system?  That it simply cannot do the heavy lifting on its own.  It cannot, alone, lift students out of poverty, at least not on a societal scale, if the rest of the economy is engineered against them.  A broader application of George’s ideas is needed, one that undercuts the foundations of inequality. Fortunately, the formula George (and others) has provided offers a roadmap.  Capture land rent, which currently enriches a wealthy and overwhelmingly white section of society, and use it for the public good.  This can make particular progress in reversing racial inequality, since land value and other kinds of rents make up such a great portion of the racial wealth gap and, as discussed above, are particularly used to gatekeep quality education.  Taking these rents and investing them into communities is the surest way to relieve people from want.  If we believe, as educational proponents proclaim, that change begins with children, we need to relieve children and parents from want.  We can do this by making housing, healthcare, and food easily accessible for every child in the country – paid for by these publicly captured rents." - Matthew Downhour

"Sociologists John Logan and Harvey Molotch coined the term “growth machine” in a 1970s essay, “The City as a Growth Machine,” which famously argued, “Growth likely increases inequality within places through its effects on the distribution of rents.” Sure enough, California has the highest poverty rate (when adjusting for housing costs), the most billionaires per capita, the highest share of homelessness in the U.S., and the largest population of any state.

Indeed, Logan and Molotch assume causation: “Increases in urban scale mean larger numbers of bidders for the same critically located land,” they proclaimed, “inflating land prices relative to wages and other wealth sources.”

We have seen that growth of regional economies and populations does not produce inequality on their own. Rather, preconditions of homeownership as a lucrative investment lead growth to distribute unevenly across racial and class lines. With a disproportionately rich and white homeowner class plowing their life savings into personal real estate assets, their wealth grows as houses get more expensive relative to wages."

How Unfair Property Taxes Keep Black Families From Gaining Wealth

HOW LAND VALUE TAX COULD NARROW THE RACIAL WEALTH AND OPPORTUNITY GAP

Thanks Duke, so we can see that there has been a long-term increase in building costs, and that building a house just before the pandemic would've cost significantly more than doing something comparable in the 70s, if adjusted for inflation.

The problem is that this only accounts for a minority of the home price increase from the "stable period" to the pre-pandemic era (we should try to ignore the pandemic spike because it's an oddball occurrence and didn't contribute to how crazy things already were in 2019). There's still a huge cost discrepancy from our theoretical '70s-inspired modern affordable house and a similar one you might find IRL. I found this graph that suggests home price increases may have been largely driven by construction costs until the late '90s when they came untethered, only briefly brought back to earth by the great recession. The pandemic spike is hardly discernible from the post-GR trend here:

It comes from this article which is pretty interesting:

https://reventureconsulting.com/the-myth-of-surging-construction-costs-home-prices/

It also links to this one that points out that even with severe dips in home construction, there is not exactly a shortage of houses, and that demographic trends should've been pushing home prices down since the mid-2010s:

https://reventureconsulting.com/the-myth-of-the-us-housing-shortage/

ProDarwin said:

GameboyRMH said:

SV reX said:

The average new house size in 1970 was 1500 SF. The average new house size in 2014 was 2657 SF. 
 

They have bigger kitchens, more baths, and far more upscale devices. 
 

They SHOULD be twice the price. 

I think this is worth looking into more closely. Apart from the size issue which I've already mentioned does not pan out, if fittings and devices were an issue, the market would be clamoring for "stripper model" houses like those from the '70s - maybe one less bath, basic cheapo kitchen counters, no Cat6 in the walls, maybe take the AC out of the HVAC - for hundreds of thousands of dollars less somehow. That hasn't happened.

 

Are you sure?

I see a lot of evidence of this happening.  Build a 2600sq ft box.  And I mean box like a cube with almost equal sides (cheapest way to enclose maximimum volume), with the lowest quality carpet, linoleum, kitchen, etc. all part of it.  They aren't cutting back on space, but they are cutting back on just about everything else.  This is the most risky part of the market IMO.  It'll need $25k in refurb in 10 years, but the owners got in for $5k less up front.

Actually that makes sense.  When you're young with a growing family. Get in, live with the cheap. As your income grows and the kids start respecting their home , no longer use coloring crayons on the walls or floor.  Improve things according to your budget.   Then as they move out  change bedrooms to offices/ dens/game rooms etc.   

In reply to Duke :

Well said.  I don't know about every window manufacture but Anderson windows use a "nylon" with some of 3M's  forever chemicals.   

In reply to GameboyRMH :

You're just not accounting for anything other than materials costs, which are absolutely NOT the only factor at play.  Construction cost is of course a (or the) major factor, but you can't just couple it directly to final cost of a given house.

A finished, occupiable house is worth more than the sum of materials and labor precisely because it is a finished, occupiable house.  And once most of the available used inventory has changed hands, any new units coming on line will command a premium price.

If you want / need to live in a hot market right now, you need a house right now.  Just like the car market you seem to be drawing comparisons to, what drove the insane inflation of used car prices since the pandemic?

The fact that a used car is a running, driving car - not an estimated build date 3 months from next week, or a 99.8% complete new vehicle sitting unoperable waiting on a chip.

Opti said:

frenchyd said:

In reply to yupididit :

Clear argument  about the needs of the many versus the  rights of the individual.

   White settlers took land from Native Americans. Often killing them or sometimes infecting  them with diseases they weren't prepared to resist.   Any way you slice it that's wrong.  
     On the other hand let's say Native Americans remained on the land until 1940.  Would Native Americans  be in a place  to resist the Nazi's or Japanese from taking their land?  I doubt bows and arrows would defeat machine guns and tanks.  
   Society does have validity and sometimes over individual rights. 

I have some issue with that last sentence. people say it when "society" agrees with them, and fight it when it doesn't. Individual rights should be pretty much at the top of everyone's list, or it degrades and eventually the power you gave up for society gets yielded against you.

You should be able to do whatever you want with your property, including developing it and adding covenants/hoas/restrictions for potential buyers, or just have an empty lot untouched by civilization for 150 years.

 Society/State/Government all seem the same hot button to some. However the reality is we cannot go back to 1776  with America's tiny population and endless empty land.  
      In science class I watched a movie about crowding.   It used mice but past a certain level of crowding  all "civilization"    broke down.  
 Abraham Lincoln's Father said he moved anytime he could see the smoke from his neighbors chimney. 
   That's no longer possible.   
    So how does society deal with modern crowding?   Yet allow basic freedoms to continue?  
   Yes,  we are talking about land rights.  
    Imagine  owning 150 empty acres in downtown Washington DC /New York/ San Francisco?      Passed down through generations.  Should property taxes remove those rights? Eminent Domaine?  
Or just wait until a descendent gets greedy enough to sell?