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

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

#101

Post by giantg2 »

pydry wrote: post #65
giantg2 wrote: post #53

Earlier quoted context omitted.

I was including that under "or simply buying because they can afford it now". "Of the two, B is a more prudent way of making property prices sane again." Maybe if you taxed unused land. Otherwise that tax will end up increasing a resident's rent/mortgage substantially (as it's a perpetual annual expense). So really, you'd have to tax way above what a normal person can afford (average US household about $75k, so $7500…

>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 of a mortgage one can afford.

"It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability."

I'm not sure about this. Just because they own more property doesn't mean they would be the most affected. The tax would likely be a larger percentage of a "normal" person's income for their own home and thus more impactful to them. Plus, if the wealthy are renting out the majority of the properties, then they can make up for tax increases by raising rents (because property tax increase priced more people out of homes (because the price drop was a drop in demand), increasing demand for rentals). I do agree that it should incentivize full utilization of rental properties. But I don't think there are enough vacant rentals to affect supply/pricing, but I don't have the numbers. I would think that most owners are already utilizing residential rentals pretty much at full capacity in the markets that are the tightest.

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

#102

Post by someguydave »

xboxnolifes wrote: post #36
someguydave wrote: post #27

Earlier quoted context omitted.

>Put all essential jobs under military jurisdiction. Under that scenario the relative fairness of paying for jobs to be done would be replaced with the relative unfairness of being friends with the right people in the "plumber corps" to fix your toliet.

If there is some sort of national mandatory essential service, that will happen regardless of what organization it falls under if it is ran poorly.

yes, it will happen in all cases where government bureaucrats decide who gets what resource

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

#103

Post by kiliantics »

VikingCoder wrote: post #20

Going off on a tangent here: There's a sci-fi novel I want to write some time... You know how some countries have mandatory military service? Well, what if all of the "Essential" jobs, all had mandatory service? I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-…

Check out "The Dispossessed" by Ursula Le Guin

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

#104

Post by asielen »

dragonwriter wrote: post #51
com2kid wrote: post #19

Earlier quoted context omitted.

> For a personal example, my wife complains that an 1800 sqft house is too small. A modern blueprint 1800sqft house, yeah, for sure. But somehow a 1960s split level at 1800sqft is spacious. We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small. The recent trend towards 4 story narrow houses doesn't help. A literal…

> We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms Two living rooms (well, “living” and “family”) and two (“formal” and, well, not) dining rooms are pretty common in 1960s homes at the size being discussed. Bedrooms, bedroom closets, and kitchens are probably smaller than newer homes, though. > The recent trend towards 4 story narrow houses doesn't help. Tall, narrow hou…

Modern homes have less room to live and more room to store crap.

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

#105

Post by gedy »

hattmall wrote: post #98

This sort glosses over the real percentage of construction costs by giving only a 20 or so percent of profit. A large portion of construction though is the individual sub-contractors profits. I would guess that the large difference in costs vs 100 years ago is proportional to the increased number of subcontractors. A hundred years ago a lot of lumber was even at least partially milled on site too. The actual costs of…

Yes, we built an extension to our home ourselves, material and tools was about $40k. We heard later that to contract this to a California builder would have cost us $150-200k

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

#106

Post by giantg2 »

ehnto wrote: post #77
giantg2 wrote: post #53

Earlier quoted context omitted.

I was including that under "or simply buying because they can afford it now". "Of the two, B is a more prudent way of making property prices sane again." Maybe if you taxed unused land. Otherwise that tax will end up increasing a resident's rent/mortgage substantially (as it's a perpetual annual expense). So really, you'd have to tax way above what a normal person can afford (average US household about $75k, so $7500…

> ignoring the fact the the market would collapse I think that is the point. The market doesn't make sense already for people who actually use the homes because of the investors. If there were property policies that targeted investors and forced their money elsewhere, prices would drop dramatically, making housing affordable again.

"The market doesn't make sense already for people who actually use the homes because of the investors."

I think that depends on the area.

A true crash, if it were to happen, would affect all though. You'd have people underwater on their mortgages, unable to move by selling or renting out the home and instead being foreclosed. People in some sectors my lose their job because people have less discretionary money (if they'd be smart and save more for retirement to offset the loss on their property). If anything, I would think more people would be looking for cheaper apartments to rent because they were foreclosed, leading them to rent from the rich who have a large share of that type of housing.

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

#107

Post by loeg »

sudosysgen wrote: post #92
loeg wrote: post #84

Earlier quoted context omitted.

The rebuild cost, as estimated by my insurance company, is more than half the total value of my house. And I live in Seattle, where land is relatively expensive. Construction cost is not "almost nothing" by any means.

Doesn't that include the cost of demolition? Demolition done right is very expensive.

In a city, most construction is going to involve demolishing the previous structure. So you could argue there isn't much value in pricing construction sans the cost of demolition.

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

#108

Post by giantg2 »

anonAndOn wrote: post #69
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 exemption. If it's your primary residence you get a tax exemption on the first $[geographically_appropriate_median_goes_here].

They did that with the casino money in PA. It's a joke, like a couple hundred bucks, if that.

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

#109

Post by sudosysgen »

loeg wrote: post #107
sudosysgen wrote: post #92

Earlier quoted context omitted.

Doesn't that include the cost of demolition? Demolition done right is very expensive.

In a city, most construction is going to involve demolishing the previous structure. So you could argue there isn't much value in pricing construction sans the cost of demolition.

Well no, because the cost of demolition is the same no matter what you build, right?

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

#110

Post by giantg2 »

asielen wrote: post #104
dragonwriter wrote: post #51

Earlier quoted context omitted.

> We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms Two living rooms (well, “living” and “family”) and two (“formal” and, well, not) dining rooms are pretty common in 1960s homes at the size being discussed. Bedrooms, bedroom closets, and kitchens are probably smaller than newer homes, though. > The recent trend towards 4 story narrow houses doesn't help. Tall, narrow hou…

Modern homes have less room to live and more room to store crap.

I haven't really noticed that. Some older home don't have closets, or only small ones. But then it was common to have a shifero etc, taking up space too.

Areas commonly used for storage, like unfinished attics, basements, and garages aren't generally counted in the assessed sqft.

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