I think the title is a correct statement, and probably there's some bad cycle of homeowners want to protect their investment → laws restricting development → it's hard to live.
BUT the economic reasoning that would back up that conclusion is like, absent? LIke the author seems to assume that the "natural" course of events is for home prices to increase at the same rate as inflation. But why would they?
Some of my family members bought apartments in Manhattan in the 80s and 90s. Now those apartments are worth a shit ton of money. IS that related the harsh restrictions on development in manhattan, probably. But it's also related to how Manhattan in the 90s was shitty and now it's nice. That's when Nas said "The city never sleeps, filled with villains and creeps. That's where I learned my hustle, had to scuffle with freaks." I hear a lot of stories about being mugged in central park and such from family members of that generation. So part of the reason those apartments are worth more is because they're more valuable in a real sense, because the location they're in is better.
How this article describes that:
And that reveals the true nature of housing prices. It’s not about the house, it’s about the location. Housing prices rise where more people want to move, but not enough houses are built to accommodate them. Aggregate housing prices do not rise because everyone’s retiling their bathrooms. They rise because the new demand outstrips the supply.
The current regime of “housing as an investment” rests on the idea that rising housing prices are good, because they generate wealth. And sure, a homeowner whose house value is rising fast enough is getting wealthier.
But it’s a fake version of wealth generation. The majority of the higher value comes from demand outstripping supply. Little actual value is being created, only transferred. Those who own houses gain wealth at the expense of the people who don’t, either through higher prices when buying or renting.
Real wealth generation should create value. It should create more goods, more services, more capabilities to do things we couldn’t before. But there’s minimal new value reflected in the rising house prices. Sure, there’s your sweat equity. But most of the house value is just “more people want in, and there’s nowhere to put them.”
OK, but why do more people want in? There's no increase in real value, but more people want it... for no reason? My brother lives in a rowhouse in Philadelphia, those are still quite affordable. What's the difference? The difference is the real increase in value of living in NYC, that it's actually nicer and there's better jobs there. That's why the population of philadelpha is the same as it was in 1990--"more people want in" isn't just some natural background process that has nothing to do with value.
Yes, development in manhattan hasn't been allowed to keep up with the increased demand for housing, but how big of a deal is that? Everyone gets so outraged, nobody seems to have an estimate of how much of a difference that made compared to other factors. The background assumption in this article seems to be not enough houses were built to accommodate the influx of people, and that's why housing works as an investment that rises in value faster than inflation. But what are the assumptions that imply it "should" have risen at the same rate as inflation, that if we hadn't been treating housing as an investment then the precise amount of development would have occurred so that the apartment prices keep pace with inflation?
Because if housing supply isn't artificially constrained you should expect rising housing costs to lead to more building, which should lead to lower housing costs. Yes, there's an upper limit to this, in that you can only build so high and land is finite, but we're nowhere near that limit.
It should increase at the level of inflation for the same thing everything else does: Most other products do not have artificial scarcity legally mandated, so the rise in price reflects actual relative changes in the costs of making goods.
I would expect in a world without artificial constraints the price of housing in Manhattan would still have gone up, but nowhere near the levels it does in our world.
It should increase at the level of inflation for the same thing everything else does
Except, as I already said, it's not the same product. A 2023 Manhattan apartment is actually better to live in than a 1995 Manhattan apartment, even if it's the same apartment. That's not true of a 2023 Manhattan loaf of bread. Where the city has stagnated, home prices often are low, but we tend to avoid those places.
Also, there's the fact that home prices depend on financing. That is, the money you actually pay is the nominal cost plus the interest paid. If I recall correctly, the rise in average home value, rather than in cities we want to live, seems to track pretty well the decrease in mortgage interest rates, so people are effectively paying a similar amount.
You're making a quantitative judgment without any quantitative knowledge to base it on. You don't know the relative contribution of artificial scarcity and other factors, and neither do I.
So to be clear, my point is not "housing should only ever increase by 2% per year and not a dime more", but "In general, housing is like any other product and if it's increasing in price in the long term, there are reasons for that other than demand shifts. If more people want to live in NYC, it's not surprising that rent will go up in the short term. My point is: for any other market, you would not expect rising demand to lead to large permanent increased in cost, because if more people want e.g. surfboards, companies can just make more of the things. You don't have to check with every surfboard rental place first.
Yes, since an apartment in Midtown Manhattan is not entirely substituteable for an apartment in Morningside heights, you might expect some increase in prices even if development is unchained.
Absent being able to look outside reality and compare all the universes where housing in NYC is restricted vs the ones that aren't, we can't exactly be certain. But in that absence, we say "For literally every other product, the long-term price is mostly correlated with the actual cost of making it, even as demand increases. Is there any reason to believe that the cost of building housing in NYC (not including extra costs from going through the various veto points) gone up as much as rent has?"
Sorry for intruding on your discussion, I have answers for you
Neither quality of housing or anything is relevant. Manhattan having apparently increased in attractiveness is probably related to gentrification and houseless and/or black people getting slowly evicted, more companies coming in because crime goes down (as crime is related to poverty. Both houseless ppl obv and black/queer/disabled people tend to be poorer and therefore often get pushed out onto the streets and later out of town. That's literally a thing that happens large scale)
Now let's get to rising cost of living and homes, why? The housing market being seen as an investment is the problem here, but not because of landlords renovating homes. Landlords aren't really known for putting in effort for their tenants are they. The rising costs come from two factors, technically three but two work together.
The first factor is legislation, either insufficient legislation making abusive practices by capitalist viable/legal or legislation designed to leave loopholes/allow stuff under proper circumstances with the power over decision making going to the landlords/companies.
The second factor are banks and investors. Investors wanna invest into anything valuable, banks determined that houses and specific types of contracts (I forgot their name I'm just gonna link something if you're interested) are most profitable. So investors made and still make a lot of these contracts and build mostly a specific kind of "middle class home". So the diversity of products on the housing market go down, these middle class homes which constantly get built suggest a demand so prices go up even further, they become unattainable for most middle class people (the middle class is fake and it isn't really useful to pretend we have anything but an upper and a lower class) and investors sit on their homes unwilling to sell or rent because expectations don't get met. So prices also can't fall and adjust to the realistic levels for those who would be interested.
Tl;dr banks offer a certain contract where they make building homes attractive for investors, those investors want a profit back on their investment since obv it had promise but don't get it so they sit on their houses without ever selling or renting them out making prices rise and rise because a suggested demand is there that doesn't actually exist. but because no comparable product gets made or offered that would be affordable everything stagnates at the high price or prices rise.
The things you two discussed in here are more related to discrimination than actual effort being put into anything.
I'm gonna leave you with a funfact for the finish there are 3-30 (numbers vary between estimates) homes/houses per houseless person in NY.
Here the promised video, yes it's about NFTs and Crypto, but it also explains some basic things that are probably of interest to you and also this housing market thing because it's is related. Very much the same principle at work, so have fun thanks for reading I'm out
https://youtu.be/YQ_xWvX1n9g
I think you're misapplying the lessons from that video. The speculative housing bubble of the 2000s was a different case than NYC today. The population of NYC and rent prices are rising while new supply of housing isn't. I don't think there's a glut of vacant properties in New York: The Vacancy rate of NYC has been around 6% since the 90s. Note also that yesterday's luxury units are often today's cheaper units, and that adding even higher cost units helps because then the people living in those units aren't competing for other units (and thus driving up the price).
In either case, our disagreement above wasn't about discrimination, except in the tangential sense of crime and black people being less attractive to whites with money. I think that enormous rise in housing over inflation is very likely due to a lack of housing supply, whereas raginrayguns thinks there isn't enough evidence to be as sure of that as the article's author is.
No yeah that's my point, the effects of that are still noticable to this day, because these units aren't used
Basically the scarcity you're mentioning here is real but artificially created because it's more "profitable" or rather in other words it's a theoretical loss on an investment that can never be profitable because there are no buyers except the investors
Like the houses readily available on the market are too few for the demand but actually houses do exist.
I may have been a little bit overeager with what I said overshadowing your arguments while the issues are probably interlinked and it isn't just one factor. For sure some things have improved and changed



