The Daily episode on the housing crisis

[Anonymous]

Did anyone listen to this last week -- it was really interesting. Here's the link: https://www.nytimes.com/2024/09/24/podcasts/the-daily/housing-crisis-michigan.html

It get's into the factors that led to the housing crisis we're in now starting with how the 2008 crash altered the economics of building new homes and how millenials entering the housing market changed demand (and then how Covid changed it again). Really interesting.

The part I found most interesting was how spiraling housing costs are kind of like a contagious disease. People in large expensive cities (like DC) get priced out as the costs spiral upward. So they leave those cities for more affordable places -- exurbs or small cities or towns. And as those places get an influx of people who have been priced out of major cities but have more money than locals (and sometimes remote jobs paying more than local jobs would) the cost of housing in these locations also starts to spiral. It's interesting because it demonstrates how interconnected the real estate industry is even in different locations.

If you are wondering what the solution is the conclusion they (Conor Dougherty the journalist being interviewed) comes to is that the main solution is we need to build way more housing and specifically within the "affordable housing" price point for working and middle class people. He gets into why this isn't happening but the main reason is that after the sub-prime crash the economics of homebuilding changed a lot and now builders are not really incentivized to build a lot of moderately priced units. The cost of land and labor and materials is such that it's generally more cost-effective to build fewer units but make them high end and target upper income buyers. This means that even the housing that is being built actually contributes to rising housing prices because it's skewed so heavily towards high end housing.

What we really need is a bunch of smaller non-lux housing.

[Anonymous]

What “crisis?”

[Anonymous]

Anonymous wrote:What “crisis?”

You think we'd have this many unhoused people in the USA if housing costs were more inline with salaries and wages? NP

[Anonymous]

Nothing will help. Any new affordable-level housing, poor immigrants will move into them. Any new housing in nice middle class neighborhoods, richer immigrants on the hunt for "good school" will move in.

[Anonymous]

We could probably solve the housing "crisis" just by allowing more office workers to be 100% remote. Imagine if people weren't chained to their jobs in about a dozen big cities.

[Anonymous]

There are plenty of affordable areas of the country to live.

[Anonymous]

Did they bother to address the fact that housing has become commoditized thanks to corporations, hedge funds, and regular people like you and me buying multiple homes and renting them out (whether as airbnbs or more traditional rental properties)? Because that’s the real culprit. Hedge funds and corporations own entire neighborhoods in certain areas. They literally come in a buy up nearly an entire new development and then have the power to set the new fair market value.

What about immigration?

What about foreign nationals who live abroad but buy homes in the US for investment purposes? ICYMI: Canada realized this was ruining their housing market and has taken steps to address it. Too little too late once people and corporations own property, but at least they got the memo.

Building more affordable housing is important, but it’s an exercise in futility unless there are strict restrictions on who can buy the housing and who must actually live there. The MoCo MPDU approach is one example (not perfect, but better than nothing).

[Anonymous]

Anonymous wrote:What “crisis?”

If you don’t know there is a housing crisis, you must not read/watch any news at all. NP

[Anonymous]

Solutions to "crisis":

-- Ban foreign ownership of real estate
-- Eliminate all federal tax deductions on homes that aren't people's primary residences

Once you realize that our country is set up to benefit corporations and the wealthy, you'll realize that the "crisis" is intentional and works to their benefit.

[Anonymous]

Anonymous wrote:Did they bother to address the fact that housing has become commoditized thanks to corporations, hedge funds, and regular people like you and me buying multiple homes and renting them out (whether as airbnbs or more traditional rental properties)? Because that’s the real culprit. Hedge funds and corporations own entire neighborhoods in certain areas. They literally come in a buy up nearly an entire new development and then have the power to set the new fair market value.

What about immigration?

What about foreign nationals who live abroad but buy homes in the US for investment purposes? ICYMI: Canada realized this was ruining their housing market and has taken steps to address it. Too little too late once people and corporations own property, but at least they got the memo.

Building more affordable housing is important, but it’s an exercise in futility unless there are strict restrictions on who can buy the housing and who must actually live there. The MoCo MPDU approach is one example (not perfect, but better than nothing).

Have seen this happening with the the tear down/new builds in FCC.

[Anonymous]

Anonymous wrote:There are plenty of affordable areas of the country to live.

I think you are missing the point. There was an article recently about some random town in Michigan…probably an affordable area in your eyes.

Well, the median price has doubled in just the last 5 years because of people selling from high cost area and moving there. Great for them, but now the locals are priced out.

Now they have a homeless problem…mainly due to local jobs not paying enough and rents increasing as much as owning.

It cascades.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What “crisis?”

You think we'd have this many unhoused people in the USA if housing costs were more inline with salaries and wages? NP

Yes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There are plenty of affordable areas of the country to live.

I think you are missing the point. There was an article recently about some random town in Michigan…probably an affordable area in your eyes.

Well, the median price has doubled in just the last 5 years because of people selling from high cost area and moving there. Great for them, but now the locals are priced out.

Now they have a homeless problem…mainly due to local jobs not paying enough and rents increasing as much as owning.

It cascades.

So it all starts with the greed at the very top, not a lack of available units. It's the price put on it all by the people who profit from housing costs. the same people who profit from saying there is a housing crisis, which gets them more land to build on, which gets them more profits. Guess what they don't build? Affordable housing.

[Anonymous]

Anonymous wrote:Did they bother to address the fact that housing has become commoditized thanks to corporations, hedge funds, and regular people like you and me buying multiple homes and renting them out (whether as airbnbs or more traditional rental properties)? Because that’s the real culprit. Hedge funds and corporations own entire neighborhoods in certain areas. They literally come in a buy up nearly an entire new development and then have the power to set the new fair market value.

What about immigration?

What about foreign nationals who live abroad but buy homes in the US for investment purposes? ICYMI: Canada realized this was ruining their housing market and has taken steps to address it. Too little too late once people and corporations own property, but at least they got the memo.

Building more affordable housing is important, but it’s an exercise in futility unless there are strict restrictions on who can buy the housing and who must actually live there. The MoCo MPDU approach is one example (not perfect, but better than nothing).

They touched on the commoditization issue but it wasn't the focus. I agree I would have liked to hear more on this. Especially because their focus was on markets that recently had very affordable housing (they do a deep dive into Kalamazoo) but have recently seen a huge run up in housing costs as people from other places have started entering those housing markets. The show makes it sound like it's mostly people moving to these markets but as someone who knows a lot of people who work in real estate development I'm pretty confident that a lot of the people buying up housing in this market are investors who do not and will never live there.

Like they interview a couple in Kalamazoo who were displaced when the duplex where they were renting a unit was sold. They ultimately find housing but it is more than double what they'd been paying because they are forced into a new build rental (modular home I think) and they can't find anything like the older rental they'd been living in. This was a dual-income couple with decent working class jobs and now most of their income is going to housing and they can't save and have to watch every penny. It's depressing.

But they don't talk about who bought the duplex. Sure it might have been a family moving from Detroit who bought it to live in and rent the extra unit. But I think odds are good it's a real estate investor who bought it and will do a cheap flip with "luxury look" finishes and then rent it out for 3-4x the prior rent. Or turn it into an Airbnb. Because you see that a lot.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There are plenty of affordable areas of the country to live.

I think you are missing the point. There was an article recently about some random town in Michigan…probably an affordable area in your eyes.

Well, the median price has doubled in just the last 5 years because of people selling from high cost area and moving there. Great for them, but now the locals are priced out.

Now they have a homeless problem…mainly due to local jobs not paying enough and rents increasing as much as owning.

It cascades.

Yes this is precisely what the episode talks about. People get priced out of DC and move to Kalamazoo and then Kalamazoo winds up with a homelessness issue because the extra demand pushes prices up. But it starts with the lack of affordable housing in DC -- if we could build WAY more affordable housing in and near these major cities where most of the jobs are then you wouldn't see people fleeing for these places elsewhere in order to access affordable housing.

I did like that the episode focuses on how trends in real estate buying and investing directly impact rents (as opposed to the cost of buying). Because I think a lot of people don't understand that's where the pinch is coming. It's not about people who are mad they can't afford to buy a house in AU Park and have to settle for Rockville. It's about how renters (who do not and likely will never have the capital to buy anything) can't afford to rent an apartment either place. And that's when you see the externalities that people complain about but don't seem to understand the causes of -- homeless encampments and the difficulty of finding employees for lower paying work. These are a direct result of not having enough affordable housing units at a rent working class people can afford.