tag:blogger.com,1999:blog-1110014885778996459.post1278943869726422820..comments2024-03-28T08:45:53.564-07:00Comments on Idiosyncratic Whisk: Housing: Part 270 - More on Canada and self-enforced limited accessKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-1110014885778996459.post-34651871232283552242017-11-27T13:49:21.618-07:002017-11-27T13:49:21.618-07:00Interesting. Thanks for the links!Interesting. Thanks for the links!Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-60684875556641796232017-11-27T13:35:59.558-07:002017-11-27T13:35:59.558-07:00PS I am just about to move to Singapore again. Th...PS I am just about to move to Singapore again. The last time I lived there from 2012 to 2014. I am pleased to see that the housing supply increased by quite a lot in the meantime, and rents have come down.<br /><br />Singapore is a weird and interesting place in that regard. About 80% of people live in government built housing. https://en.wikipedia.org/wiki/Public_housing_in_SingaporeMatthiashttps://www.blogger.com/profile/13665641102508209349noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-81589297344277748642017-11-27T13:31:45.123-07:002017-11-27T13:31:45.123-07:00The German example shows that regulations like ren...The German example shows that regulations like rent control mostly become a problem when they become binding constraints: you have to see that prices and rents in most of Germany's regional markets are roughly flat over time, thanks to enough supply.<br /><br />The rent regulations I remember are mostly: (a) it's hard to kick out tenants. But that's not too much of a problem as long as they still pay market prices. (b) For existing tenants, you can increase rents by arbitrary amounts over enough time, but you have to do it slowly. (There's a limit to the maximum increase your tenants has to agree to by law.) But that's also not a problem, if the market rent isn't increasing a lot.<br /><br />'Why are there NIMBYs?' (https://www.dartmouth.edu/~wfischel/Papers/00-04.PDF) points to undiversified owner-occupier as the main culprits: they are somewhat rationally very risk-averse, and so oppose even proposals that would increase the average expected value of their property.<br /><br />Germany almost doesn't have NIMBYs, especially not eastern Germany were I grew up: a lot of people rent, and the owners of the rental properties are usually more diversified, so have the luxury of becoming more risk-neutral.<br /><br />Apropos of that: Germany's housing cooperatives are also worth a look. From a household's view there are a great way to get exposure to residential real estate. Your shares in the cooperative usually entitle you to rent any of their properties (usually all in one city) at a much reduced rate.<br /><br />Some of the old timers I knew paid for their shares in kind: they laboured to construct some of the houses after the war in the 50s.<br /><br />'Why Land Value Tax and Universal Basic Income Need each other' (https://medium.com/basic-income/why-land-value-tax-and-universal-basic-income-need-each-other-42ba999f7322) is an interesting article about how to introduce land value taxes without committing electoral suicide: use the proceeds from such a tax to finance a universal basic income. Thanks to wealth concentration at the top, your typical owner-occupier would still get a net positive income from such a scheme. And on the converse, a land value tax would be absolutely necessary to make sure a universal basic income wouldn't just go straight to the landlords via higher rents.<br /><br />(Trying to post again. Please pardon if this was posted multiple times.)Matthiashttps://www.blogger.com/profile/13665641102508209349noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-21762864247447344432017-11-27T11:34:12.815-07:002017-11-27T11:34:12.815-07:00It certainly is a vexing problem.It certainly is a vexing problem.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-45006635175663419662017-11-27T11:20:22.635-07:002017-11-27T11:20:22.635-07:00There is a big problem with your "loosen cred...There is a big problem with your "loosen credit" solution. Supply responses take a long time. In the interim, looser credit pushes up values. As wealth accrues to existing landowners they amass more political influence and will eventually find ways to cut short the supply response. You are left with more wealth concentration and a more fragile economic system, and perhaps not much else. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-2102297597207647112017-11-27T04:20:16.643-07:002017-11-27T04:20:16.643-07:00OT and just a complaint into the darkness. Tim Duy...OT and just a complaint into the darkness. Tim Duy is moderate, thoughtful fellow. And he writes this: <br /><br />“We do not have much experience with an economy operating near full employment. This sounds odd, but generally the Fed kills the economy soon after reaching that point.”<br /><br />Gadzooks---and he is right! If you believe the Fed, we have an economic system that requires moving to greater unemployment in periodic waves. <br /><br />So let's see: Let's fight inflation by periodically unemploying millions of people, and defining "full employment" when there are about 1.4 to 1.5 people seeking a job for every job opening. <br /><br />Then, let's restrict new housing construction, despite housing being one of the largest costs of living. <br /><br />I see no problems here. Why would people want anything except free enterprise? <br /><br /><br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-72006929217708470612017-11-25T22:43:49.028-07:002017-11-25T22:43:49.028-07:00This makes sense in theory, but in practice, the t...This makes sense in theory, but in practice, the timing of the fall in housing starts wasn't systematically different in Closed Access cities in 2006 and 2007 than it was in other cities, and the price collapse wasn't worse than in cities with more elastic supply. I think this falls in the plausible but not definitive category.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-47855587591352184882017-11-25T18:41:25.051-07:002017-11-25T18:41:25.051-07:00Using a system viewpoint and basic control theory ...Using a system viewpoint and basic control theory and noting that supply/demand for housing is a feedback loop system where an increase in demand gets developers all excited about providing more supply with a construction time delay. ALL simple proportional feedback systems of this type are unstable when the response time of the control system is the same as the natural frequency (if a vehicle responses was at the same frequency as your responses, you will crash as you over respond with every correction and the error grows). <br /><br />When it only takes less than a year for housing to actually be built and the normal cycle frequency for housing seems to be 5 to 10 years, without controls or limits, the system is stable and every time the demand increases, the supply increases to meet the demand and the price doesn't change very much. <br /><br />However, when you put zoning and regulators that can take 5 to 10 years to issue permissions to the inside cronies along with the extended pre-permits times (getting all the political players on-board), you have created a mathematically unstable system that will create and pop a bubble. <br /><br />The problem is in the time delays and how systems can go unstable. All the suggested corrections don't fix the time delays and can't work even if you captured the excess rents and put it all into government housing with a 5 to 10 year long political planning time, the system will be inherently unstable and they will have to worry about an oversupply at the wrong time. Government projects have long time momentum. <br /><br />Dallas Weaver, Ph.D. https://www.blogger.com/profile/18377607344114920593noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-31346411291025466462017-11-25T10:14:56.213-07:002017-11-25T10:14:56.213-07:00Thanks Bill.
Chicago and Philly are interesting. ...Thanks Bill.<br /><br />Chicago and Philly are interesting. I think they have some of the pressures the other old metro areas have, so their rate of building is lower than the US average. But it tends to be higher than the closed access cities.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-32583697918014424222017-11-25T09:55:42.457-07:002017-11-25T09:55:42.457-07:00I don't know a lot about specific German housi...I don't know a lot about specific German housing policies, but I agree they seem to do many things right. They seem to disincentivize housing consumption while being flexible about supply. That seems smart. It allows things to happen on the margin. I think there are strong tenant protections, including rent control, which could be problematic. But it just goes to show how much supply can help. Rent control is only a problem when constricted supply causes rents to rise excessively. With enough supply, rent control can offer tenants security without creating distortions.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-58216233658008845722017-11-25T09:50:36.292-07:002017-11-25T09:50:36.292-07:00Yes. Generally property or land value taxes seem g...Yes. Generally property or land value taxes seem good. But tricky. For instance, now in closed access cities renters groups frequently oppose new building because it will enhance the character of the neighborhood and draw wealthy tenants, making rents go up. I could imagine some owners opposing new developments for similar reasons because their land taxes would go up. It's definitely a fruitful topic, but I'm not sure about all the ramifications.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-80732067178204222872017-11-25T07:53:38.525-07:002017-11-25T07:53:38.525-07:00I love your work.
Here in Philly, we have people ...I love your work. <br />Here in Philly, we have people worried and concerned about housing affordability even though houses can be bought for $100,000. I don't know the rents but I'm willing to guess that they are pretty low.billnoreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-54887826547424069782017-11-25T06:16:32.932-07:002017-11-25T06:16:32.932-07:00PS Lots of cities in East Germany have a broad sup...PS Lots of cities in East Germany have a broad supply of affordable public housing. But they created affordability basically by huge drops in demand thanks to migration to the richer west and south, less so by increasing supply.<br /><br />On a less cynical note the German housing market as a whole is worth having a look. It's dominated by renting.Matthiashttps://www.blogger.com/profile/13665641102508209349noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-9914932393866268012017-11-25T05:38:11.817-07:002017-11-25T05:38:11.817-07:00Kevin, the paper 'Why are there NIMBYs' su...Kevin, the paper 'Why are there NIMBYs' suggests that the land taxes might help bring about the changes in zoning and more generous access you suggest. At least if the land tax would be levied on owner occupied housing.<br /><br />Basically the paper has some data to suggests that people turn NIMBY when a large part of their net worth (often above 100%, thanks to mortgages) is tied up in one illiquid undiversified asset.<br /><br />A land tax would be equivalent to the government taking a substantial equity position in everyone's land, and thus might reduce NIMBY tendencies over time. And NIMBY tendencies are part of what keeps access closed.<br /><br />(You can find the paper for free online. I just can't link to it easily from mobile. The author mentions some policy implications, but does not make the connection to (capitalisation of) land value taxes.)Matthiashttps://www.blogger.com/profile/13665641102508209349noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-44141733004785291302017-11-24T21:36:23.907-07:002017-11-24T21:36:23.907-07:00Agreed. The "market rent" on those units...Agreed. The "market rent" on those units is no more of a market price than the controlled price.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-75316475237858313102017-11-24T21:33:58.504-07:002017-11-24T21:33:58.504-07:00Great post.
There would be a lot of dislocation ...Great post. <br /><br />There would be a lot of dislocation with an end or radical liberalization of property zoning in closed access regions---indeed, lenders have a lot of money riding on property zoning as a permanent condition, as do extant property owners. <br /><br />Add in the lefty-loos, and their self-righteous contempt for market solutions....<br /><br />A very tough nut to crack. <br /><br />I will say this: If a propertied-financial class does not end property zoning within a city, then the voters are somewhat "justified" in voting in rent control. A tangled web we weave....Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com