To me it seems house prices are growing faster than wages, doesn't sound like a good thing to me.
In a free market model (not using a model like Singapore's), how can we ensure that house prices are always affordable?
byu/Wh1te_Pillow inAskEconomics
Posted by Wh1te_Pillow
4 Comments
A thing is expensive because there’s not enough of it. And no amount of giving people more money solves the shortage; if there’s a shortage and you give people more money–all you do is drive up the price of the thing there isn’t enough of.
So if you want to assure housing prices are affordable, you have to build more housing.
The problem is that, at least in the United States, the jurisdictions where housing is in greatest demand are those jurisdictions where it’s the hardest to add more housing units. Partially it’s because the incentives for those who already own houses are aligned against it: they don’t want to see their neighborhoods change, and they’re rewarded with more equity in their houses for their trouble. And partially because in many areas, it’s already built out–and all you can do is buy a block of houses, tear them down, and build apartment blocks: something that can only be done in a piecemeal way (as property becomes available or if you’re willing to buy people out above market prices).
So the problem is, at least in the United States, difficult, and *local*: because zoning is handled locally you can’t just pass a Federal law which cuts through all this red tape. (Nor can you force people to sell their homes even if you’ve solved for the zoning problem.)
It’s doable. But the stars are currently aligned against it.
You can’t guarantee affordable housing in a free market, that’s kind of the point of a free market. Prices go where supply and demand take them. The issue isn’t the market model, it’s that we’ve made it nearly impossible to build enough housing through zoning laws, NIMBYism and endless regulations.
The simple answer is build more houses. The more in-depth answer is reduce regulation such as nimby laws so that we can build more houses.
Restrictions on building additional units would have to be based solely on factors such as protecting risky environments, not on people wanting to limit growth in their area. The “I got mine. Go get yours somewhere else,” mindset is the biggest limiting factor on new building. As a result supply does not equal demand.
Where I live there was recently a hearing on whether a new housing development should be allowed to be built. As expected, most attending were against it, citing traffic, schools, etc. My view is different. While I like where I live, I’d also like to see my children, and my neighbor’s children, have an opportunity for a good life.