Construction pricing is definitely out of control. Part of the problem is that the entire industry is funded with low interest purchase and equity loans and not cash. Another problem seems to be that a lot of construction entities went offline in during the crisis and never came back. Any construction quote easily runs into the $100,000s for even a tiny addition to a house. It's way out of control.
If there would exist a construction company that would have upfront pricing, not insanely expensive, and can get most jobs done within several weeks, they would get a huge amount of business. Instead it's always months out, pricing 5x what it should be, and often just impossible to find anybody.
"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 first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…
Another issue is the labor. I haven't personally looked into what the underlying reasons might be, but in Quebec, construction workers have all the power. If they don't show up, come late, under-deliver or do sloppy work, there's not much recourse, there's no one else. Given that these jobs are some of the highest paying relative to education level, there must be some artificial constraint that perpetuates this. If you are a general contractor, it's nearly impossible to provide consistent, high quality service, because they simply have little control over their workers.
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 This is a major reason why prices are so out of control. Land prices aside, there is no reason somebody couldn't build a nice ~1000sqf house for under $100k. But without literally doing the work yourself, these places just don't get built.
As a data point, a couple of months ago we bought a 1500 square foot home for $114,000. It's a modular home, but still classified as stick built/custom by the zoning authority. https://www.rochesterhomesinc.com/tiptown
The site work, however, is almost another $200,000.
"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 first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…
You're putting the poor in an awfully tight position there. Between no tax deduction for a mortgage and paying the same property tax (what you call land value tax) for their trailer as the mansion next door, they're kind of getting screwed.
And what about old people that have owned their own house for decades? If the local economy goes up, increasing the land value tax, they either leave or go bankrupt. And the kicker is that their investment into their home is now worth a lot less.
"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 first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…
Agreed. The subsidies(tax breaks) help drive up prices (just as student loans have inflated higher edu cost). Unfortunately, in the case of housing, as mentioned, property taxes come into play. It seem unlikely gov is going to cut off its own revenue stream.
My point about the banks was, we can't expect low end houses to be built if they can't be sold (because banks are less likely to finance them.) I'm not suggesting artficial support. I'm curious to know if the void in this segment in housing is fed by a void in bank support.
The first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…
You're putting the poor in an awfully tight position there. Between no tax deduction for a mortgage and paying the same property tax (what you call land value tax) for their trailer as the mansion next door, they're kind of getting screwed. And what about old people that have owned their own house for decades? If the local economy goes up, increasing the land value tax, they either leave or go bankrupt. And the kicke…
If your poor the tax deduction doesn't mean much since it's based on a lower tax bracket.
There seems to be a lot of articles posted on HN purporting to explain the housing crisis from companies that profit from it.
Bearing that in mind, it's not so surprising to see "labor shortages" get the blame while untaxed land, low interest rates and wealth inequality/property hoarding go unmentioned.
The first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…
You're putting the poor in an awfully tight position there. Between no tax deduction for a mortgage and paying the same property tax (what you call land value tax) for their trailer as the mansion next door, they're kind of getting screwed. And what about old people that have owned their own house for decades? If the local economy goes up, increasing the land value tax, they either leave or go bankrupt. And the kicke…
I think the counter argument is that housing prices will fall and be closer to free market. I can't really get much worse for the poor, the status quo clearly isn't helping them.
You do have a point, but there seems to be another side as well.
Why isn't there a tech company trying to disrupt home construction?
People speak of Uber being worth so much because of the giant market it's going after and transportation is big being the second largest consumer expenditure at 17% of wallet share. However housing is first at nearly 30% of wallet share and the biggest dent you can make in that figure is lowering the upfront cost which is several years of income for the average buyer.