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How much do construction costs matter to the price of housing?

constructionphysics.substack.com

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Re: How much do construction costs matter to the price of housing?

#111

Post by giantg2 »

pydry wrote: post #58
bumby wrote: post #46

Earlier quoted context omitted.

How do you implement B) without causing a disproportionately negative impact on existing homeowners? For example, would you just tax "new" purchases more heavily? Or scale it into existing homes? Give caveats for fixed-income (elderly and disabled)? Politically, this seems like a tough road, even if it's the best choice. You have to essentially convince people to vote against their own economic self-interest. I think…

Land value tax. It could be made palatable to regular people by making a high tax free threshold. Most homeowners could be left unaffected. That leaves 50% of land owned by the 1%. A fair chunk. Additionally the money could be funneled initially into pensions for the impoverished elderly. Capital/billionaires would fight back by arguing that it would hit the elderly the hardest just as the howard jarvis taxpayers fou…

"That leaves 50% of land owned by the 1%."

Is a lot of that farm land, like with Gates?

I thought a lot of the investors are involved with apartments, which don't take up much land?

Re: How much do construction costs matter to the price of housing?

#112

Post by giantg2 »

paulryanrogers wrote: post #74
bumby wrote: post #46

Earlier quoted context omitted.

How do you implement B) without causing a disproportionately negative impact on existing homeowners? For example, would you just tax "new" purchases more heavily? Or scale it into existing homes? Give caveats for fixed-income (elderly and disabled)? Politically, this seems like a tough road, even if it's the best choice. You have to essentially convince people to vote against their own economic self-interest. I think…

Homestead exemptions for older folks already exist. Perhaps a higher tax rate for those not living in a property?

I would love to see no tax on primary home property at all. Just for commercial/investment properties. Unfortunately, a lot of that would be passed on to renters unless income taxes were assessed differently. But that would also mean drastically changing school funding, which could be a good opportunity but would likely turn this into every more of an impossible shitshow.

Re: How much do construction costs matter to the price of housing?

#113

Post by giantg2 »

chaxor wrote: post #68
bumby wrote: post #34

Earlier quoted context omitted.

> But somehow a 1960s split level at 1800sqft is spacious. I've actually found the opposite. Modern builds seems to prefer open floor plans and higher ceilings that older homes do not. To me at least, this can make the equivalent square footage seem less cramped. To your point though, it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.

Yeah those higher ceilings are very popular, and extremely inefficient. We recently saw this in the new constructed homes in Texas, which made their problem with the power grid last year even worse. The few minutes they gave power to those fancy new home regions (during the time they were cycling power steering) basically went to waste, because the ceilings were so insanely high, and everyone has the open and spaciou…

Plus two story or more ceilings a pain to clean and paint.

Re: How much do construction costs matter to the price of housing?

#114

Post by pydry »

giantg2 wrote: post #101
pydry wrote: post #65

Earlier quoted context omitted.

>Otherwise that tax will end up increasing a resident's rent/mortgage It would do nothing to rents or mortgages intrinsically but it would cause property prices to fall and it could add to the tax burden of regular property owners depending on how it were implemented (i.e. if the tax free threshold were set too low). >that still wouldn't be much of a disincentive to the wealthy It would be a massive disincentive to t…

"It would do nothing to rents or mortgages intrinsically" Most people have their property taxes escrowed with their mortgage payments. Taxes can easily account for 25% of one's monthly payments. As for rent, the property owners just pass the cost on to the tenants by increasing rent. So property taxes are related to rent and mortgage payments. Even if not included directly in the mortgage payment, it affects how much…

>As for rent, the property owners just pass the cost on to the tenants by increasing rent

Rents would either remain unchanged or go down.

I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged.

The only change I could forsee to affect either is previously empty properties being put up for rent in order to cover tax payments to turn property liabilities back into property assets. This would increase supply.

>Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents

They'd really love for that to be how it works and sometimes they pretend it is.

Re: How much do construction costs matter to the price of housing?

#115

Post by svachalek »

brailsafe wrote: post #44
giantg2 wrote: post #8

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…

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 ha…

I don't think it's possible with all the shell corporations and other gimmicks the rich use. It's just too easy to conceal who owns what. I think simply removing all the market restrictions that make homes such a valuable investment would do it, when demand meets supply suddenly housing markets start to look like any other market. But this seems to be politically unthinkable just about everywhere.

Re: How much do construction costs matter to the price of housing?

#116

Post by giantg2 »

bumby wrote: post #70
chaxor wrote: post #68

Earlier quoted context omitted.

Yeah those higher ceilings are very popular, and extremely inefficient. We recently saw this in the new constructed homes in Texas, which made their problem with the power grid last year even worse. The few minutes they gave power to those fancy new home regions (during the time they were cycling power steering) basically went to waste, because the ceilings were so insanely high, and everyone has the open and spaciou…

Sure, I was going to mention the tradeoff with the inefficiency but left it out for brevity. I will say, though, that the same inefficiency in those geographic areas exist when building multistoried buildings. A ranch is much easier to cool in west texas/new mexico/arizona than a multistory building where the bedrooms and living areas need to be cooled. I've notice the construction style also mitigates this somewhat.…

There are a lot of articles that go through the issues in detail. The main points they list are that in that climate heating is less of a concern and so inefficient resistant heating is common. Then the grid itself didn't winterize, which lead to some plants not staying up and the others not being able to cover the spike in demand with a reduction in generation capacity.

Re: How much do construction costs matter to the price of housing?

#117

Post by giantg2 »

pydry wrote: post #114
giantg2 wrote: post #101

Earlier quoted context omitted.

"It would do nothing to rents or mortgages intrinsically" Most people have their property taxes escrowed with their mortgage payments. Taxes can easily account for 25% of one's monthly payments. As for rent, the property owners just pass the cost on to the tenants by increasing rent. So property taxes are related to rent and mortgage payments. Even if not included directly in the mortgage payment, it affects how much…

>As for rent, the property owners just pass the cost on to the tenants by increasing rent Rents would either remain unchanged or go down. I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged. The only change I could forsee to affect either is previously empty properties being put up for rent in order to cover tax payme…

"I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged."

What you're missing is that the market floor get universally pushed up. There's no competition from cheaper places because they all increased their rent to cover the new coat so they can still make their same margin. The demand is still there because people still need a place to live.

"The only change I could forsee to affect either is previously empty properties being put up for rent"

Any numbers on that, or are you just going to keep claiming it's a big enough vacant supply to significantly affect prices?

"They'd really love for that to be how it works and sometimes they pretend it is."

This is still tied to the previous comment. If the number of vacancies are not sufficient, then supply is adequately constrained to just increase the prices to cover costs. Because, again, this increase moves the market floor.

Re: How much do construction costs matter to the price of housing?

#118

Post by s1artibartfast »

sokoloff wrote: post #99
dzhiurgis wrote: post #94

Earlier quoted context omitted.

Did standard improve 5x tho? Probably by like 2-3x I'd guess. Or standard maybe even decreased in some ways, but we're actually paying for complexity. Also - building larger typically reduces price/sqm.

In 1925, only half of homes in the US had electric lighting. None had air conditioning. Many would have had only steam boilers (which can function without electric pumps) fired by hand-shoveled coal. Most would have had no insulation. In 1940, half of homes had no indoor flush toilets and no hot running water. If you built a house today without electricity, with only cold water service, and an outhouse, I think you’d…

>In 1925, only half of homes in the US had electric lighting. None had air conditioning. Many would have had only steam boilers (which can function without electric pumps) fired by hand-shoveled coal. Most would have had no insulation. In 1940, half of homes had no indoor flush toilets and no hot running water.

This is true but can be a little bit misleading.

You would expect new homes built in 1925 or 1940 to have many more of these amenities than the average. (you can see the flush toilet in the Sears 1914 home).

For context, The average home in the US today was built ~45 years ago.

Re: How much do construction costs matter to the price of housing?

#119

Post by brailsafe »

svachalek wrote: post #115
brailsafe wrote: post #44

Earlier quoted context omitted.

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 ha…

I don't think it's possible with all the shell corporations and other gimmicks the rich use. It's just too easy to conceal who owns what. I think simply removing all the market restrictions that make homes such a valuable investment would do it, when demand meets supply suddenly housing markets start to look like any other market. But this seems to be politically unthinkable just about everywhere.

I think there's a difference between completely impossible, and partially very difficult. If reasonably well-off people can pretty easily leverage low-interest rates and take control over property that otherwise wouldn't have as much competition, then that's probably a bad thing. The super rich will always figure out a way if it's lucrative enough, but those actions would stand out more if it was generally unacceptable. As it stands, I don't even know how to track down data on how many people own multiple properties. Likewise, you can't possibly out-pace multiple property ownership with supply in a desirable place unless you exhaust the excess capital available to wealthy people and ban low-density zoning codes and maybe even ban surface-level parking lots.

In my neighbourhood, lots of wealthy homeowners have signs up decrying the construction of a sky-scraper that's sort of vaguely near the edge of their neighbourhood, which is currently occupied by a parking lot. The effect it would theoretically have, is adding to the available housing supply in the area for people currently renting at absurd rates because it's impossible to buy anything. It would take away rental income from people who already leveraged themselves too much, and marginally decrease demand for their scarce commodity known as a place to live.

Re: How much do construction costs matter to the price of housing?

#120

Post by vkou »

chrisseaton wrote: post #76
ghaff wrote: post #75

Earlier quoted context omitted.

I expect that most "bakers" in the US today work for grocery chains (or maybe for manufacturers of packaged bread and pastry products--not sure how precisely the category is defined). They're probably mostly not working for artisan specialty bakeries although I wouldn't be shocked if people at those places weren't exactly raking it in either.

I don't think those large industrial bakeries really have 'bakers'? They have automation engineers, food scientists, mechanics.

No, those people are the specialists that come in and set things up, or design and build the machinery that gets set up.

The day-to-day work is done by bakers, and much of it is not automated.

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