Smooth_Imagination t1_it8viy4 wrote on October 21, 2022 at 7:56 PM

Reply to comment by ThePhysicistIsIn in Many countries have a "hidden welfare state" for incumbent homeowners, as governments subsidize homeowners through the tax system. The homeownership welfare state is strongest in the US and other Anglophone countries, but weakest in the Scandinavian countries. by smurfyjenkins

Yes this is true in that people have to modify what size of mortgage they can take on in light of disposable income, but I think a better solution is to restrict mortgage lenders from lending excessive multiples of an average wage whilst restricting planning permission except for affordable housing (as calculated by an affordable mulltiple of average earnings in the local area). So in this way land costs are restricted. See, a developer knows that affordable housing is defined as a certain level, purchases land, the council or planning department says 'affordable only', this causes the value of the land to be more rational, which is a major component of the final cost. Governments should in my view actively contract home construction companies to meet demand for affordable housing where they know there is jobs.

By relaxing lending in a situation of scarcity and at the same time allowing overseas investors and other investors to accumulate excess property, then the mortgages will go into bubble territory which also is mirrored in rental prices. Its a self-fulfilling loop.

Soupkitchn89 t1_it9n14g wrote on October 21, 2022 at 11:15 PM

The problem is you can’t really force housing to be affordable. At some point the cost of actually building the house dictates how cheap it can actually be.

zeptillian t1_it9vegt wrote on October 22, 2022 at 12:21 AM

You can make buying up existing housing to make money less profitable by charging a higher rate for properties that are not lived in by the owners, or have a graduated tax rate where it becomes cheaper the longer you live in your home.

Businesses bought up over 20% of the housing since the pandemic started. That's a huge upward pressure on price.

Smooth_Imagination t1_it9qenn wrote on October 21, 2022 at 11:42 PM

Oh it does, the cost of the house can't go to zero, thats true.

But in industrialised, technologically progressing societies, the ammout of stuff each of us produces increases and can in turn, even with a fat cat in the middle, get more in exchange for what we trade. So housing should get technically more affordable, although never free.

In my country by way of background, in my area many people are priced out. But not far from here getting a new, town centre flat can be very affordable, in areas that are reasonably desirable. Because of national minimum wage most everyone can earn £1500 a month and the flats are £100,000, with rent of about £400 a month. These are new builds not being sold at a loss, that's just a reflection of what they cost. Anyone can get a deposit and buy one there.

But go where the housing is in higher demand and prices go, as we say 'mental'. In the capital, for example, a major driver of this is that property is bought for money laundering and oversees investment funds.

So managing demand so that new builds (a fraction of which) can only by bought by local workers and not more than a reasonable multiple of wage is quite doable.

Now, the cost of housing is about 30% from the underlying cost of the land. But, if you were a house builder in this country and wanted to increase the odds of getting your planning application on a plot of cheap farmland you have bought, from nearly zero to decent, you would have to put a fraction of it as 'affordable'. Now if you put it to 100% affordable then developers know that the development has higher odds of getting planning but is less profitable. Councils can thereby keep housing costs down because granting planning for affordable housing means the land is worth less, and thereby costs less, than for say a millionaires row. And this does lower the cost of the development. So yes it is happening, but the rate at which new housing is coming onto the market lags years behind because planning permissions take ages, and really should be strategically pre-approved where it is logical to build them (for affordable housing). The ongoing bubble prices are due to supply vs demand imbalance.

Edit typo

Soupkitchn89 t1_it9qz4i wrote on October 21, 2022 at 11:46 PM

For sure. I just think making housing cost less then it should in a given market is the wrong way to make affordable housing I guess. I think more should be able to afford homes but I don’t think everyone should be able to afford a home everywhere. Like it doesn’t make sense to require affordable housing in the most desirable areas. Then we get situations where a poor person can live there and a rich person can live there but no one in between. I think getting rid of homes as rentals would greatly increase supply and help alleviate the issue. As well as all other types of investment groups buying single family homes at all.

Smooth_Imagination t1_it9ujgt wrote on October 22, 2022 at 12:14 AM

Yeah I agree, micromanagement like that is undesirable for many reasons.

I think where the solution lies is in separating out lending and finance for new builds / restoration vs existing housing. Where a market is plainly overheated encouragement of planning applications for affordable housing to stimulate new supply is different than, say encouraging higher lending for mortgages on existing already built housing stock, that just keeps its price going up, edit or as you point out, financing existing property accumulation by land lords.

The way we do it, which is potentially effective if it was done faster, is that councils are told how many houses they need to bring online to meet population demands, and a fraction of that needs to be affordable. If it falls below its target for long enough those councils are fined. Its up to them to decide where planning submissions are approved for that. I favour high density developments near towns personally, as also transport costs are less and residents have access to jobs.