I seem to come across two types of articles about real estate. The first is straightforward but rather boring as it simply reports the latest price movements in a ticker-tape-announcement sort of way. The other is a much more complicated, rambling article which touches on every aspect of housing that one could imagine. These remind me of a parable which originates out of the Indian subcontinent. The story describes a handful of men trying to address an issue by groping at it from all sides. It goes something like this.
A group of blind men heard that a strange animal, called an elephant, had been brought to the town, but none of them were aware of its shape and form. Out of curiosity, they said: “We must inspect and know it by touch, of which we are capable”. So, they sought it out, and when they found it they groped about it. The first person, whose hand landed on the trunk, said, “This being is like a thick snake”. For another one whose hand reached its ear, it seemed like a kind of fan. As for another person, whose hand was upon its leg, said, the elephant is a pillar like a tree-trunk. The blind man who placed his hand upon its side said the elephant, “is a wall”. Another who felt its tail, described it as a rope. The last felt its tusk, stating the elephant is that which is hard, smooth and like a spear.Wikipedia
Pricing and homelessness and house maintenance and building restrictions and greedy developers and disgruntled renters and building equity and housing density and parking and so much more can all be jumbled into one passage about, real estate. It’s too much.
We need some rules.
Most of the population of the area under consideration navigates and open market system of securing housing. They are as much of a price setter as the sellers, including the developers. Who has the upper hand in the market goes through cycles and it noted by things like time on market or number of properties taking a price reduction before receiving an offer. We’ve been in a sellers’ market for a number of years and people have seemed to forget that a buyers’ market will be here in due course.
But the brings up a second category of conversation. The number of dwellings versus the number of households in the area of interest is rarely printed. It seems like looking into this metric would be helpful. Otherwise, it is unclear what happened to reduce the dwellings or to increase the households and thus forcing the increased expense. It would also bring into better focus what groups of people maybe hanging onto unused properties. For instance, if the issue were that older folks had transitioned into assisted care yet couldn’t come to terms with letting go of their property, perhaps there would be some inducement to make that happen.
The third category is around how groups of people learn to live side-by-side. This brings in all that comes before a city council. There are, and rightly so, rules made at the state level as well. In Minnesota we have an intermediate level of governance, the Metropolitan Council, which controls the expansion of the metro. Logistically the number of layers of governance from an HOA to a city to the Metropolitan Council to the State has led to some significant inefficiencies. There is work here to be done to better coordinate these providers of public services.
On the flip side you have all the private activities that go into building new and maintaining existing structures. This makes up category four. The motivations and markets that drive these efforts reside in the traditional economic realm, and rightly so. Contractors, plumbers, electricians, homeowners, carpenters, landlords, banks, and so on all how this operates, and for the most part it runs well.
However, at some point, someone decided that category five, those that need help with their housing, should be the wards of the housing developers. I think it came out of the political language: “We need to build more affordable housing.” New construction is not affordable, it is the most expensive type of housing. This destined-to-fail concept was laid at the feet of those that construct buildings. The real conversation here is not how to fit xx many affordable (by who’s standards?) units into a new project. It is who and how will the entire public (city, state) pay to subsidize the rent for those who can’t pay for themselves.
The final conversation is about taxation. But that’s too complicated to tackle on a Friday evening. But maybe we can turn the elephants back into the jungle?