21–30 of 72 posts
I think that this idea will be better in many cases than building condos everywhere.
I hear an argument a lot, "housing in the Bay Area is expensive because because labor cost is so high." According to this report in San Francisco it costs $269,000 to build a new housing unit. With the median home sale price over $1,000,000 it seems fair to say that the labor component isn't the primary driver of the high costs, it's probably related to the inability to legalize enough housing.
Labor is definitely not the main driver. Often quoted construction price is about 300$/sqft around where i live. If you were to build new, you would spend 750k-850k. Now, you cant buy land for less than 1.8 in mountain view that can hold 2500sqft home. And sale price would be close to 3m anyways.
No, the #1 reason it's so hard to find an affordable home is that potential buyers can get huge loans at very low rates. Since buyers compete with each other, prices go up. I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
Do you have a source for this? Huge loans at very low rates? The current is about 3.85% even for an FHA loan. Even then they won't loan you huge amounts unless you have the income to justify it. Even if interest rates were allowed to "creep up" the government will not stop guaranteeing loans, and banks won't stop lending. They'll find some other way to offset. With higher interest comes higher payments which means on…
Low interest rates have the same effect in reverse. Prices adjust so that regardless of interest rate your monthly payment is about the same, but low rates do transfer huge wealth to existing homeowners.
As down payments have come down over time this is only more pronounced. From 50% down with a 5 year term in the early 1900s to peak-mortgage 5% down 50 year terms a few years ago.
Earlier quoted context omitted.
Can't you contract the building part if you have a suitable piece of land?
Sure, but that's going to cost a lot more, as it is now a "custom home". Economies of scale apply strongly to houses.
Though that is beginning to change as they have kids, and are now moving to suburbs. So they now build little cities within the suburbs.
No, the #1 reason it's so hard to find an affordable home is that potential buyers can get huge loans at very low rates. Since buyers compete with each other, prices go up. I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
No, the #1 reason it's so hard to find an affordable home is that potential buyers can get huge loans at very low rates. Since buyers compete with each other, prices go up. I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
"We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,” said Isaac Stocks of Azure Northwest Homes, a Seattle-area home builder. That sums it up. Plus, more expensive homes means more property tax revenue, so there's little incentive for state/local gov to encourage lower end housing. Finally, it…
"We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,” said Isaac Stocks of Azure Northwest Homes, a Seattle-area home builder. That sums it up. Plus, more expensive homes means more property tax revenue, so there's little incentive for state/local gov to encourage lower end housing. Finally, it…
The second part of the solution is to convert all property taxes into Land Value Taxes, so that idle and vacant land is taxed at exactly the same rate as land containing well maintained houses. Local governments would no longer get higher payouts for zoning for high end housing, they would only get higher payouts if they raised the net desirability of all land within the borders of their city as a whole.
The land value tax would also free up vacant, idle and underutilized land for actual use and improvement, by making land unattractive as an asset for investment or speculation. This would greatly increase the competitiveness of the housing market, because if it is no longer profitable to hold onto a vacant building, a parking lot, or a strip mall in a high demand area after the carrying cost applied by the land value tax, the vacant lot might be split up and sold to smaller owner-operators, the parking lot might be replaced by several smaller town houses, and the strip mall might be replaced by a mixed used development with additional housing units builtin above the shops, increasing average quantity of housing units per city block or per area unit measure.
> How willing are banks to issue loans at the lower end?
Focusing on banks and subsidizing loans is what is fueling this problem. The solution is not to make loans easier to get, it is to drastically lower the price of land and increase the efficiency at which land is used. When the price for land is cheaper and closer to a market price rather than a monopoly price, far fewer people will have to bother with loans or mortgages in the first place. Lower end housing can be made substantially more affordable even if all mortgage assistance schemes are eliminated.
Earlier quoted context omitted.
Can't you contract the building part if you have a suitable piece of land?
Sure, but that's going to cost a lot more, as it is now a "custom home". Economies of scale apply strongly to houses.