America’s big cities are turning into housing catastrophes. If we want to fix this mess, we should try and copy Tokyo.

https://www.yahoo.com/news/americas-big-cities-turning-housing-120600526.html

America’s big cities are turning into housing catastrophes. If we want to fix this mess, we should try and copy Tokyo.

By Jairaj Devadiga

October 9, 2021

Tokyo

A view of residential houses in Tokyo, Japan.

In major cities around the world, housing is becoming less and less affordable.

Tokyo, Japan, is a notable exception, with prices barely rising since 1995.

The US has restrictive, often absurd regulations, and should instead mirror Tokyo.

Jairaj Devadiga is an economist specializing in public policy and economic history.

This is an opinion column. The thoughts expressed are those of the author.

In major cities around the world, housing prices have spiraled out of control.

In California’s Bay Area, the median house price is $1.3 million. In Vancouver, the average household must save for 34 years to make a down payment on a house, and put aside 85% of its pre-tax income for mortgage payments. In Sydney, a decrepit house without any toilet facilities sells for $3.5 million.

In this sea of craziness, Tokyo has been an island of sanity. Its housing prices have barely risen since 1995. This is not due to deflation either.

While the population of Japan as a whole has been shrinking, Tokyo has been growing. Between 1995 and 2019, the population of Tokyo grew by 2.17 million, or just above 90,000 per year on average. To accommodate all these new people, lots of housing had to be built. Over the same time period, there was an average of 153,000 housing starts annually.

A study by the Fraser Institute illustrates what happens when housing supply fails to keep up with demand. Between 2015 and 2019, 120,000 new jobs were created in Vancouver and Toronto. In the same time period, there were only 57,000 housing starts every year. Since demand was growing more than twice as fast as supply, prices skyrocketed. The same story played out in almost every major city. Lots of new jobs being created, lots of people wanting to move, and not enough homes being built for all of them.

There are numerous bad policies which prevent the construction of more housing. Chief among them are restrictive zoning laws. In most cities with expensive housing, vast swathes of residential land are reserved exclusively for single family homes. Until very recently, the worst of the bunch was San Jose, with 94% of the land being off limits for apartment buildings. No wonder it is the least affordable city in America.

Not only does this make housing costlier for middle and low income folks, but also subsidizes mansions for the rich. The land on which a mansion sits would be worth a lot more if an apartment building could be built on it. The developer would make a profit even if they sold each apartment at an affordable price.

However, because that’s not allowed, developers won’t bid for that land, thus driving down its price.

While Tokyo does have low density zones, these do not prohibit multi-family buildings. Thus it is not uncommon to see a three story apartment building right next to a single family home.

Apart from zoning, cities dictate minimum lot sizes and maximum floor area ratios (how much of the plot is covered by the building itself), which further stifle construction. In much of Mumbai, for instance, the floor area ratio was capped at 1.33 until 2018.

This had the disastrous result of pushing poor people into slums, as they could not compete with affluent families for the limited housing. In 1971, 22% of Mumbai’s population lived in slums. By 2010, this had risen to 62%. By contrast, Tokyo allows floor area ratios as high as 13, and even higher with government permission.

Another problem is cities wanting to preserve too many historical sites. For instance, cities often declare old homes or commercial establishments to be historical monuments, which prevents them from being torn down and replaced with apartment buildings.

In some cases, cities prevent development even when the historical monument itself would be untouched. For instance, last year, a historic preservation board in Seattle rejected a proposal for a 200-unit apartment building because it would be taller than nearby historical monuments. While Tokyo has historic buildings, its criteria for preservation are much stricter and thus don’t get in the way of affordable housing.

Another important factor in raising housing prices is over-regulation. A recent report by the National Association of Home Builders estimates that regulations add almost $94,000 to the price of new homes. The vast majority of these regulations are purely aesthetic, such as mandating certain types of landscaping and architectural styles, or banning vinyl sidings.

This is not exclusive to American cities. A study on India’s Ahmedabad shows that unnecessary regulations add 34% to the cost of housing. By contrast, Tokyo has very few common sense regulations; mainly to protect against the frequent earthquakes. As long as developers follow these and the very liberal zoning laws, they are free to build as they please.

At this point, you might wonder why these restrictive rules persist if they are so obviously bad. Why is liberal city-planning the exception, rather than the norm? To answer this, we must examine the policy making process itself, to understand the motivations of all participants.

Consider San Jose, with its 94% single-family zoning. The politicians in San Jose were catering to the wishes of their constituents; the people already living in San Jose. Those voters wanted high prices. To them, their house is an investment, which would lose value if more housing were built in their neighborhood. It would also result in new neighbors bringing in a different culture from what the residents are used to.

People who wanted to move to San Jose, but couldn’t due to high prices, would benefit from more liberal planning. They might live in different parts of California, or even in other states. Obviously they don’t get to vote in San Jose elections, thus local politicians have no incentive to help them.

The same process plays out across every city, resulting in sky-high prices.

At the state or national level, though, the political calculus changes completely. People in a particular city might want to restrict housing development, but everyone else wants more. Thus state and national politicians have an incentive to liberalize.

This is exactly what happened in Japan. It too had local governments choking the housing market, resulting in a massive housing bubble in the 1980s. This prompted the national government to enact a series of reforms to rein in housing prices.

The national government formulates building codes, zoning laws, and other city-planning regulations for the entire country, giving very little leeway to local governments.

Recently, governor Gavin Newsom did something similar in California, by finally abolishing single-family zoning statewide, and also loosening some other restrictions.

To win elections, local politicians must necessarily keep down the supply of new housing. It is up to state and national governments to deny them that power, and quickly. Otherwise, home-ownership will remain a pipe-dream for most people.

October 9, 2021. Tags: , , , , , , . Economics, Housing. Leave a comment.

San Francisco elected official Hillary Ronen blames the city’s homeless problem on “Republican ideology.” She is wrong. Here are six reasons why “progressive ideology” is the real cause of the city’s homeless problem.

By Daniel Alman (aka Dan from Squirrel Hill)

September 1, 2020

Hillary Ronen is an elected government official who gets paid $140,148 per year to work as a member of the legislative body for San Francisco.

In this video, Ronen blames San Francisco’s homeless problem on “Republican ideology.” (Skip to 8:52 in the video).

https://www.youtube.com/watch?v=uw8MACDZ3RI

Ronen is wrong.

“Republican ideology” is not the cause of San Francisco’s homeless problem.

Here six are reasons why “progressive ideology” is the real cause of San Francisco’s homeless problem.

First of all, here is a link to an article that was published by the Atlantic in 2007.

When a developer builds housing, there are three separate and distinct costs: the cost of land, the cost of construction, and the cost of getting a building permit (which the article refers to as the “right to build”).

The article includes this chart:

So in San Francisco, getting a building permit (which the article refers to as the “right to build”) adds approximately $700,000 to the cost of a new home.

And please remember, this cost for the “right to build” is completely separate from the cost of the land, and the cost of construction.

The cost for the “right to build” is determined entirely, 100% by zoning laws, density restrictions, and other local government policies.

Since Hillary Ronen is an elected government official who works as a member of the legislative body of San Francisco, she is one of the people who is responsible for the city’s zoning laws, density restrictions, and other local government policies.

Secondly, here’s another example of how hard it is to get a building permit in California:

http://www.aei.org/publication/texas-great-american-job-machine-solely-responsible-1m-net-us-job-increase-since-2007/

January 23, 2015

… there were more permits for single-family homes issued last year through November in just one Texas city – Houston (34,566) – than in the entire state of California (34,035) over the same period.

Let’s put this into perspective.

Houston is 628 square miles.

California is 163,696 square miles.

So even though California is 260 times as big as Houston, Houston actually issued more new building permits for single family homes in 2014 than did the entire state of California.

Just think about that for a minute.

Those numbers show just how incredibly, ridiculously hard California makes it to build new housing.

Anyone who has ever bought or sold anything at eBay understands that, all else being equal, the bigger the supply of something, the lower price, and the lower the supply, the higher the price.

By making it so difficult to get a building permit in California, the government is causing housing to be far, far more expensive than it would otherwise be.

Third, here is a great article by Thomas Sowell about how the politicians in California have waged war against the construction of new housing.

Fourth, this video also explains San Francisco’s war against the construction of new housing. And please note that it is progressives, social justice warriors, and other left wing activists who are the ones that are most opposed to building this new housing:

https://www.youtube.com/watch?v=ExgxwKnH8y4

Fifth, in the video with Ronen that I included at the beginning of this blog post, she brags about creating a new government program that gives free illegal drugs to homeless people. (Skip to 7:56 in the video.)

Being high on illegal drugs makes the problem of homelessness bigger, not smaller.

And sixth, the Washington Post published this article, which is called:

“Rand Paul is right: The most economically unequal states are Democratic”

The article includes this chart, which ranks the states by their levels of inequality based on their Gini coefficients.

You can see a bigger version of the chart at this link:

https://www.washingtonpost.com/wp-apps/imrs.php?src=https://arc-anglerfish-washpost-prod-washpost.s3.amazonaws.com/public/NJ6UOCWVE426LBX7NOQN6ECZVU.jpg

The information in the chart verifies the title of the Washington Post article. Blue states have more inequality than red states.

So that’s six different reasons why Hillary Ronen is wrong to blame San Francisco’s homeless problem on “Republican ideology.”

In each and every one of those six cases, it is actually “progressive ideology” that is causing San Francisco’s homeless problem.

San Francisco is waging a very strong, major war against the constriction of new housing.

For Hillary Ronen to blame this on “Republican ideology” is a huge lie.

On the contrary, since Ronen is one of the left wing, progressive, elected government officials responsible for San Francisco’s housing policies, it is Ronen’s own fault that San Francisco has such a big homeless problem.

September 1, 2020. Tags: , , , , , , , , , , , , , . Economics, Housing, Social justice warriors. Leave a comment.

Minneapolis vandalism targets include 189-unit affordable housing development

https://www.startribune.com/minneapolis-vandalism-targets-include-189-unit-affordable-housing-development/570836742/

Minneapolis vandalism targets include 189-unit affordable housing development

The apartments were expected to hit the market later this year.

By Jim Buchta

May 28, 2020

The affordable housing development that burned late Wednesday in south Minneapolis was a six-story building with 189 units that was under construction and expected to open later this year.

The under-construction affordable housing development that burned in the widespread violence in south Minneapolis late Wednesday and early Thursday was to be a six-story rental building with 189 apartments for low-income renters, including more than three dozen for very low-income tenants.

Construction began last fall on Midtown Corner, which was expected to be completed and ready for occupancy this year. Late Wednesday the wood-framed upper floors of the building were fully engulfed in flames, with thick plumes of smoke that figured prominently in widely viewed photos of the riots. By Thursday morning, what had been an active construction site was reduced to a pile of smoldering ashes atop what was left of the concrete first-floor commercial space.

The redevelopment project was on the site of the former Rainbow Foods grocery store at Lake Street and Hiawatha Avenue in south Minneapolis.

The developer, Twin Cities-based Wellington Management, declined to comment Thursday on the fate of the project.

Wellington has done several income-restricted rental projects throughout the Twin Cities on difficult-to-redevelop sites, including offices and an apartment building that are under construction along Penn Avenue in north Minneapolis.

Wellington has been a prolific developer and investor in the area for more than a decade. Over the years the company has developed several rental buildings in the Lake and Hiawatha corridor, and it has also invested in commercial projects including the Greenway Office Building and the Hi-Lake Shopping Center.

The fire also heavily damaged 7-Sigma, a high-tech manufacturing company that’s occupied a low-rise industrial building across the street from the Midtown Corner site for more than 30 years. The entire roof and upper floors of that brick building were destroyed, and water spilled out of broken windows on the lower floors as firefighters continued dousing the building with water early Thursday.

Barb Jeanetta is executive director of Alliance Housing, a nonprofit that has two rental buildings in the area, including Hiawatha Commons, an 80-unit low-income apartment building adjacent to Cub Foods and Target. Some of the first-floor retail tenants were looted and vandalized, but the building was largely unscathed.

“It’s just such a firestorm right now,” she said. “All in all, we came out pretty lucky.”

May 29, 2020. Tags: , , , , , , , , , . Housing, Police brutality, Racism, Rioting looting and arson, Social justice warriors. Leave a comment.

Democrats give public housing to illegal aliens instead of to U.S. citizens

I just found out that Democrats are giving public housing to illegal aliens instead of to U.S. citizens.

HUD Secretary Ben Carson said of this:

“There is an affordable-housing crisis in this country, and we need to make certain our scarce public ­resources help those who are ­legally entitled to it.”

President Trump has ordered illegal aliens to get out of public housing within 18 months.

Democrats don’t like that one bit.

New York City Democratic Mayor Bill de Blasio said of Trump’s order:

“This is what cruelty looks like.”

Apparently, de Blasio doesn’t think it’s “cruel” to keep U.S. citizens out of these public housing units that are currently being occupied by illegal aliens.

U.S. Congressional Representative Carolyn Maloney (D-New York) said that Carson was

“despicable” for “ripping apart families and throwing children on the street”

Apparently, Maloney thinks that if illegal aliens move out of public housing, this will somehow cause them to abandon their own children.

Also, apparently, Maloney doesn’t think it’s “despicable” that Democrats are causing U.S. citizens to be homeless.

With the demand for public housing exceeding the supply, it is necessary to prioritize who should and should not be allowed to live in it. By choosing to give this housing to illegal aliens instead of to U.S. citizens, Democrats have shown where their true loyalties lie.

May 22, 2019. Tags: , , , , , , . Donald Trump, Housing, Immigration. Leave a comment.

U.S. Congressional representative Katie Porter (D-California) doesn’t seem to think that children need a father, and doesn’t seem to care about the density restrictions and other anti-development laws that increase the cost of housing in California

U.S. Congressional representative Katie Porter (D-California) recently talked about “Patricia,” one of her “constituents” who lives in Irvine, California.

Here’s a video of part of Porter’s statement, from the Washington Post channel at YouTube:

https://www.youtube.com/watch?v=0QKOLydDfNg

Since Porter said she looked up the salary of Patricia’s job at monster.com, I am guessing that “Patricia” is fictional. Nevertheless, I will go along with this, and offer my comments and analysis.

Patricia works as a bank teller at JPMorgan Chase, and earns $16.50 per hour, which works out to $35,070 per year. Patricia has a six-year old daughter, and the two of them live together in a one-bedroom apartment in Irvine, California. After taxes, Patricia takes home $29,100 per year, which is $2,425 per month.

Porter provided this image of Patricia’s monthly expenses:

These are Patricia’s monthly expenses:

$1,600 rent

$100 utilities

$250 on a 2008 car

$150 gas

$402 USDA “low cost” food for one adult and one child

$40 phone

$450 after school childcare

This leaves Patricia with a monthly budget deficit of $567.

Porter blames this budget deficit on JPMorgan Chase.

Now I’d like to offer my own commentary and opinion on this, in three different categories.

First of all, Porter makes no mention whatsoever of Patricia’s child’s father.

If Patricia was actually married, then her husband could work from home and take care of their child after school, and there would be no need to spend $450 per month on after school child care. Also, her husband’s income from working at home would make it easier to pay for their other expenses.

This refusal by Porter to even so much as mention Patricia’s child’s father is typical of liberals when they talk about single mothers who are struggling to raise their children. I have previously written about liberals’ refusal to mention the fathers of these children here, here, here, here, and here.

Secondly, Porter never mentions how density restrictions and other anti-development laws cause the price of housing in California to be substantially higher than it would otherwise be.

But I will mention it.

Here is a link to an article that was published by the Atlantic in 2007.

When a developer builds housing, there are three separate and distinct costs: the cost of land, the cost of construction, and the cost of getting a building permit (which the article refers to as the “right to build”).

Irvine is in the Los Angeles metropolitan area. According to the Atlantic article, using data from 1999, getting permission for the “right to build” added $303,000 to the cost of a house in Los Angeles in 1999.

Here’s part of the relevant text from the article:

In a 2003 article, Glaeser and Gyourko calculated the two different land values for 26 cities (using data from 1999). They found wide disparities. In Los Angeles, an extra quarter acre cost about $28,000 – the pure price of land. But the cost of empty land isn’t the whole story, or even most of it. A quarter- acre lot minus the cost of the house came out to about $331,000—nearly 12 times as much as the extra quarter acre. The difference between the first and second prices, around $303,000, was what L.A. home buyers paid for local land-use controls in bureaucratic delays, density restrictions, fees, political contributions. That’s the cost of the right to build.

And that right costs much less in Dallas. There, adding an extra quarter acre ran about $2,300—raw land really is much cheaper—and a quarter acre minus the cost of construction was about $59,000. The right to build was nearly a quarter million dollars less than in L.A. Hence the huge difference in housing prices. Land is indeed more expensive in superstar cities. But getting permission to build is way, way more expensive. These cities, says Gyourko, “just control the heck out of land use.”

The same article also includes this chart:

And please remember, this cost for the “right to build” is completely separate from the cost of the land, and the cost of construction.

The cost for the “right to build” is determined entirely, 100% by zoning laws, density restrictions, and other local government policies.

Here’s another example of how hard it is to get a building permit in California:

http://www.aei.org/publication/texas-great-american-job-machine-solely-responsible-1m-net-us-job-increase-since-2007/

January 23, 2015

… there were more permits for single-family homes issued last year through November in just one Texas city – Houston (34,566) – than in the entire state of California (34,035) over the same period.

Let’s put this into perspective.

Houston is 628 square miles.

California is 163,696 square miles.

So even though California is 260 times as big as Houston, Houston actually issued more new building permits for single family homes in 2014 than did the entire state of California.

Just think about that for a minute.

Those numbers show just how incredibly, ridiculously hard California makes it to build new housing.

Anyone who has ever bought or sold anything at eBay understands that, all else being equal, the bigger the supply of something, the lower price, and the lower the supply, the higher the price.

By making it so difficult to get a building permit in California, the government is causing housing to be far, far more expensive than it would otherwise be.

Here is a great article by Thomas Sowell about how the politicians in California have waged war against the construction of new housing.

This video also explains California’s war against the construction of new housing. And please note that it is progressives, social justice warriors, and other left wing activists who are the ones that are most opposed to building this new housing:

https://www.youtube.com/watch?v=ExgxwKnH8y4

California is waging a very strong, major war against the constriction of new housing.

But Porter never mentions any of this.

Third, being a bank teller is an entry level job. It doesn’t require any education beyond high school.

If Patricia wanted to earn more money, she could have gone to college or trade school before having a child.

But Porter never mentions this, either.

April 15, 2019. Tags: , , , , , , , , . Economics, Housing. 2 comments.

San Francisco developer builds 160 unit apartment building on 9,000 square foot lot

I just came across this wonderful success story in San Francisco.

At 16:00 in the video below, the developer says:

“This is only a 9,000 square foot lot and yet we have 160 apartments in it. It comes to about 800 units an acre.”

I have no idea how he got permission to build such dense housing. (See here for an explanation of how San Francisco politicians deliberately prevent affordable housing from being built.)

The video also explains how these “micro-apartments” cater specifically to people who do not own cars.

The amenities in the building are quite amazing.

This type of high density apartment building is exactly what the city needs. And they need a huge number of them.

I wasn’t deterred by the video’s 20 minute length. I watched the entire thing, and I found it to be quite enjoyable.

https://www.youtube.com/watch?v=3LI0tqVmGtI

October 1, 2017. Tags: , , , , , , , . Economics, Housing. 2 comments.