San Fransokyo
August 12, 2016 2:02 AM Subscribe
Why Tokyo is the land of rising home construction but not prices - "The city had more housing starts in 2014 than the whole of England. Can Japan's capital offer lessons to other world cities?" (via)
also btw...
also btw...
- Tokyo may have found the solution to soaring housing costs - "Tokyo housing prices have barely risen in 20 years. Here's how they did it."*
- Building more housing keeps rents low - "Tokyo, Japan's capital city, has a growing population of over 13 million people but house prices have hardly increased in twenty years. Why?"*
- San Francisco: A City of Bridges or Walls? - "The Economist's cover story, 'Drawbridges Up', highlights a new political phenomenon that's upending traditional right-left lines in the West: the debate between open and closed societies."*
- San Francisco Progressives Declare War on Affordable Housing - "Opposition to high-density housing is the ultimate in misguided Nimbyism."
- California's tax, land use policies allow too much value to get absorbed into land, housing - "The San Francisco tech boom will be undone by physical world constraints -- housing, infrastructure, labor."
- Silicon Valley is getting so expensive that even lawyers can't afford to live there - "The average house in Palo Alto costs 13 times the national average."*
- The Typical Home in San Jose Now Costs More Than $1 Million - "Rising home prices and growing affordability concerns showed no signs of abating in the second quarter, as San Jose, Calif. became the first city where the price of a typical home eclipses $1 million."*
- A growing shortage of affordable rental housing - "There is not a single state where a full-time worker earning the minimum wage can rent a market-rate one-bedroom apartment for 30 percent or less of their income, according to the National Low Income Housing Coalition. And more than 11 million households spend more than half of their income on rent."*
- Lopsided Housing Rebound Leaves Millions of People Out in the Cold - "Federal tax policy should quit subsidizing homeownership relative to renting. It's bad policy and quite regressive."*
- Innovative Approaches to Solving the Housing Crisis - "Guys, even the Fed is saying California needs more housing."*
- To Cut Down Poverty, Cut Down the Cost of Living - "A basic principle of finance could yield big wins for U.S. cities, according to a new policy agenda."*
- What if every city looked like Tokyo? - "A Japanese architect has Tokyo-ified six famous metropolises."*
Housing starts is not a good metric in Japan because old homes have no value and are knocked down to be replaced.
posted by awfurby at 2:51 AM on August 12, 2016 [20 favorites]
posted by awfurby at 2:51 AM on August 12, 2016 [20 favorites]
Yes this article is real estate developer propaganda placed in the ft real estate section. Not only is the housing starts number gross not net in a country with high scrappage, is also uses a start point for the price analysis that is influenced by one of the highest property bubbles in history.
But the most damning evidence is simply this - to believe the underlying argument you believe that the value of a home is the price of land plus the cost of building the dwelling, so you can have land prices/sq foot increasing, but because you are increasing density prices stay flat to down. Tokyo land prices have been declining during the entire period of the analysis and there is almost zero construction inflation.
The underlying thesis - more density and development = more supply=lower clearing price is plausibly reasonable but this Tokyo example isn't proving what it thinks it's proving.
Really all is saying is that owning a real asset in a deflationary environment isn't a great time.
posted by JPD at 3:31 AM on August 12, 2016 [19 favorites]
But the most damning evidence is simply this - to believe the underlying argument you believe that the value of a home is the price of land plus the cost of building the dwelling, so you can have land prices/sq foot increasing, but because you are increasing density prices stay flat to down. Tokyo land prices have been declining during the entire period of the analysis and there is almost zero construction inflation.
The underlying thesis - more density and development = more supply=lower clearing price is plausibly reasonable but this Tokyo example isn't proving what it thinks it's proving.
Really all is saying is that owning a real asset in a deflationary environment isn't a great time.
posted by JPD at 3:31 AM on August 12, 2016 [19 favorites]
awfurby:
My, admittedly very limited, understanding is that their average wages in general are far more appropriate for the cost of living, and that their social safety net is pretty good (excepting welfare, which I've heard is pretty bad). I get that housing was the way to moderate wealth and security for the last few generations of Americans. It may have to change, because that method is clearly flawed: a decent [and likely to be white/middle class] number of people who find good fortune that way became land barons.
Not always significant individual land barons, I suppose. Land was cheap enough that a lot of folks locked up the good stuff in cities, and the way that things work in the states has essentially barred the old manner of climbing the economic ladder to newcomers. Additionally it actively saps the wealth of younger generations' and the poor through an unofficial tax of sky-high rents to feed pensions to a generation who will probably try to actively deny us our own pensions as long as they are alive.
It's an unsustainable system regardless. You can't hold on to the idea that land is stable wealth forever. The whole idea is predicated on the notion that land in America will never run out, and that we can pave over as many wetlands, forests and savannahs as we like. It's a terrible holdover from the days of "manifest destiny", when they thought the west would just keep pouring out ahead of them like a magician's ribbon. Eventually useful land will run out.
I think that reducing the incentive to aspire to the means of historical European nobility (in this one aspect) encourages us to use our land more efficiently, as is done in Japan. That might partially be a consequence of the fact that in many places in Japan there simply isn't anywhere to expand, no matter the human eagerness to turn all visible skyline into concrete facades.
This is already the case in America, in the sense that some cities are so spread out that it is difficult to adequately provide services and build functional infrastructure. We need to start admitting that suburbs and exurbs are extremely inefficient and a huge planning mess.
posted by constantinescharity at 3:32 AM on August 12, 2016 [3 favorites]
My, admittedly very limited, understanding is that their average wages in general are far more appropriate for the cost of living, and that their social safety net is pretty good (excepting welfare, which I've heard is pretty bad). I get that housing was the way to moderate wealth and security for the last few generations of Americans. It may have to change, because that method is clearly flawed: a decent [and likely to be white/middle class] number of people who find good fortune that way became land barons.
Not always significant individual land barons, I suppose. Land was cheap enough that a lot of folks locked up the good stuff in cities, and the way that things work in the states has essentially barred the old manner of climbing the economic ladder to newcomers. Additionally it actively saps the wealth of younger generations' and the poor through an unofficial tax of sky-high rents to feed pensions to a generation who will probably try to actively deny us our own pensions as long as they are alive.
It's an unsustainable system regardless. You can't hold on to the idea that land is stable wealth forever. The whole idea is predicated on the notion that land in America will never run out, and that we can pave over as many wetlands, forests and savannahs as we like. It's a terrible holdover from the days of "manifest destiny", when they thought the west would just keep pouring out ahead of them like a magician's ribbon. Eventually useful land will run out.
I think that reducing the incentive to aspire to the means of historical European nobility (in this one aspect) encourages us to use our land more efficiently, as is done in Japan. That might partially be a consequence of the fact that in many places in Japan there simply isn't anywhere to expand, no matter the human eagerness to turn all visible skyline into concrete facades.
This is already the case in America, in the sense that some cities are so spread out that it is difficult to adequately provide services and build functional infrastructure. We need to start admitting that suburbs and exurbs are extremely inefficient and a huge planning mess.
posted by constantinescharity at 3:32 AM on August 12, 2016 [3 favorites]
I would guess that one factor is fewer rich foreigners wanting to move to Tokyo than to London and San Francisco
posted by DanCall at 3:37 AM on August 12, 2016 [3 favorites]
posted by DanCall at 3:37 AM on August 12, 2016 [3 favorites]
The Tokyoifications are neat to look at but my god, what an eyesore.
posted by Hal Mumkin at 4:12 AM on August 12, 2016
posted by Hal Mumkin at 4:12 AM on August 12, 2016
They're also stunningly superficial. "What if celebratory banners and bunting were a permanent fixture" "What if every road looked like the nightlife district" "What if every possible public safety feature were added all at once to a road with none"
posted by DoctorFedora at 4:22 AM on August 12, 2016 [2 favorites]
posted by DoctorFedora at 4:22 AM on August 12, 2016 [2 favorites]
Does any country other than the US have tax deductions for mortgage payments? My impression was that we were the only nation to screw things up in quite this way even though others also have strong home-ownership cultures.
posted by Tomorrowful at 5:05 AM on August 12, 2016 [2 favorites]
posted by Tomorrowful at 5:05 AM on August 12, 2016 [2 favorites]
Not only is the housing starts number gross not net in a country with high scrappage
Not to mention it is in a country with no population growth.
posted by srboisvert at 5:28 AM on August 12, 2016 [2 favorites]
Not to mention it is in a country with no population growth.
posted by srboisvert at 5:28 AM on August 12, 2016 [2 favorites]
Tokyo has population growth
posted by JPD at 5:29 AM on August 12, 2016 [7 favorites]
posted by JPD at 5:29 AM on August 12, 2016 [7 favorites]
but my god, what an eyesore
...said every nimby ever
posted by Reasonably Everything Happens at 6:24 AM on August 12, 2016 [14 favorites]
...said every nimby ever
posted by Reasonably Everything Happens at 6:24 AM on August 12, 2016 [14 favorites]
the great sucking sound one hears everywhere in Japan is Tokyo drawing in all of the population and wealth from the rest of the country
I'm the opposite of an apologist for neo-liberalism, but still. Urbanization is a real thing, with a complex web of 'natural' incentives. The Brexit vote results show how people respond politically to this agglomeration effect, but they're dismantling the central (potentially redistributionary) governments with one hand while they clutch their pearls about the countryside with the other.
posted by Reasonably Everything Happens at 6:28 AM on August 12, 2016 [1 favorite]
I'm the opposite of an apologist for neo-liberalism, but still. Urbanization is a real thing, with a complex web of 'natural' incentives. The Brexit vote results show how people respond politically to this agglomeration effect, but they're dismantling the central (potentially redistributionary) governments with one hand while they clutch their pearls about the countryside with the other.
posted by Reasonably Everything Happens at 6:28 AM on August 12, 2016 [1 favorite]
Does any country other than the US have tax deductions for mortgage payments?
We did in France for a while, but like in Japan, it was with reasonable restrictions: it had to be your primary residence, had to be a viable residence when you purchased it (in this case, that meant plumbing and electricity up to code, as well as having a minimum "habitable surface area" of 9sq.m/97sq.ft), and had to be your first mortgage. All of this with home inspection and bank documentation, naturally. It worked very well, but started in 2006 and ended in 2009. In other words, smack dab before and at the start of the recession.
Now it's back to the way it was before – property owners are either well-off and able to bling out their places for sale and rent, or the middle class is slowly choking to death and unable to sell decent-but-not-fantastic places they can neither afford to fix up, nor rent out, because they can't afford to buy or rent a second place. So you've got increasingly expensive and dwindling rental properties, renters who have something affordable are holding on to what they can find (thankfully rental laws favor renters here much more than in the States), and people who own places are either panicking or resigned to reality. It almost looked like AirBnb would make a dent for that middle class segment, but AirBnb's practices were doused quickly by local governments (with good reason, but that's another long story) who are trying to make things viable for new homeowners again.
Over here the approach being taken by Paris is multi-pronged and aimed at several societal issues, but that would be a huge writeup as well. It does seem quite similar to Japan, with a major exception in that as so many places are built of stone and concrete, they're a lot more expensive to tear down, so priority is being given to improved transportation to the suburbs, encouraging ecological construction that's viable over a long term (decades), and requiring cities to give construction permits for apartment buildings with unit sizes that actually reflect society, i.e. not just 4-bedroom 200sq.m (2,100sq.ft) villas – those are humongous by French standards.
This is the issue the Riviera has run into – massive villas – and handled terribly; they wanted to attract rich folk, well, they did, and then the rich folk stay for one or two months a year and don't pay taxes, their properties are empty the rest of the time, and the working and middle classes live in micro-apartments they can neither afford to fix up nor sell because no one in their segment can afford to buy them now. This is what I've been forced to deal with after leaving Nice two years ago: my place would be perfect for a young couple, I set it at an affordable price (where I would actually be at a 5K loss, but I didn't mind if it went to people who loved it), and....... the only offers I got were from developers knocking another 15K off so they could afford to fix it up and flip it the second that was done. I kept telling my first realtor that I was not going to finance 20K of work for someone else to profit off. I still own the place and have found a trusted renter. I'm "lucky" because it's no longer my primary residence, and so can rent it out (scare quotes around lucky because helloooo goodbyyyye 65% of my income to housing every month, sigh). Anyway, local governments in Nice are finally starting to wake up to the fact that luxe tourists do not make cities run, and some Paris-similar solutions are in the works.
posted by fraula at 6:41 AM on August 12, 2016 [5 favorites]
We did in France for a while, but like in Japan, it was with reasonable restrictions: it had to be your primary residence, had to be a viable residence when you purchased it (in this case, that meant plumbing and electricity up to code, as well as having a minimum "habitable surface area" of 9sq.m/97sq.ft), and had to be your first mortgage. All of this with home inspection and bank documentation, naturally. It worked very well, but started in 2006 and ended in 2009. In other words, smack dab before and at the start of the recession.
Now it's back to the way it was before – property owners are either well-off and able to bling out their places for sale and rent, or the middle class is slowly choking to death and unable to sell decent-but-not-fantastic places they can neither afford to fix up, nor rent out, because they can't afford to buy or rent a second place. So you've got increasingly expensive and dwindling rental properties, renters who have something affordable are holding on to what they can find (thankfully rental laws favor renters here much more than in the States), and people who own places are either panicking or resigned to reality. It almost looked like AirBnb would make a dent for that middle class segment, but AirBnb's practices were doused quickly by local governments (with good reason, but that's another long story) who are trying to make things viable for new homeowners again.
Over here the approach being taken by Paris is multi-pronged and aimed at several societal issues, but that would be a huge writeup as well. It does seem quite similar to Japan, with a major exception in that as so many places are built of stone and concrete, they're a lot more expensive to tear down, so priority is being given to improved transportation to the suburbs, encouraging ecological construction that's viable over a long term (decades), and requiring cities to give construction permits for apartment buildings with unit sizes that actually reflect society, i.e. not just 4-bedroom 200sq.m (2,100sq.ft) villas – those are humongous by French standards.
This is the issue the Riviera has run into – massive villas – and handled terribly; they wanted to attract rich folk, well, they did, and then the rich folk stay for one or two months a year and don't pay taxes, their properties are empty the rest of the time, and the working and middle classes live in micro-apartments they can neither afford to fix up nor sell because no one in their segment can afford to buy them now. This is what I've been forced to deal with after leaving Nice two years ago: my place would be perfect for a young couple, I set it at an affordable price (where I would actually be at a 5K loss, but I didn't mind if it went to people who loved it), and....... the only offers I got were from developers knocking another 15K off so they could afford to fix it up and flip it the second that was done. I kept telling my first realtor that I was not going to finance 20K of work for someone else to profit off. I still own the place and have found a trusted renter. I'm "lucky" because it's no longer my primary residence, and so can rent it out (scare quotes around lucky because helloooo goodbyyyye 65% of my income to housing every month, sigh). Anyway, local governments in Nice are finally starting to wake up to the fact that luxe tourists do not make cities run, and some Paris-similar solutions are in the works.
posted by fraula at 6:41 AM on August 12, 2016 [5 favorites]
Mortgage tax deductions are bad, but absent changes in marginal rates i think they should represent only a one time shift in prices. The real problem is they represent a tax subsidy to a group were shouldn't be subsidizing.
posted by JPD at 6:53 AM on August 12, 2016 [2 favorites]
posted by JPD at 6:53 AM on August 12, 2016 [2 favorites]
Btw all of those French restrictions apply to the interest rate deduction in the US. It's tricky as well because we generally allow businesses to deduct interest expense.
posted by JPD at 6:55 AM on August 12, 2016
posted by JPD at 6:55 AM on August 12, 2016
who could have ever dreamed that a regulated housing market would keep housing affordable
DoctorFedora: You've said things like this before and it drives me up the wall. Classifying Japanese housing markets as regulated and North American ones as not is dead wrong by any standard. One has plenty of land use regulation at the national level, the other has plenty at the municipal level.
posted by ripley_ at 7:36 AM on August 12, 2016 [5 favorites]
DoctorFedora: You've said things like this before and it drives me up the wall. Classifying Japanese housing markets as regulated and North American ones as not is dead wrong by any standard. One has plenty of land use regulation at the national level, the other has plenty at the municipal level.
posted by ripley_ at 7:36 AM on August 12, 2016 [5 favorites]
Most American cities have zoning in place that's designed to prevent neighborhood change and preserve land value. There's no urban planning, no growth strategy, just blanket denial of reality. What precious little gets built is for the mega rich and absentee owners, neither of which contribute anything a living city needs. Pointless and stupid.
posted by 1adam12 at 7:47 AM on August 12, 2016 [3 favorites]
posted by 1adam12 at 7:47 AM on August 12, 2016 [3 favorites]
Most American cities have zoning in place that's designed to prevent neighborhood change and preserve land value.
A member of Palo Alto's city planning commission resigned this week and moved to Santa Cruz because she can't afford housing in Palo Alto.
In some places they're succeeding too well.
posted by GuyZero at 7:52 AM on August 12, 2016 [5 favorites]
A member of Palo Alto's city planning commission resigned this week and moved to Santa Cruz because she can't afford housing in Palo Alto.
In some places they're succeeding too well.
posted by GuyZero at 7:52 AM on August 12, 2016 [5 favorites]
I'm also not in love with the FT post. For one, "Local government has almost no power over development" is a bit of an exaggeration – local governments in Japan decide which (national) zoning districts go where. That's a lot of power, it's just slightly different from how we do things in the West.
But! Leaving the FT post aside, I don't think there can be any doubt that 1) Tokyo is dramatically affordable compared to other world cities 2) at least part of that is due to their permissive land use regulation, some of which comes from the Japanese national government. You want examples? Holy hell do I ever have examples.
For the poor, Tokyo is *so* much better than major western cities. Last I checked, apamanshop.com had 6000+ apartments in central Tokyo for under $500 USD/month. They're gonna be small, but many are clean+attractive and I'll take these over our dwindling stock of run-down SRO hotels.
The affordability isn't just limited to the low end. You can walk around trendy central neighbourhoods and see average apartment listings for $900/month. Or maybe you want a 4BR single-family home, with parking, next to a beautiful greenway for $2450/month?
It's also worth noting that this doesn't all come from skyscrapers, as is the popular Blade Runner-esque vision of Tokyo. Most of Tokyo is zoned for low-rise residential, it just happens to be much more permissive (in terms of setbacks, FSR, # of units allowed, minimum lot sizes) than in most North American cities.
posted by ripley_ at 8:03 AM on August 12, 2016 [7 favorites]
But! Leaving the FT post aside, I don't think there can be any doubt that 1) Tokyo is dramatically affordable compared to other world cities 2) at least part of that is due to their permissive land use regulation, some of which comes from the Japanese national government. You want examples? Holy hell do I ever have examples.
For the poor, Tokyo is *so* much better than major western cities. Last I checked, apamanshop.com had 6000+ apartments in central Tokyo for under $500 USD/month. They're gonna be small, but many are clean+attractive and I'll take these over our dwindling stock of run-down SRO hotels.
The affordability isn't just limited to the low end. You can walk around trendy central neighbourhoods and see average apartment listings for $900/month. Or maybe you want a 4BR single-family home, with parking, next to a beautiful greenway for $2450/month?
It's also worth noting that this doesn't all come from skyscrapers, as is the popular Blade Runner-esque vision of Tokyo. Most of Tokyo is zoned for low-rise residential, it just happens to be much more permissive (in terms of setbacks, FSR, # of units allowed, minimum lot sizes) than in most North American cities.
posted by ripley_ at 8:03 AM on August 12, 2016 [7 favorites]
A Typical Home in San Jose Now Costs Over $1 Million
posted by robbyrobs at 8:26 AM on August 12, 2016
posted by robbyrobs at 8:26 AM on August 12, 2016
Yes this article is real estate developer propaganda placed in the ft real estate section.
It's really incredible just how many people some folks are willing to throw under the bus to have the moral satisfaction of thumbing their noses at "developers."
That being said, I hope that people don't walk away from this article thinking that their choices are between San Francisco and Tokyo. It's perfectly possible to have dense, walkable cities (with good transit and stuff like that) without skyscrapers. Paris is probably the best example of this.
The other crazy thing about the low-rise, pre-war apartment buildings is that they're probably the cheapest and most durable kind of architecture to construct. Good economies of scale with conventional building techniques.
Even European suburbs manage to have a lot more density and walkability than their American counterparts, while making seemingly few tradeoffs.
Tokyo has a lot of serious constraints, and it's impressive that they've managed to do what they've done, which is even more of a damning indictment on the American housing crisis. Our problems aren't even particularly difficult ones.
posted by schmod at 9:28 AM on August 12, 2016 [2 favorites]
It's really incredible just how many people some folks are willing to throw under the bus to have the moral satisfaction of thumbing their noses at "developers."
That being said, I hope that people don't walk away from this article thinking that their choices are between San Francisco and Tokyo. It's perfectly possible to have dense, walkable cities (with good transit and stuff like that) without skyscrapers. Paris is probably the best example of this.
The other crazy thing about the low-rise, pre-war apartment buildings is that they're probably the cheapest and most durable kind of architecture to construct. Good economies of scale with conventional building techniques.
Even European suburbs manage to have a lot more density and walkability than their American counterparts, while making seemingly few tradeoffs.
Tokyo has a lot of serious constraints, and it's impressive that they've managed to do what they've done, which is even more of a damning indictment on the American housing crisis. Our problems aren't even particularly difficult ones.
posted by schmod at 9:28 AM on August 12, 2016 [2 favorites]
It's perfectly possible to have dense, walkable cities (with good transit and stuff like that) without skyscrapers. Paris is probably the best example of this.
Tokyo's a pretty good example too.
posted by ripley_ at 9:36 AM on August 12, 2016 [4 favorites]
Tokyo's a pretty good example too.
posted by ripley_ at 9:36 AM on August 12, 2016 [4 favorites]
A member of Palo Alto's city planning commission resigned this week and moved to Santa Cruz because she can't afford housing in Palo Alto.
Since when is Santa Cruz affordable?
posted by boilermonster at 9:37 AM on August 12, 2016
Another factor to consider: the sheer, gobsmackingly massive geographic size of Tokyo in comparison with other cities.
Japan is often regarded as relatively small in landmass. That's certainly the case; in comparison with neighbors such as China and Russia, it's a svelte, rail-thin sliver in the ocean.
But that image paints over the reality of Tokyo, which is situated on the broad, seemingly endless Kanto Plain. The map at the top of this page superimposes Tokyo on New York. You can see that it encompasses Manhattan through north of Central Park; a large chunk of Brooklyn and Staten Island; and, for good measure, sprawling New Jersey cities like Elizabeth and Jersey City. And that's just Greater Tokyo! The area around the blue circle, three times its size, includes cities and bedtowns that are in commuting distance (by local standards) of the city center.
Even if zoning was as tough as elsewhere, Tokyo would still have sufficient landspace for seemingly limitless building of housing, warehouses and offices. Add in the flexibility of tear-down and building rules and customs, and the quantity of the potentially available footprint is mindboggling.
posted by Gordion Knott at 9:43 AM on August 12, 2016 [3 favorites]
Japan is often regarded as relatively small in landmass. That's certainly the case; in comparison with neighbors such as China and Russia, it's a svelte, rail-thin sliver in the ocean.
But that image paints over the reality of Tokyo, which is situated on the broad, seemingly endless Kanto Plain. The map at the top of this page superimposes Tokyo on New York. You can see that it encompasses Manhattan through north of Central Park; a large chunk of Brooklyn and Staten Island; and, for good measure, sprawling New Jersey cities like Elizabeth and Jersey City. And that's just Greater Tokyo! The area around the blue circle, three times its size, includes cities and bedtowns that are in commuting distance (by local standards) of the city center.
Even if zoning was as tough as elsewhere, Tokyo would still have sufficient landspace for seemingly limitless building of housing, warehouses and offices. Add in the flexibility of tear-down and building rules and customs, and the quantity of the potentially available footprint is mindboggling.
posted by Gordion Knott at 9:43 AM on August 12, 2016 [3 favorites]
When you are coming from Palo Alto.
posted by Mitheral at 9:44 AM on August 12, 2016 [1 favorite]
posted by Mitheral at 9:44 AM on August 12, 2016 [1 favorite]
It's really incredible just how many people some folks are willing to throw under the bus to have the moral satisfaction of thumbing their noses at "developers."
Eh. Um i'm kinda sorta one of the more markets focused people who regularly post on this here website. So perhaps you should read again what I wrote. That was a dig at the FT real estate section and the quality of this article.
That said David Tang 4 life.
posted by JPD at 9:45 AM on August 12, 2016
Eh. Um i'm kinda sorta one of the more markets focused people who regularly post on this here website. So perhaps you should read again what I wrote. That was a dig at the FT real estate section and the quality of this article.
That said David Tang 4 life.
posted by JPD at 9:45 AM on August 12, 2016
One common factor across all real estate bubbles - low interest rates. Governmental reluctance to curb high loan-to-value mortgages not only encourages sky-rocketing real estate prices, it also creates the conditions for catastrophic collapse.
And government mortgage policies seem fundamentally flawed in the mathematical sense. In Canada, the rules are percentage-based. A house buyer must have a minimal downpayment of 5%.
Ten years ago when house prices were around $250K, that meant a payment of 12K and a mortgage of $238K. Nowadays in Toronto and Vancouver where prices are now $1M+, the mortgage can be as high as $950,000.
This makes no financial sense for the average buyer. Interest rates for mortgages are only locked in for a maximum of 5 years. That means that a surge in rates, say, ten years from now could easily wipe out the equity overnight. It makes no sense for governments either, because they'd be left with a financial sector crippled by mortgage default.
It seems more reasonable to cap mortgages to a fixed absolute limit, e.g. no-one can borrow more than say $500K for a residential home (adjusting the limit every year to account for inflation).
posted by storybored at 10:07 AM on August 12, 2016 [1 favorite]
And government mortgage policies seem fundamentally flawed in the mathematical sense. In Canada, the rules are percentage-based. A house buyer must have a minimal downpayment of 5%.
Ten years ago when house prices were around $250K, that meant a payment of 12K and a mortgage of $238K. Nowadays in Toronto and Vancouver where prices are now $1M+, the mortgage can be as high as $950,000.
This makes no financial sense for the average buyer. Interest rates for mortgages are only locked in for a maximum of 5 years. That means that a surge in rates, say, ten years from now could easily wipe out the equity overnight. It makes no sense for governments either, because they'd be left with a financial sector crippled by mortgage default.
It seems more reasonable to cap mortgages to a fixed absolute limit, e.g. no-one can borrow more than say $500K for a residential home (adjusting the limit every year to account for inflation).
posted by storybored at 10:07 AM on August 12, 2016 [1 favorite]
Unlike the US (not sure about the UK) home buyers do not have much incentive to overbuy.
Nigel Lawson got rid of the ability to pool each partners’ mortgage tax rebate in the UK back in the late 80s. It marked the highpoint of the 80s housing bubble in the UK as people rushed to buy housing before their rebate was cut in half & they all vastly overpaid. I think the amount you could claim was then left to lag behind property prices, so that by the time it was eliminated in 2000 by Brown it was relatively uncontroversial.
I think the only other country with a mortgage interest tax deduction is Australia where property ownership is by all accounts practically the state religion.
posted by pharm at 10:18 AM on August 12, 2016
Nigel Lawson got rid of the ability to pool each partners’ mortgage tax rebate in the UK back in the late 80s. It marked the highpoint of the 80s housing bubble in the UK as people rushed to buy housing before their rebate was cut in half & they all vastly overpaid. I think the amount you could claim was then left to lag behind property prices, so that by the time it was eliminated in 2000 by Brown it was relatively uncontroversial.
I think the only other country with a mortgage interest tax deduction is Australia where property ownership is by all accounts practically the state religion.
posted by pharm at 10:18 AM on August 12, 2016
"who could have ever dreamed that a regulated housing market would keep housing affordable
unimaginable"
In fact Tokyo represents a largely UNregulated housing market w/r/t the U.S or most major western cities.
cf Houston, which has essentially no zoning, is also huge in area, has no natural barriers to sprawl, and has also experienced substantial population growth over the last several years, but with only a modest bubble in prices.
Houston has plenty of eyesores, but so what? Zoning and land use regulations protect and enrich those who have already developed their property at the expense of those who haven't, and they make housing more expensive. They have benefits, but substantial costs.
posted by etherist at 10:28 AM on August 12, 2016 [6 favorites]
unimaginable"
In fact Tokyo represents a largely UNregulated housing market w/r/t the U.S or most major western cities.
cf Houston, which has essentially no zoning, is also huge in area, has no natural barriers to sprawl, and has also experienced substantial population growth over the last several years, but with only a modest bubble in prices.
Houston has plenty of eyesores, but so what? Zoning and land use regulations protect and enrich those who have already developed their property at the expense of those who haven't, and they make housing more expensive. They have benefits, but substantial costs.
posted by etherist at 10:28 AM on August 12, 2016 [6 favorites]
Since when is Santa Cruz affordable?
Compared to Palo Alto or Mountain View or a bunch of other Valley towns? It's not bad at all. Plus it's pretty and actually seems like a real city with culture and nightlife and all kinds of stuff. I know someone who just moved there and commuted 1-2 hours each way to Mountain View daily and he's loving it. To me it's insane, but he's not alone.
posted by GuyZero at 10:42 AM on August 12, 2016
Compared to Palo Alto or Mountain View or a bunch of other Valley towns? It's not bad at all. Plus it's pretty and actually seems like a real city with culture and nightlife and all kinds of stuff. I know someone who just moved there and commuted 1-2 hours each way to Mountain View daily and he's loving it. To me it's insane, but he's not alone.
posted by GuyZero at 10:42 AM on August 12, 2016
It seems more reasonable to cap mortgages to a fixed absolute limit, e.g. no-one can borrow more than say $500K for a residential home (adjusting the limit every year to account for inflation).
There are a lot of bad economic policies around housing in the US, but this is even more terrible than most of them. It's basically a fuck-you to middle-income families in high-cost cities. Heck, it's a fuck-you to high-income families in high-cost cities. I know families that have net incomes of probably in the 300K-400K range - why shouldn't they have million-dollar mortgages? It's the only way to buy a house in Mountain View unless you have dynastic wealth or are importing money in from China.
posted by GuyZero at 10:45 AM on August 12, 2016
There are a lot of bad economic policies around housing in the US, but this is even more terrible than most of them. It's basically a fuck-you to middle-income families in high-cost cities. Heck, it's a fuck-you to high-income families in high-cost cities. I know families that have net incomes of probably in the 300K-400K range - why shouldn't they have million-dollar mortgages? It's the only way to buy a house in Mountain View unless you have dynastic wealth or are importing money in from China.
posted by GuyZero at 10:45 AM on August 12, 2016
For reals. You already get hit with penalties for having a "jumbo loan" — because that number is set nationwide and is a joke in high-price, high-pay markets. In general, in the US, capping things by a flat number screws urbanites. We don't need to make it worse.
posted by dame at 12:02 PM on August 12, 2016 [3 favorites]
posted by dame at 12:02 PM on August 12, 2016 [3 favorites]
Housing starts is not a good metric in Japan because old homes have no value and are knocked down to be replaced.
that's touched on in the FPP: "Constant rebuilding helps to explain why housing starts in the city are so high: the net increase in homes is lower. Like our next-door neighbours, however, a rebuild often allows an increase in density." so i guess a better metric would be 'net new homes' or perhaps 'net new residential sq. footage' or something... which the article suggests is still rising, increasing density?
also i saw this statistic in Japan's Creative, Ephemeral Homes: "Architecture in Japan is big business, with 24 architects for every 10,000 people, compared with 3.4 in the U.S., says the International Union of Architects..."
Tokyo real estate prices plummet as ghost homes on outskirts of city lie abandoned and unsold - "Chinese middle classes, mainly from Beijing and Shanghai, are coming in for the cheap takings and buying up apartments in central Tokyo. But on the outskirts of Tokyo, in Yokosuka, houses lie abandoned all over the place..."
Superblocks: how Barcelona is taking city streets back from cars - "Barcelona is absolutely dreamy — one of the most pleasant, walkable cities on Earth, filled with markets, sidewalk cafes, and bustling street life... The idea is pretty simple. Take nine square blocks of city. (It doesn’t have to be nine, but that’s the ideal.) Rather than all traffic being permitted on all the streets between and among those blocks, cordon off a perimeter and keep through traffic, freight, and city buses on that."
oh and fwiw more on the palo altan who moved to santa cruz: "Palo Alto mayor Patrick Burt... said the city was working to slow job growth and increase the rate of housing development..."
"Vulcan logic lead to zoning changes in the Bay Area, ushering in Star Trek's utopian economy..."*
that's touched on in the FPP: "Constant rebuilding helps to explain why housing starts in the city are so high: the net increase in homes is lower. Like our next-door neighbours, however, a rebuild often allows an increase in density." so i guess a better metric would be 'net new homes' or perhaps 'net new residential sq. footage' or something... which the article suggests is still rising, increasing density?
also i saw this statistic in Japan's Creative, Ephemeral Homes: "Architecture in Japan is big business, with 24 architects for every 10,000 people, compared with 3.4 in the U.S., says the International Union of Architects..."
There are signs of price appreciation only at the real-estate market’s high end—mostly apartments in posh buildings, not detached houses. Otherwise, the land is where value is retained. (More than 90% of locations in central Tokyo surveyed by the Land Ministry saw price rises in the last quarter of 2014.) But a higher land price often means a smaller budget left over for the house, which can result in a poorer-quality building that deteriorates faster.I would guess that one factor is fewer rich foreigners wanting to move to Tokyo than to London and San Francisco
“This has become a self-fulfilling prophecy,” said Zoe Ward, CEO of Japan Property Central, a buying agency for overseas investors. She said because of the lifespan estimates, which were meant for tax depreciation, many houseowners stop doing upkeep.
Tokyo real estate prices plummet as ghost homes on outskirts of city lie abandoned and unsold - "Chinese middle classes, mainly from Beijing and Shanghai, are coming in for the cheap takings and buying up apartments in central Tokyo. But on the outskirts of Tokyo, in Yokosuka, houses lie abandoned all over the place..."
"There used to be a car industry here but mechanisation took over ... there's no jobs and young people don't want to live here."I hope that people don't walk away from this article thinking that their choices are between San Francisco and Tokyo. It's perfectly possible to have dense, walkable cities (with good transit and stuff like that) without skyscrapers.
[...]
The Chinese are coming in great numbers for the cheap takings, and it is not the billionaires but the growing Chinese middle classes that are investing in sought after areas in central Tokyo... Japanese real estate agent Yoshi Tanaka said investors from China have tripled in the past year, and they buy with cash, looking for small to medium sized apartments... And like cities in Australia, the Chinese are pushing up prices. In some areas of central Tokyo apartment prices have risen by 20 per cent — the first real increase for a couple of decades.
Superblocks: how Barcelona is taking city streets back from cars - "Barcelona is absolutely dreamy — one of the most pleasant, walkable cities on Earth, filled with markets, sidewalk cafes, and bustling street life... The idea is pretty simple. Take nine square blocks of city. (It doesn’t have to be nine, but that’s the ideal.) Rather than all traffic being permitted on all the streets between and among those blocks, cordon off a perimeter and keep through traffic, freight, and city buses on that."
oh and fwiw more on the palo altan who moved to santa cruz: "Palo Alto mayor Patrick Burt... said the city was working to slow job growth and increase the rate of housing development..."
Joe Snider, a 31-year-old information technology analyst, left Palo Alto for Colorado and now works remotely for his company. He said he also supports fewer regulations and unrestricted housing development."In America, growth policy is urban policy."
Snider and his partner are both from northern California and wanted to remain, but they ultimately decided that the idea of an hour-long commute was too daunting.
"Vulcan logic lead to zoning changes in the Bay Area, ushering in Star Trek's utopian economy..."*
San Francisco benefited enormously from radical changes that came after Earth's First Contact with Vulcans. It soon became home to important United Earth institutions, including the precursor to Starfleet. The skyline was also altered significantly, with a host of new skyscrapers eclipsing both the Transamerica Building and Golden Gate Bridge. (ENT: "Broken Bow"; Star Trek: The Motion Picture; Star Trek)posted by kliuless at 12:34 PM on August 12, 2016 [1 favorite]
kliuless: "so i guess a better metric would be 'net new homes' or perhaps 'net new residential sq. footage' or something... which the article suggests is still rising, increasing density?"
Number of bedrooms with maybe an adjustment factor for square footage to account for luxuriation of stock.
posted by Mitheral at 2:15 PM on August 12, 2016
Number of bedrooms with maybe an adjustment factor for square footage to account for luxuriation of stock.
posted by Mitheral at 2:15 PM on August 12, 2016
Palo Alto mayor Patrick Burt... said the city was working to slow job growth
Things you thought you'd never see in America
posted by GuyZero at 2:28 PM on August 12, 2016 [2 favorites]
Things you thought you'd never see in America
posted by GuyZero at 2:28 PM on August 12, 2016 [2 favorites]
Just as Glass-Steagall kept commercial and investment banking apart (followed by disaster when it was repealed), we have long needed laws that protect residential housing from speculative investment.
Unfettered capitalism has allowed US medical care and housing to become the pawns of speculators. What will keep the same thing from happening to food and water? Appeals to 'ethics'?
A country that cannibalizes itself can hardly be called Great.
posted by Twang at 2:32 PM on August 12, 2016
Unfettered capitalism has allowed US medical care and housing to become the pawns of speculators. What will keep the same thing from happening to food and water? Appeals to 'ethics'?
A country that cannibalizes itself can hardly be called Great.
posted by Twang at 2:32 PM on August 12, 2016
I know better than to read the comments, but holy shit, don't read the comments on the local Palo Alto newspaper linked to by the link above. If a lawyer and a software developer are examples of entitled lazy millenials with no work ethic, I'd hate to see what those commenters really think of East Palo Alto (which is also getting expensive).
posted by fragmede at 4:02 AM on August 13, 2016 [1 favorite]
posted by fragmede at 4:02 AM on August 13, 2016 [1 favorite]
etc.
- Yes, more housing supply makes rents go down.
- Reclaiming "Redneck" Urbanism: What Urban Planners can Learn from Trailer Parks - "most forms of low-income housing have been criminalized in nearly every major US city"*
- The Greatest Social Challenge of our Generation - "America's suburbs are not financially viable, even with the affluent living in them. As the poor become more of a presence there, it's hard to see how these places can keep from unraveling... There are simply not enough Americans, and never will be, to maintain the vast space our metropolitan areas and small towns have now expanded into. The next generation of change will continue to have extreme winners and losers, especially so on our current trajectory. How do we use the best of who we are to to create a society that is strong, prosperous and just?"
- Explanation of Japanese zoning laws
- Zoning is a national law, not a municipal by-law
- There are only 12 different zones
- Zones still restrict uses, but they tend to allow a "maximum" use instead of an exclusive use for each zone
- Japanese zoning doesn't differentiate the types of residential use
- It includes rational rather than arbitrary height limits
- Cities still conserve the right to require certain geometric criteria
- On zoning, inequality & homeownership: " 'homeowners, who are the most numerous and politically influential group within most localities', are driven to wield their considerable political power in the manner that will maximize the value of this asset."*
- Homeowners and financial savers run America.*
- How Mark Zuckerberg Might Attack The Affordable Housing Crisis - "Zuckerberg had met with several housing experts to learn more about the country’s affordable housing crisis. It does make some sense as it's an issue that—in the Bay Area at least—Silicon Valley tech companies have helped create, so much so that Facebook recently set aside a section of their latest corporate housing development in Menlo Park to absorb residents being displaced by tech workers with hearty salaries."
- "It's bad for the economy if... our most productive places can't grow."
What California and Texas Have in Common - "What is the California-Texas secret? Well, most obviously, it's that, as economic activity in the U.S. has become increasingly concentrated in a few big, vibrant metropolitan areas, they are both states with big, vibrant metropolitan areas..."
posted by kliuless at 3:57 PM on August 24, 2016
Big metropolitan areas are doing so well in large part because cramming lots of people together increases the interactions that fuel innovation and growth. The impact is especially big if these people bumping into one another are highly skilled...What it will take to make Silicon Valley affordable again - "The cost of making housing is very high. Cost of stopping new housing is exceedingly low because you see projects getting killed because a small group of residents object to it based on their specific issues. Cumulatively the whole region misses out."
Why did these cities develop in California and Texas, and why do they exercise such attractive force? A lot of it is surely dumb luck, but I think there is an important common thread (and this is where I'm going to haul out my particular ideological ax). In past decades, private- and public-sector leaders in both California and Texas made big investments in their states' futures that have paid off richly...
In recent years, both California and Texas seem to have pulled back on that investment, at least on the public level. In California this is mainly because the state has loaded itself up with too many obligations to the past (pensions) and present (health care). In Texas the issue appears to be more ideological -- the state's Republican majority really, really wants to keep taxes and spending low. As somebody who grew up in California and has a big soft spot for Texas, I'm hoping both states find ways around these obstacles. Investing in the future is what made them great. They need to keep doing it.
posted by kliuless at 3:57 PM on August 24, 2016
Kliuless, the zoning thing alone is worth focusing so much on. For years, my wife has talked about wanting to start a "general store" or maybe a convenience store type situation in America that would basically serve a suburban neighborhood that it would be located in, but American zoning laws generally prohibit even considering the idea because that square is Green instead of Blue and that means Housing Only in the suburbs, period.
Zoning based on maximum allowable nuisance level rather than explicitly for a single purpose means that you can have what are generally regarded as Small Town Walkability without restricting it to just what have traditionally been downtown sorts of areas, and have supermarkets routinely located within walking distance of homes without having to explicitly zone the land for mixed use. It's wonderful.
posted by DoctorFedora at 7:23 PM on August 24, 2016
Zoning based on maximum allowable nuisance level rather than explicitly for a single purpose means that you can have what are generally regarded as Small Town Walkability without restricting it to just what have traditionally been downtown sorts of areas, and have supermarkets routinely located within walking distance of homes without having to explicitly zone the land for mixed use. It's wonderful.
posted by DoctorFedora at 7:23 PM on August 24, 2016
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unimaginable
posted by DoctorFedora at 2:40 AM on August 12, 2016 [20 favorites]