Or to put it another way, why didnt it happen 20 years ago or 50 years ago or 100 years ago? It seems like the underlying reasons for property being so expensive have been around, well, forever? Landlords accumulate wealth, buy property, use property to generate more wealth, property stock declines and property prices go up? I realise thats a 5 year old’s view of capitolism but i dont have any background in economics. Id love to have it explained in more detail
In: Economics
The short answer: in the US we stopped building new homes in the Great Recession and we haven’t caught up on the huge shortage since then.
New single family home construction in the US by decade:
* 1960s: 9.3 million starts
* 1970s: 11.4 million starts
* 1980s: 9.9 million starts
* 1990s: 11.0 million starts
* 2000s: 12.3 million starts
* 2010s: 6.8 million starts
If you adjust this for population growth it looks even worse. Full stats: https://eyeonhousing.org/2020/01/a-decade-of-home-building-the-long-recovery-of-the-2010s/
Every decade from 1960s-2000s the US built >2x homes per capita compared to 2010s.
Note that this has **not** happened in all developed countries. The details are very regionally specific. In Japan, for instance, housing is generally affordable (much cheaper in Tokyo than in NYC, for example).
There are major housing shortages in several English speaking countries, which have similar legal and cultural trends. Again the details differ, but the general summary:
* Tons of homebuilders went bankrupt in the Great Recession of 2008 and housing market crash. Even those that remained basically stopped building for a decade. The slow recovery led to a “lost decade” where homes were built at half the rate in the 2010s compared to earlier decades. This was a global phenomenon.
* English speaking countries have similar zoning laws that make it difficult and expensive to build new homes. These were passed in the 50s during White flight as folks left cities for suburbs and passed laws to stop poor people or people of color from following.
* Even in recent decades cities were still below their peak population, so they had spare housing as people moved back to the city. (Somerville, MA in the Boston metro is still below its peak population from *1940*.)
* More people live alone. Households are smaller. So the same population today demands ~2x as many homes as 100 years ago. And population has also grown, of course.
* Major metros hit limits on how far you can build single family suburbs and exurbs. The longer the commute, the worse car traffic gets.
Why not 100 years ago? Zoning laws hadn’t been invented yet. If you wanted to build a duplex, nobody would stop you. Lots of vacant land even in major metros.
Why not 50 years ago? Cities had emptied out, suburbs still had room for more single family homes despite restrictive zoning. Lots of vacant buildings in major cities.
Fast forward to today: zoning rules start to really hurt as suburbs are “full” and make it illegal to build denser apartments. More people live alone and not in multi-generational households.
Folks like to blame Airbnb and private equity as boogeymen, but the true story is that normal John and Jane Doe homeowners own most of the houses and pass local laws making it hard to build new homes.
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