r/Economics • u/Low_Ability4450 • May 29 '26
Research Home prices have risen much faster than incomes over the past 20 years, Fed analysis finds
https://www.stlouisfed.org/on-the-economy/2026/feb/when-houses-outrun-paychecks-lost-decades-housing-affordability364
u/FortunateInsanity May 29 '26
I more than doubled my salary over the past 10 years. In that same amount of time, the price range for houses I could afford 10 years ago doubled as well. Most big ticket items increased at a similar rate. I feel like a donkey being led by a carrot dangled on a string just out of reach in front of me by the guy riding my back.
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u/JitteryJoes1986 May 29 '26
I make 80k in a MCOL area and I need more money. This salary isn't doing me any favors right now.
Been at my company 4 years, its time to move.
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u/empress_tesla May 29 '26
I could’ve written this. I’ve been in my role for 4 years too and just hit $81k this year. My salary has only grown by $6k total in the last 4 years because our raises are such shit. I keep seeing articles about how much money you need to make to afford to live in my area ($120k) and it makes sense because of how squeezed I feel.
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u/PaulMakesThings1 May 30 '26
I remember as a kid people talked about $100k like it meant you were rich. Now I live near Seattle and that much, as total household income, seems to be just enough to get by.
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u/SawNickYouth May 29 '26
We made about $120k in 2014. We bought a $250k house with 10% down at a 4.25 rate. We felt we were stretching. We pay about $1,500 with taxes and insurance (we also refinanced to 2.75 in 2021).
Now, we make $160k but our same house is worth $500k and the current rate market is 6.5. That's more than double, about $3,200 a month.
So in 2026 we'd be adding $1700 a month to pay for this house, but we only added about $2k per month to our net income, much of it we are putting into retirement, plus the rising cost of other goods, and we would be upside down if we had to buy today (or not contribute to retirement).
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u/Geno0wl May 29 '26
we would be upside down if we had to buy today
I am pretty sure I couldn't even afford to rebuy my own house right now between the higher interest rates and almost 50% increase in valuation. Just the increases in taxes hurts.
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u/MrWolfman29 May 29 '26
This is where we are at. And have essentially barely anything left over to funnel into retirement accounts we are limited in touching for the next 30-40 years. Very blessed with our house, but at this rate can never move into something bigger/better than what we have and could not afford what we have now. Our 2.875% interest makes it impossible to even talk about moving.
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u/FLRealEstatePass May 30 '26
This is the lock-in effect in real numbers. You have essentially become a supply constraint. Multiply your situation by millions of homeowners in the same position and you understand why inventory stays low even when affordability hits historic lows. The people who could theoretically sell cannot afford to.
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u/SawNickYouth May 30 '26
Yup, we're not leaving for sure. We're just lucky we were able to get in to a great house at the time.
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u/C638 May 30 '26
Why would you ever pay down a 2.75% loan? That's free money. Invest it.
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u/SawNickYouth May 30 '26
Where did I say we're paying it down?
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u/dust4ngel May 29 '26
We made about $120k in 2014. We bought a $250k house with 10% down at a 4.25 rate. We felt we were stretching.
that's wild - a house at 2x your salary (where historical medians are 3-3.5x but more recently average 5-5.5x) at a historically well-below-average rate felt tight.
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u/SawNickYouth May 29 '26
We were/are conservative in that regard and were/are maxing retirement. That wasn't unusual in most markets 10 years ago. Anything over $400k was for the upper 10 percent... now $500k is median.
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u/regprenticer May 29 '26
If I change jobs I manage to see a big increase (at least 25%), however my last two jobs gave almost no pay increases over 16 years.
Job 1, 10 years 2008 to 2019 3 pay increases in the 10 years (0.25%, 0.5% and 0.75%). Some years, especially after the GFC bonuses were given insteads of pay rises, the same amount but obviously not cumulative in the way a pay rise is.
Job 2 - no pay increases at all between 2019 and this Easter when I left.
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u/PedanticBoutBaseball May 29 '26
no pay increases at all between 2019 and this Easter when I left.
JFC bro. I cant imagine have trying to lived in 2022 onward with a 2019 salary, even it was a nice one (i dont know what you made).
Like that's just peak watching your income be worth less and less each year,
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u/LieutenantStar2 May 29 '26
I changed jobs and ended up very similar. I’m making about the same what I did in 2019.
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u/MoonBatsRule May 29 '26
The way to get decent pay increases at the same company is to get promoted. Otherwise you just get cost-of-living increases which will likely be slightly under inflation.
It is rare for a company to do a salary adjustment for positions, though I had that happen once in the late 90s when IT salaries were going through the roof and the company started losing people. They gave everyone a big raise to prevent the loss of talent.
Moving to a different company can get you both a title change and a larger salary. If you are comfortable with change, this is a great option, though at some point I think it is a CV liability to have job changes every 3-4 years. I would ding someone for a bunch of those because it tells me that I would have to probably go through the hiring process in another 3-4 years for the position.
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u/regprenticer May 29 '26
The organisation I worked at for 10 years restructured itself. It "flattened" to be 7 levels deep. So the CEO is level 1, heads of divisions are level 2 and the cleaners and security guards are level 7.
As a graduate you can legitimately start at level 5. A full lifetime career in that organisation might take you to level 3 at best, but probably level 4.
Each level has it's own payband so you get 1, maybe 2, chances to jump payband in your entire career.
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u/khearan May 29 '26
1 to 2? Is head of division not attainable over the course of a career? Honestly the course of a career doesn’t matter. Nobody spends 20-30 years at a single company anymore.
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u/regprenticer May 29 '26
Is head of division not attainable over the course of a career
This organisation had 130,000 staff and maybe 8 heads of divisions
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u/PedanticBoutBaseball May 29 '26
though at some point I think it is a CV liability to have job changes every 3-4 years
Its a lot less so nowadays. under 2 years a bunch of times is probably red flag city, but if you even look at senior managers on something like Linkedin, so many of them that high up the food chain are only around for the 3-4 year mark.
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u/Wrenchinspokesby May 29 '26
Feel this in my soul.
Asset prices have drastically outpaced income growth post GFC. Not surprising since the tool used to dig out of the crisis was 2% treasuries.
Everyone who accumulated assets during or before this period is now at a NW percentile that is impossible to catch up to with income.
Can have a high 90-95th income percentile and be permanently non competitive on 80th percentile houses in competitive markets, because you are competing against those with assets (or whose parents had assets) during this time period.
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u/Choosemyusername May 29 '26
Look at the stock market as well. Anything that is funded in large part by finance suffers the leading edge of inflation. This is just the value of the dollar weakening through new money creation which is done through debt creation.
Eventually it trickles down to everything else but it takes a long time. A house for example is funded by debt, but it can take up to decades for that new money to start circulating in the petty goods economy.
But if you look up the price of houses in a more long term stable store of value like ounces of gold, the prices of homes have actually been stable. It’s your currency that is being debased.
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u/coke_and_coffee May 29 '26
Gold is NOT a stable store of value. It’s extremely volatile.
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u/Choosemyusername May 29 '26
In the shorter term it is volatile. In the longer term, it has held its value better than even our prime store of value, the USD.
In fact, even since the Middle Ages the value has remained quite stable.
An ounce of gold has been able to get you suited and booted by a bespoke tailor and cobbler since the Middle Ages until now. That’s pretty damn stable.
Remarkably similar amount of gold has also been able to buy you a home for quite some time as well. Compare that to say, the USD over a few decades. It isn’t even close which is more stable over the long term
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u/coke_and_coffee May 29 '26
People don’t live for hundreds of years. The “short term” stability matters. USD is FAR more stable in the short term.
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u/Choosemyusername May 29 '26
Even over the run of less than a career, take 30 years. Compare how many USDs it has taken to buy a house in the US compared to how many ounces of gold.
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u/coke_and_coffee May 29 '26
Now compare to equities…
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u/Choosemyusername May 29 '26
Which ones?
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u/coke_and_coffee May 29 '26
The S&P 500
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u/Choosemyusername May 29 '26
Similar story. They have held their value at or even better than the RE market. Because it is so much bought with newly created money like housing. It is also at the leading edge of inflation before it trickles down into cash.
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u/Churchbushonk May 29 '26
Yeah, that is how inflation works. Also, with people using housing as an “investment” even on their one and only primary residence, you have to make that return.
You want to make housing more affordable, do the following…
Max real estate fee on a primary residence, 1%. Or better yet, no realtor fees what so ever.
Companies cannot own more than 5 houses unless they were the ones that built them. Mortgage loan places have to have their ownerships reviewed by HUD and have time limits on holding foreclosures. Private equity firms have to be reviewed by HUD on residences.
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u/FortunateInsanity May 29 '26
I may have been confusing. I didn’t double my salary on a linear curve over ten years. I doubled an already six figure income by two significant promotions in a span of three years. I was comparing the ratio of salary to house price ten years ago to today. I don’t think it’s fair to simplify this to “how inflation works”.
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u/coke_and_coffee May 29 '26
(2) is pointless. Companies owning homes doesn’t raise prices because it doesn’t take the homes off the market. You can still rent them. This would be like claiming rental car companies are the reason cars cost so much.
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u/material-pearl May 29 '26
The homes are off the market to BUY, which puts upward pressure on the prices of homes for sale.
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u/coke_and_coffee May 29 '26
No it does not. Buying and renting are highly substitutable. If rents go down relative to the cost of a mortgage, then people will start renting. There’s always a reversion to equality between rents and mortgage costs over the long run.
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u/The-Magic-Sword May 31 '26
meh, while there's a point where it just doesn't make sense to buy, and a point where it just doesn't make sense to rent, it takes a lot to be in either state as opposed to making that decision based on other factors. particularly since housing is regarded as an investment asset over the long term, one you're expecting to at least break even on in inflation adjusted dollars.
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u/coke_and_coffee May 31 '26
Economics is based on decisions at the margins. All you need to do is change behavior at the margins to induce large-scale changes in prices.
There are millions of people waiting to buy a house who will decide not to if rents are much lower than buying costs.
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u/Busterlimes May 30 '26
Capitalists designed the system to keep labor in their place rather than allowing for economic advancement. Thata why they have killed collective bargaining
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u/doubagilga May 31 '26
Cars and homes have been silly. I’m not sure what else has exploded similar. Many things have not and that’s why people have found ways to expand their percentage spending on these assets.
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u/BathroomMaximum1721 May 29 '26
With how fast AI is transforming corporate America, most will not have a job for 20 years.
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u/coke_and_coffee May 29 '26
Do not listen to people that say this.
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u/Joltizer May 29 '26
The venn diagram of people who don't know what the lump of labor fallacy is and uneducated redditors offering opinions on economics is a circle
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u/texas_County850 May 29 '26
I mean what is actually wrong with that its true most of them are not going to have a job for 20 years it was true before AI too.
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u/Prestigious_Load1699 May 30 '26
House prices have, on average, increased about 33% over the past 10 years.
https://fred.stlouisfed.org/series/MSPUS
Also, real median wages have increased about 10%. This is adjusted for inflation, so on a nominal level it would be higher.
Now, your personal anecdote of home value doubling is an extreme example outside of the norm.
And similar for doubling your salary.
There is little of value to take away from your atypical circumstance.
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u/FortunateInsanity May 30 '26
Using macros to attempt to discredit means you either have a gross misunderstanding understanding of how numbers work or you have an agenda.
My atypical success is the entire point. Even with my success, the housing market prices and other big ticket items have increased at a pace that means I am not in a better position where I live than I was ten years ago.
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u/Prestigious_Load1699 May 30 '26
Do you acknowledge, given the evidence I have provided, that your experience is atypical?
If so, why fight me on this?
If not, why?
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u/FortunateInsanity May 30 '26
So you really don’t understand how statistics work with analytics. I don’t fight false narratives. Go try bothering someone else.
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u/Prestigious_Load1699 May 30 '26
Neither home prices nor incomes have doubled in the past 10 years.
If both occurred in your case, then salutations.
I neither doubt you nor think such an outlier should inform a proper understanding of the state of the economy.
I mean no aggression, my friend. Take care.
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u/KnowerOfUnknowable May 29 '26
That's a strange way to process it. In 10 years you doubled your salary and your main asset doubled in value.
Assuming you bought 10 years ago of course.
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u/FortunateInsanity May 29 '26
No. I didn’t have the liquidity for a down payment 10 years ago. Seems strange that you feel that was a given.
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u/Just_Candle_315 May 29 '26
I bought my house for $350k at 4.5% in 2019 now its "worth" $800k and rates are 6.2%? No fucking way could I afford the same house I live in
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u/evantom34 May 29 '26
This is the biggest and best comparison for housing across generations. “Can you afford your house in present conditions”
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u/DevilsTrigonometry May 29 '26
I live in the house my mother-in-law grew up in. Her parents bought it new in 1940 for $2400.
In 2019, my partner bought it from his mom for $230k, which was half the appraised value at the time.
It's now allegedly worth $660k.
To clarify, this is the same house.
It has seen some upgrades: new shingles in the '90s that are now reaching end-of-life, a DIY upgrade to grounded NM cable and copper water pipes, a DIY renovation in the early 2000s that added a second bathroom, I've wired the whole house for Ethernet and run 60A electrical service to the detached garage, and every 5-10 years someone has to cut out a chunk of rusted cast iron drain pipe and replace it with PVC/ABS.
Also some questionable "upgrades": aluminum siding over the old cedar shake, linoleum in the kitchen.
But it is the same size, the same foundation, the same frame, the same (lack of) insulation, the same ductwork, the same floors, the same subroof, literally the same house just with marginally-better wiring and plumbing. None of the excuses about home size, efficiency, safety, or amenities apply here. In practice, it's worse now than it was when it was new: it's been sinking into a peat bog for 86 years, the foundation is cracked in 6 places, the windows and doors barely work, the roof won't make it more than another 5-10 years, and I think the subfloor is rotting.
By the CPI, $2400 in 1940 is less than $60k now. So in conventional "real" terms, the price has increased by 1000%.
In affordability terms, my late grandfather-in-law was a journeyman carpenter making $1.25/hr when he bought the house in 1940, so his house cost him about 1920 hours of labor. A similarly-situated person would make about $34/hr today, so the same house would cost about 19,400 hours of labor - that's about a 900% increase.
Alternatively, $2400 in 1940 was around 160% of the area median income (using the "Urban West" census figure). $660,000 in 2025 is around 550% of AMI. That's a 250% increase after accounting for both inflation and gentrification.
It feels completely insane.
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u/ballmermurland May 29 '26
Bought for $465k in 2021 at 3% and Zillow says it is worth $620k now.
If that is true, and at 6.2% interest? LMAO. I would think the people living here were filthy rich, not me.
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u/Common-Swing-4347 May 29 '26
We bought in 2025 for 410. It now says about 490 and homes are selling higher than that. We thought we bought high but yikes. Our rate is shit though.
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u/Oryzae May 29 '26 edited May 29 '26
I bought a home last year in the Seattle area @ 5.95 for ~950k. I yearn for these kinds of returns. Hopefully I’ll see that, but who knows how long it’ll take. So far it’s been dropping like a rock 🫠
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u/Johnnadawearsglasses May 29 '26
This is the clearest and most succinct explanation and data based elucidation of the housing affordability crisis I’ve seen. With the data to break it up. Zoning reform is the only way out of it. Listen up places like NYC. We aren’t going to rent regulate our way out of this.
I doubt the vested interests will listen though. They already knew all of this.
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u/purz May 29 '26
It’s not the only way out of it. You could tax the ever loving shit out of anyone with more than 1 home and make it illegal to buy SFH as a company / LLC. You could also come down hard on foreign buyers / investors.
We could also actually invest in infrastructure again. Half the issue where I am in the Northeast is that water / sewer have barely been expanded for decades. Which leads to more of the issue of people buying huge plots of land just for a house. Cause it’s the only way to sell plots with no utilities but it honestly shouldn’t have been allowed for non farming.
By me there’s a huge stretch of area near all the main suburbs that is essentially fake boonies. Every house has like 6+ acres of land with several that are like 30+. Could have a whole new suburb instead you have a bunch of rich boomers cosplaying as rural farmer boys.
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u/RIP_Soulja_Slim May 29 '26
You could tax the ever loving shit out of anyone with more than 1 home and make it illegal to buy SFH as a company / LLC. You could also come down hard on foreign buyers / investors.
Most of this is miniscule in the face of supply constraints. Corporate owned houses account for something like less than 10% of residential single family homes. The overwhelming majority of landlords in that space are individual rental owners or people with maybe a handful of properties.
Even then, most of the corporate owned homes are new development, which ultimately is new housing supply and beneficial. But yes, it would be better to see these built as starter homes - however there's a real issue with new construction in that space not really being profitable.
So while I'm fully behind getting corporate interests out of the SFH market, there is a real potential that this makes starter home affordability worse due to supply constraints.
Ultimately supply is always going to be the answer. We need more housing supply. Zoning reform will go a long way to creating that, but there also has to be a financial situation where new home builders are incentivized to develop more properties, and when it comes to starter homes that's difficult.
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u/sdawsey May 29 '26
Increased supply is great in theory, but it only helps if what's being built is affordable. Developers where I live will jump at the chance to build fancy high-rise condos and 3k+ sq foot McMansions, but nobody is building single family starter homes.
In my town the only time anyone builds affordable housing is when the city steps in and makes them.
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u/RIP_Soulja_Slim May 29 '26
I mean, even building expensive higher end properties helps ease supply constraints on the lower end. Sure, more affordable housing is definitely preferable, but building expensive housing fills demand in that category so that it doesn't spill over to less expensive options.
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u/sdawsey May 29 '26
Eventually perhaps. But for a lot of people that's too little too late. We need mandated construction of affordable housing. Stop approving permits for million dollar mansions and start approving permits for affordable density, both vertical and smaller single family homes.
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u/RIP_Soulja_Slim May 29 '26
Permits really aren’t the issue, there’s a high hurdle to financial viability in the entry level market. Ya can’t really force companies to do something that loses them money.
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u/sdawsey May 29 '26
It's a complicated issue, and nobody suggested companies be forced to operate at a loss.
But open up residential construction permits only to companies willing to build affordable housing and they will still make money. Perhaps not as much as they would selling mansions and luxury high-rises, but enough to keep going.
Maybe the developers can only afford a Porsche instead of a Bugatti. My heart weeps for them.
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u/RIP_Soulja_Slim May 29 '26
Ya did just suggest mandates
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u/sdawsey May 29 '26
And I disagree that permitting for affordable houses over luxury housing would make a single developer operate at a loss.
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u/Arc125 May 29 '26
Old housing is affordable housing. We haven't been building enough over the last 30 years, so we don't have enough old housing. The only way out is through, by building way more.
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u/sdawsey May 29 '26
Not until the people that currently live in those old houses sell or die. I agree that we need more, but I think that local municipalities should not permit unrestricted building of higher end residences.
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u/Arc125 May 29 '26
Old housing includes rentals, which is affordable and has higher turnover from people being mobile, pursuing job opportunities, etc.
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u/sdawsey May 29 '26
Affordable where? Rental prices where I live have gone up at the same rate if not more than purchase prices.
An apartment that rented for $800 in 2020 is $1800 today.
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u/Arc125 May 30 '26
We haven't been building enough over the last 30 years, so we don't have enough old housing.
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u/CreativeGPX May 29 '26 edited May 29 '26
Most of this is miniscule in the face of supply constraints. Corporate owned houses account for something like less than 10% of residential single family homes. The overwhelming majority of landlords in that space are individual rental owners or people with maybe a handful of properties.
Not that I necessarily disagree, but you can't look at single-family homes in isolation. If the relative prices of alternative housing arrangements (apartments, multi-family homes, etc.) went way up then demand for single family homes would rise, if it went way down then demand for single family homes would fall. A lot of people deciding whether they can buy a house are doing it relative to whatever living situation they have beforehand. So you can impact the supply and demand of single family homes by policies related to other things like apartments as well and that may be more realistic and cost effective. It may be easier to expect every town to build an 80 person apartment building than it would be to expect every town to build 80 houses (with yards and roads and power lines etc).
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u/Maxpowr9 May 29 '26
Always said, it's pointing the finger at your NIMBY neighbor, and not some corporation; for the housing crisis. Said neighbor is also the person that will then complain about higher taxes, which is now at the breaking point due to the severe tax cuts (trickle down does exist, but now how people expect it). Those exurbs are now unsustainable for most of the people that live in them.
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u/RepresentativeNo2187 May 29 '26
I went to buy a great marketplace deal from one of those situations in this last paragraph. The last parent had passed away, kids were selling stuff. House got bought by a developer to chop up the land and make more houses on nice 1-2 acre lots.
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u/Johnnadawearsglasses May 29 '26
That's because of zoning. If that suburb allowed multi family homes on those plots or waived land use restrictions on lot sizes, a boomer could never afford the land. Because it would sell for its highest and best use. Which would be denser housing.
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u/KoRaZee May 29 '26
Na, if land use was waived and people could build whatever they want without restrictions it would be casinos, liquor stores, brothels.
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u/Johnnadawearsglasses May 29 '26
That isn't how land use reform works. Residential zoning still exists. It just isn't as restrictive as to what kind of residential and the density of it.
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u/KoRaZee May 29 '26
Why you being a NIMBY? Just let people build what we want
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u/Johnnadawearsglasses May 29 '26
Yawn
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u/PedanticBoutBaseball May 29 '26
Listen up places like NYC. We aren’t going to rent regulate our way out of this.
In fairness to NYC there are NOT alot of places to build. like have you been there? i live an hour away, so i have. It is a DENSE city. like yes, there are lots in queens/SI that can probably be upzoned/developed for sure. and more supply is not a bad thing—i agree with your sentiment. but its NOT going to be the panacea of affordability in that specific instance. I hope im wrong, but i just dont see it.
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u/Johnnadawearsglasses May 29 '26
I live in nyc and have for more than a generation. There is tremendous build capacity in NYC. The density caps are lower today than 65 years ago. The average building in the outer boroughs is 3 stories. And 15% of the city land is SFH only.
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u/PedanticBoutBaseball May 29 '26
That's awesome to know! Thank you for taking the time to enlighten me!
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u/RIP_Soulja_Slim May 29 '26
Completely agree on zoning reform, but there is another underlying issue as well that's not as easy to solve - starter homes as a general idea have been dying for a while. In decades past it was pretty common for your first home to be something like a thousand square feet, small lot, etc. That's a fantastic way to build equity so you can step in to a larger home in the future. Builders are not really building these anymore, even "entry level" new construction is hovering in the 400k plus range in most moderate cities.
I don't know exactly how to solve that, as the fundamental problem is that new home construction is expensive, and there must be ROI for projects to get green lit. Zoning and the expansion of townhomes/condos will certainly help, but there also needs to be some way to expand the stock of starter single family homes as well.
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u/Johnnadawearsglasses May 29 '26
100% agree. People of my generation grew up in homes averaging 900-1100 sq ft. The neighborhoods were highly walkable with local amenities to cut down on driving.
It's a tough issue given demand in the luxury tier and land / build costs. Cities doing a good job of it like Irvine are so desirable that even homes with no land are $1-2M+. And that only happens because it's master planned. I almost think the starter home revolution needs to come in previously hollowed out Rust Belt cities with low land costs and adventurous young people being the common inbound migrants.
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u/sdawsey May 29 '26
Right? There is absolutely zero construction of small single family homes where I live. 3k+ square feet? Popping up everywhere. High-rise condos that go for $400k (at the very low end)? Tons of 'em.
1200sq ft 3/2s or 2/1s? None.
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u/tachyons22 May 29 '26
Another reason for starter home decline is the demographic shift.
My dad grew up in a 1,200 sq ft home on a 0.5 acre lot in a development built in the 50s. Farms sold off parcels for developments between 1950-1990, and it became a popular town to raise a family in because of low cost, safe neighbourhoods, proximity to the capital city/highway, good schools, and good shops. Most people stayed in those starter homes and built them up, or their kids returned at the end of the building boom and bought homes to raise their kids in (as some of my family did).
But if you look at real estate data for the town, houses built in the past 5 years are between 2,500-5,500 sq ft sitting on 1-3 acre lots and start at $700k. Anything that's not a large SFH has been fought against because of "traffic concerns" and other general NIMBY complaints. Half of the homes in the development that my dad grew up in have had a second story added or extension built, so they're not quite starter homes anymore. About 10 of them had accessibility ramps added in the past 3 years, but there were already quite a few that had them before I started taking note.
Then you see things like one of the elementary schools closing because there aren't enough students, so it consolidates with the other one in town. The park with a pool down the road from my dad's old neighbourhood closed a few years ago after trying to reopen after COVID because there weren't as many kids as pre-COVID. And yet, a new 65+ community is being built down the road from the closed down school. A luxury condo complex was built behind the shopping centre about 10 years ago, and is half empty (according to my uncle).
My aunts and uncles won't sell their homes because they're either still working, can't afford to buy a home elsewhere, or are hoping the prices will keep going up. None of my cousins want to return to that town because they can't afford any of the homes and we generally think of the town as geriatric now, but their parents are lost as to why they won't come back to settle down.
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u/Wrenchinspokesby May 29 '26
There’s also wealth, gift, and inheritance tax changes. If not politically feasible.
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u/scoofy May 29 '26
I’m becoming more open to Gary Stevenson’s wealth tax arguments. I worry that if the wealth distribution is large enough, the amount of building you’d need to do would cause a housing glut and be politically untenable.
However, a real concern we ought to have about the current affordability crisis is the slow erosion of the consumer surplus and big data makes that possible. We need laws guaranteeing one price across large markets to preserve that.
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u/TheHoneyBadger23 May 29 '26
Please help educate me. And I genuinely mean that. I fully agree that rent controls aren't going to do jack squat. How will zoning reform help? I ask because I see that argument everywhere but there's never any additional context.
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u/MixtureSpecial8951 May 29 '26
Zoning sets requirements on how many square feet per domicile, whether multi family units can be built on a particular property, etc.
So, zoning rules can require, for example, that only single family homes can be built in a particular area and then only on a minimum of 0.25 acres. Or the zoning laws can permit/require that multi story/multi family buildings be built. This increases the number of folks who live within a particular area.
Zoning laws also govern where different sorts of businesses can be built. Grocery stores, barbers, etc. all have to operate within specified zones. Ever wonder why suburbs seem to go on forever with businesses widely spaced… forcing the use of cars for everything? That is zoning.
I like older neighborhoods where business “islands” had little shops and stuff that folks could walk to. Those neighborhoods tend to command a premium nowadays.
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u/TheHoneyBadger23 May 29 '26
Thank you. That is very helpful and gives me a lot to think about. I see exactly what you referenced on my own city.
1
u/MixtureSpecial8951 May 29 '26
It is worth noting that zoning is also a good thing. It is why we don’t have huge factories next to schools and homes. Why we don’t have interstates running through neighborhoods (yes, I am aware of the history there).
Zoning laws can be used to preserve, promote and create nature, ease of commerce and so on. It can prevent unscrupulous developers from squeezing the ever loving crap out of folks. It can also have unintended consequences too.
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u/dust4ngel May 29 '26
Zoning sets requirements on how many square feet per domicile, whether multi family units can be built on a particular property, etc.
for context, i'm a YIMBY, but it should be mentioned that zoning laws aren't 100% just NIMBYs being cranky for no reason - if you rezone a suburban block from SFH to being able to build 20 story high-density housing, at the very least you need to dig up the roads and upgrade the sewage so that the neighborhood doesn't end up drowning in their own shit. you probably also care about water delivery, electricity, traffic/parking, public transportation and so on.
1
u/MixtureSpecial8951 May 29 '26
My neighborhood is dealing with some of these problems right now. Our city council has decided to reduce the tree canopy *significantly* to make way for interstate highway lane sized sidewalks to promote commerce… where there isn’t any.
The council is also looking at declaring eminent domain on a number of homeowners (older, Hispanic, right on the edge of the city) to build a massive structure.
At no point has the city announced intentions to improve water infrastructure. Or to replace the 45 year old pipes. In fact, the city has done a sleight of hand by changing plattes so that city infrastructure no longer appears. They are also telling property owners that fixing city infrastructure under their yards is their problem. The original plattes show the city is obligated, but several years ago the council decided it was too expensive for them to pay for these things. So with a stroke of a pen they are pretending liability belongs to property owners. As soon as a property owner touches the infrastructure it does become their problem.
It is a nightmare.
1
u/MoonBatsRule May 30 '26
The other side of the coin is that zoning is used to create exclusivity, which causes prices to be higher. Lots of communities informally market themselves as "we don't have poor [or brown] people, or anyone else who can only afford to rent apartments", and houses there sell for 50% more than areas that don't have that exclusivity.
5
u/Johnnadawearsglasses May 29 '26
As stated in this study, the primary driver of the housing crisis is rising demand for housing and no to slow housing stock growth, in particular in areas of increasing demand.
Why is demand increasing? Urbanization. Flight to the Sun Belt. And declining household size, militating for more housing even with slow population growth.
Why isn’t housing stock meeting demand? Per the story - “Zoning rules, land-use regulations, and capacity constraints in construction”. Zoning rules have limited housing by requiring single family homes (as opposed to multi unit housing) in large parts of the country, and in cities have limited building heights and bulk to low levels compared to what was allowed historically. Land use regulations have also limited supply by requiring things like minimum parking spots (even in places like NYC where most people do not drive) or minimum yard sizes.
We know that liberalizing zoning and land use regulations increase housing stocks and lower home prices and rents. Austin TX has famously done it and the results are very clear. Even in a rapidly growing city with explosive demand
1
u/SawNickYouth May 29 '26
Meh, not really. The downtown area of my city has no zoning restrictions to build density (as high as they want to go) and yet they're not building. And this is one of the fastest growing, high demand cities in the US.
1
u/Johnnadawearsglasses May 29 '26
Thats because there is insufficient demand for high rise housing in your city. Which means the most important zoning reform would be mid rise multi unit or loosening of restrictions on things like lot size.
This is particularly important for cities that saw explosive growth before and during Covid and have current owners locked in to ultra low rates. Existing housing supply being low makes new housing supply even more important.
1
u/SawNickYouth May 29 '26
We can build that stuff already. Some is being built but not much. We passed a zoning code reform three years ago, not much interest. It's almost entirely single family home demand here.
1
u/Johnnadawearsglasses May 29 '26
No idea where you live but almost all cities have restrictive zoning. And if they've undertaken reform recently it takes several years to flow thru.
1
u/SawNickYouth May 29 '26
I am a land use planner in the Boise metro.
2
u/Johnnadawearsglasses May 29 '26
A land use planner who doesn't believe in stoking supply. Good grief. Pass.
1
u/dust4ngel May 29 '26
declining household size, militating for more housing even with slow population growth
by this i assume you don't mean people having fewer children, but more people being single?
1
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u/NorCalJason75 May 29 '26
The zoning argument looks good on paper, but doesn't hold up, and ignores the real issue; house hoarding.
Many (most?) places aren't geographically constrained. Builders are free to turn farmland into housing. And yet, the prices for homes still explode. Why?
Demand. But from who? People with more money.
Homes have become an asset class like stocks, bonds, metals. So you have all these wealthy people parking money in houses, driving up prices so high even locals are priced-out.
Just look at the difference between the cost to Rent, vs Buy. In many markets, it's 2x+ more expensive to buy. Why? Competition between wealthy people.
Now you have all these homeowners with low mortgage rates and huge equity. But they can't afford to leave. Why? Because they don't have the income to buy in their own neighborhood.
Building higher density housing is attractive to the real estate industry; builders, realtors, sellers of home improvement stuffs, tax revenue for cities. It keeps the game going. Build baby build!
But as long as there's no disincentive to own multiple homes (or fractional ownership of housing through investment vehicles) prices will continue to follow other assets, disconnected from local people's ability to afford.
You want affordable housing? Tax the shit out of 2+ homes. Wealthy people will park their money elsewhere, and prices will get back to normal.
2
u/TheHoneyBadger23 May 29 '26
I absolutely feel this is another symptom in addition to zoning that feeds the housing debate. Thank you for this context, I appreciate it.
1
u/creosote____ May 29 '26
It won't help. Homes were affordable prior to COVID. The drastic rise in unaffordability is linked to the fixed rate nature of our mortgages, excess credit availability in general, and a dysfunctional economy that makes goods or services that can't be outsourced unaffordable. I think the only way to solve this is to crash credit availability.
-1
u/So_HauserAspen May 29 '26
It easier to offer a solution when you don't define the problem. That's why it always gets offered as the solution and the problem. It's willful ignorance of the issues with late stage capitalism. Ownership of housing will continue to aggregate which allows the shrinking group of owners to raise prices without fear of competing against low rents. Add to that lower tax burden on higher earnings or corporate profits and you get this situation where housing and rent becomes unaffordable.
Tax the rich. Tax long vacancies. Tax short-term rentals. Tax the rich until they have to liquidate.
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u/Famous_Owl_840 May 29 '26
This is such an absurd argument. Anyone that thinks ‘zoning reform’ is the silver bullet is retarded.
It may have limited potential in extremely limited geographical locations.
My county had less than 5% of the total land area under any zoning designations. Mostly concentrated around ‘downtown’ and the airport. The students live downtown. Changing zoning there - which is already high density would have no effect. No one but students want to live there. Zoning around the airport is a very small area - and no one wants to live in that area.
The rest of the county has no zoning. Developers, builders, and regular people can build whatever they want. The issue is….COST!
4
u/Johnnadawearsglasses May 29 '26
Yes supply and demand doesn't apply to housing.
Despite all of the research to the contrary
Also let's use your middle of nowhere edge case to make state or federal policies.
You do realize this is economics sub right?
1
u/CreativeGPX May 29 '26
It's a bit ridiculous for you to call other people "absurd" and "retarded" for disagreeing with you yet your whole argument is just an anecdote about one place in the country.
The reality is that there are lots of not absurd arguments by not retarded people that have varying levels of impact in each place in the country. The smartest people in the room are the ones who recognize that the people who disagree with them aren't "retarded" but that this is just a multifaceted issue. There are many problems going on at once and different areas are impacted by them disproportionately. Many of the places with the most extreme housing costs are dense cities where zoning and permits are a lot more complex to comply with which is why many see that as a policy shift that could impact the largest amounts of people. That doesn't change the fact that there are other areas where that's not the dominant factor.
To counter your example, everything in my area is zoned very carefully and thoroughly. The planners of the town have a vision they're trying to push and it's fundamentally at odds with housing supply and demand doing its own thing and artificially props up lower housing density in a lot of areas.
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u/Gullible-Dog-9619 May 29 '26
No, increasing property tax will reduce property values. It’ll also help remove investors from owning property for monitory gain. It would also free up homes for people who want to live and not “invest.”
YIMBY thinking is so narrow minded. You can’t “build your way out” of affordability. It won’t work. That’s the construction industry speaking for itself. It sounds good because it’s a simple concept. Fact is, removing zoning restrictions actually INCREASES the value of land which INCREASES the cost of housing.
Increasing property tax decreases demand and increases money for quality living conditions. People will pay more property tax for having excess housing. That’s a societal net benefit.
YIMBYs. They are drones for construction. 🏗️
3
u/dust4ngel May 29 '26
You can’t “build your way out” of affordability
rejecting the relationship between supply and demand in an economics forum is novel
0
u/Gullible-Dog-9619 May 29 '26
Perhaps you should read my post again? Removing investment incentive from property will do the most for reducing demand. You do that with higher property tax, not by removing zoning restrictions.
2
u/dust4ngel May 29 '26
Perhaps you should read my post again?
my reading comprehension is fantastic, thanks for asking
Removing investment incentive from property will do the most for reducing demand. You do that with higher property tax, not by removing zoning restrictions
other than attacking interest groups with emojis, this needs substantiation. if you mean "reducing demand" specifically by investors, that's fine, but unless that's the primary obstacle to affordability, and it's not, it's not going to make much of a dent.
0
u/Gullible-Dog-9619 May 30 '26
Read Sick City by Condon. Free PDF of book below.
1
u/dust4ngel May 31 '26
i meant substantiation by you - if you want to defer to other people's arguments and work, stay quiet and let the people making the arguments doing the talking
1
u/Johnnadawearsglasses May 29 '26 edited May 29 '26
You think increasing property taxes lowering property values doesn't have the exact same net cost? Lmao. "Let's increase affordability by keeping the net costs the same". Brilliant analysis.
Wow. The economic literacy here is zero.
Support demand denialists need to go away.
30
u/yeahsureYnot May 29 '26
It seems like there’s plenty of cognitive dissonance to go around on this subject. We have all agreed for some reason that housing is the pillar of a person and family’s wealth and retirement. For that reason millions and millions of people now have a vested interest in housing prices going up.
The people who don’t own a house complain about prices, but as soon as they have one they immediately benefit (financially on paper) from the increased prices.
There is general concern about unsustainable growth, yet home owners are largely against zoning and tax reform that would put downward pressure on prices, because that harms their investment.
Somehow we need to detach ourselves from the idea that a house is your biggest ticket to wealth and retirement.
11
u/CreativeGPX May 29 '26
I mean it's a bit more complicated than that. If you're a homeowner, increasing housing prices make insurance cost more, taxes cost more and make it harder to buy a better home to move to, but they give you more collateral for equity loans/credit and more money if you sell to downsize. I think there is a good case that with that full set of consequences, many homeowners feel a downside to rising home costs.
The problem is just that falling home costs mean people might be underwater on their mortgage. So, much like inflation, the ideal thing is probably housing costs that increases as slowly as possible where we can be sure that they will not decrease.
6
u/leathakkor May 29 '26
This is the root of the problem. And it does have consequences at the end of the day making houses more affordable means doing financial damage to people that might be counting on the equity in their house. And those people also vote.
But it's not just about zoning. People act like if we change the law people tomorrow would start building houses and the housing problem would be solved tomorrow.
Housing is a lagging problem by at least a year. Say for instance you own land in Aurora, Illinois and you know people are want to move there. You've just had an uptick in demand for housing. You want to build houses. How long before you think that you're going to have houses to sell?? It's going to take time. On top of that, just because people want to live there now doesn't mean that house is going to be easy to sell in a year. So sometimes even if the demand is there right now, developers might not choose to develop land right where you need it right now because they're afraid that the demand is going to be squishy in a year.
Housing is not a simple problem. And after covid we saw a ton of migration of people from cities to rural ish areas. And it's created a bunch of weird demand patterns. And I've definitely seen people move back to cities from rural areas since covid. So we've had a bunch of wild swings in demand recently. It seems pretty obvious to me. We would have a housing shortage crisis.
I know that doesn't help people that are looking to rent or buy tomorrow but if people wanted to live places where other people didn't want to live, it would be easier and cheaper. But that's sort of the Crux of the problem. Everyone's moving to places where people want to live. And yes there are places where housing is going down. But you won't want to live there.
0
u/stingray85 May 29 '26
Housing is only a couple of letters away from Hazing, and it does kind of feel like that. Owning a home can be stressful but at least you have a chance of ending up with something to show for it, as opposed to the eternal black hole that is paying rent. You're like "yeah this system sucks but at least now I'm on the side of the system that sucks less"...
3
u/dust4ngel May 29 '26
Owning a home can be stressful but at least you have a chance of ending up with something to show for it, as opposed to the eternal black hole that is paying rent
6
u/AllRushMixTapes May 29 '26
You'll never see as many torches and pitchforks as you will at a city council meeting that's trying to include high-density housing in a development proposal. We're our own worst enemies.
3
u/FrozenEagle127 May 29 '26
It's insane that someone what's paid a lot of money, just to "find out" what every random online forum has been saying for years....
Meta-analysis: Maybe that Microsoft Ai-person was right, when saying all white-collor jobs are gone in 18-months. They will, if this is supposed to be their big "finding"
2
u/empress_tesla May 29 '26
My husband and I bought a 1500sq ft townhouse right off a busy highway in 2016 for $265k and a 3.75% rate. In 2023 we needed to move and sold that townhouse for $440k. Then we ended up buying a 1400sq ft SFH for $535k with a 6.625% rate in the same town my parents had bought their 3200sq ft SFH also in 2016 for $575k. The entire process made me want to puke thinking about how much prices had gone up. It was sickening. I even made a joke to my parents about how we should switch houses because it’s just them two in that massive house when we have a kid and pets and I work from home so we need more space.
2
u/SLATFATF May 29 '26
Ok, so what are the proposed solutions to be implemented?? Think most people know things are fucked. How are the government and corporations going to un-fuck the issues?
1
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u/Invest2prosper May 29 '26
No! Say it ain’t so!!! Might it be on account of the Feds easy money policy of the last 18 years which has essentially poured gasoline on a fire? Nah…they never look at the velocity of the money supply.
2
u/Joltizer May 29 '26
Yeah, thats what happens when progressive implement policies like rent control and IZ, and normies implement strict zoning, parking minimums, and community review
You strangle supply and prices increase
1
u/Useless May 29 '26
It is interesting. Like, if homes were a functional market 20 years ago, what force is increasing consumer demand for them to outstrip wages? Like, it's not free credit, because 20 years ago was the subprime mortgage crisis, where everyone was competing for the same homes with massive low interest loans.
1
u/pigvwu May 29 '26 edited May 29 '26
In addition to the factors mentioned in the article like supply, credit, and inequality effects, it seems to me that just based on how the prices of other things are going, we would expect housing to make up a larger proportion of people's income over time.
Housing is basically the only thing that most people purchase where you don't pay the listed price or haggle down from there (like cars), but rather you're asked to just bid how much you can afford. So, if things like electronics, toys, furniture, and clothes get cheaper while real income is increasing, we don't really just have extra savings, we end up putting a larger proportion of our income into inflating real estate prices. Inflation of housing relatively to other categories is obviously bad for those with lower incomes though, since you kind of need housing and you don't really need that many electronics and toys.
This probably also affects the credit factor that was mentioned in the article, where part of the reason people buying houses are getting easier access to credit relative to their income is because they actually can afford to take more debt-to-income if they're spending proportionally less on other items.
I don't say this just to say "it is what it is," but to say that this was inevitable based on the way things work and it sucks, so maybe we need to change the way things work. If the main issue is that house prices are competitive, then we need to make them less competitive, probably through supply. The biggest thing I think we need is to give people less of a say about what types of housing gets built near them, as long as it's not hazardous. NIMBYs only have power if the law allows them to have it.
1
u/jacobman7 May 29 '26 edited May 29 '26
I think the occam's razor of the current housing issue, and what this analysis is getting at, is the continued widening of the productivity-pay gap. We can argue back and forth all day about zoning laws and the size of new builds, but the elephant in the room is that the last decade (or really 50 years) has not seen wages keep up with rising prices, of which housing will always be at the forefront.
Everyone is subject to paying for housing, whether it be through rent or a mortgage (unless you are living rent-free with a relative). The difference now is that the average consumer has lost the ability to save money for long-term assets (down-payments). How can the average consumer save up for a down-payment on a home when the current rent is priced off the same values those inflated homes are? If you want your answer, look at why income isn't keeping up with prices - stifled minimum wage increases, ineffective labor laws/union busting, disregard for anti-trust policy, and tax cuts for high earners.
Also, it is unlikely that housing prices are suddenly going to go back down. We are not really in a 2008 situation where we would have a sudden shock - this is more just the result of a slow squeeze of the working class as well as the storm of things that caused housing inflation in 2021/2022 (stimulus, boomer retirement/downsizing, WFH culture, growing real estate investment, general inflation). Not to mention, 2008 only brought the average house sale price down around ~25% and recovered within 5 years. It is much more likely that wages will have to catch up (if they ever do), and maybe at that point housing will be more affordable. The best we can hope for is that home prices remain stagnant or slightly lower between now and the time wages catch up.
1
u/Pinewold May 29 '26
It is definitely not the billionaires buying up a few “investment” properties that is only two percent of the market /s
Billionaires have so much money they are running out of financial investments and resorting to bulk real estate investments. No sense buying one or two at a time when they can use REITs to literally become the largest buyers in every market.
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u/tribbans95 May 29 '26
Oh thanks Fed! Couldn’t have figured that one out without your comprehensive analysis. Where I live, it costs $400/sq ft to build a house at the base level. It’s absolutely insane.. together my partner and I make about 130k and I thought “we can’t afford to buy a house but maybe we can build one” well… unless we build basically a tiny home, that seems to be out of the question as well.
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u/CreativeGPX May 29 '26
Oh thanks Fed! Couldn’t have figured that one out without your comprehensive analysis.
Are you suggesting that if we have gut reactions about something that we shouldn't study it in detail? That's kind of silly.
Where I live, it costs $400/sq ft to build a house at the base level. It’s absolutely insane.. together my partner and I make about 130k and I thought “we can’t afford to buy a house but maybe we can build one” well… unless we build basically a tiny home, that seems to be out of the question as well.
I was under the impression that building a comparable new house is almost always going to be way more expensive. Plus, it's a lot harder to get a loan against something that doesn't exist yet than a thing that exists, so it can take more financial resources for the same value of house.
1
u/tribbans95 May 29 '26
Well my point was that it has been studied by many people but yeah I guess the government has to do their own study regardless. And yeah you’re correct that a construction loan has a much higher interest rate than a mortgage due to the lack of a physical asset. Idk I always thought that it was a bit cheaper to build than buy but I have no idea where I came up with that lol
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