This weekly roundup thread is intended for all culture war posts. 'Culture war' is vaguely defined, but it basically means controversial issues that fall along set tribal lines. Arguments over culture war issues generate a lot of heat and little light, and few deeply entrenched people ever change their minds. This thread is for voicing opinions and analyzing the state of the discussion while trying to optimize for light over heat.
Optimistically, we think that engaging with people you disagree with is worth your time, and so is being nice! Pessimistically, there are many dynamics that can lead discussions on Culture War topics to become unproductive. There's a human tendency to divide along tribal lines, praising your ingroup and vilifying your outgroup - and if you think you find it easy to criticize your ingroup, then it may be that your outgroup is not who you think it is. Extremists with opposing positions can feed off each other, highlighting each other's worst points to justify their own angry rhetoric, which becomes in turn a new example of bad behavior for the other side to highlight.
We would like to avoid these negative dynamics. Accordingly, we ask that you do not use this thread for waging the Culture War. Examples of waging the Culture War:
-
Shaming.
-
Attempting to 'build consensus' or enforce ideological conformity.
-
Making sweeping generalizations to vilify a group you dislike.
-
Recruiting for a cause.
-
Posting links that could be summarized as 'Boo outgroup!' Basically, if your content is 'Can you believe what Those People did this week?' then you should either refrain from posting, or do some very patient work to contextualize and/or steel-man the relevant viewpoint.
In general, you should argue to understand, not to win. This thread is not territory to be claimed by one group or another; indeed, the aim is to have many different viewpoints represented here. Thus, we also ask that you follow some guidelines:
-
Speak plainly. Avoid sarcasm and mockery. When disagreeing with someone, state your objections explicitly.
-
Be as precise and charitable as you can. Don't paraphrase unflatteringly.
-
Don't imply that someone said something they did not say, even if you think it follows from what they said.
-
Write like everyone is reading and you want them to be included in the discussion.
On an ad hoc basis, the mods will try to compile a list of the best posts/comments from the previous week, posted in Quality Contribution threads and archived at /r/TheThread. You may nominate a comment for this list by clicking on 'report' at the bottom of the post and typing 'Actually a quality contribution' as the report reason.
Jump in the discussion.
No email address required.
Notes -
Yeah, my sense is that that is a big factor. I have no statistics to back this up, but I live in the Northeast United States and my sense is that a lot of the new single family houses being built in the suburbs are very very far from the cities with the jobs. So that the average price of a house is misleading. And in fact, one of the results of building more housing far away from the city is that road congestion increases, arguably raising the premium for housing which is more convenient to the city.
I would have predicted that work from home would fix this problem, but at least for now, the situation seems pretty lousy.
Anyway, I think it's also worth noting that this is a factor which seems to have changed considerably over time. In the 1970s, notwithstanding the high interest rates, it was possible to buy a single family residence in the inner suburbs of Boston, New York, Philadelphia, etc. on a much lower income than what is required today, relatively speaking. Since then, it seems like things have really gone downhill. (Or uphill, if you happen to have bought a house decades ago.)
Newly constructed homes are also quite a bit bigger than they used to be, particularly in the Northeast.
https://fred.stlouisfed.org/series/COMPSFLAM1FQ
The higher cost of red tape means the fixed costs of development are higher and push builders into building larger, more costly homes to cover the higher fixed costs.
I agree with this based on my general observations.
Well suppose you buy a lot in a fancy suburb for $1.5 million; build some monstrous house for another $1.5 million, and sell the whole thing for $3.5 million, netting you a $500k profit (less the interest on your financing). How much of the money involved went into red tape? And how much would have been spent on the equivalent deal from 30 years ago?
The last time I saw any anecdotes about this was at leasr 6 years ago. From builders, it cost about $250k per lot after buying to buy a large parcel to have the legal right to build a subdivision.
If you buy a lot, the price likely already includes most of the cost. Its buying lots of land and getting the rights to build more than one home that is expensive.
That sounds high to me. Perhaps they are including the cost of building access roads; sewer connections; municipal water connections; etc.
And yet single lot developers are building much bigger houses nowadays than in the past. Which makes me think that there is much more in play than just the cost of red tape.
Yes, they were including all of those costs.
In that case, I would disagree with attributing $250,000 to "red tape." When you build a house you need to have a sewer hookup; water; electricity; and so on. I suppose one could argue that these things are legal requirements and therefore count as "red tape," but realistically who is going to buy a new house in a subdivision if there is no water, sewer, electricity, or road access?
Also, I am pretty sure that these things have been required for decades in new subdivisions.
One big recent increase in costs is driven by subdivisional development having a water runoff abatement infastructure.
Undeveloped land (especially forested) land is something like a sponge that the trees slowly return to the atmosphere, while paved/construction sheds water. New developments need to capture nearly all the excess shed water resulting from their development to reduce the water flowing through stormwater management systems and prevent flooding of older construction which generally didn't need to perform any stormwater abatement.
That may very well be, but I would like to see documentation showing (1) the breakdown of how that $250,000 figure is reached; and (2) how those components have changed over the years.
I would also like to see a plausible explanation for the situation with single lot developments.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
One thing Austin did was cut the minimum lot size for single family home. Less lawn but you can build 3 times the number of homes. Makes sense that supply increases and prices decreases.
I agree that this would make sense, in the sense that permitting more units of housing to be built would be expected to result in a reduction in price per unit. Of course, whether this is good public policy is a separate question. And it doesn't seem like an efficient cause of the explosion in prices for single family houses.
Well yes, this is a value judgment. Young people might appreciate the ability to buy these cheaper (but smaller houses). Older homeowners might not appreciate the riff raffs. But maybe in a few years they will appreciate the economic boom from the population growth. For what it's worth, I do think Austin politicians are saying they are one of the few that has successfully tackle housing affordability in the country.
Well, I did want to point out that when Austin had the old (larger) minimum lot size, that is an example of red tape increasing cost of house. If 3x houses can be sold from the same square footage, it goes to show that before only 1 house can be sold, and the developer would have to make it a pretty expensive house (I don't know if it would have been 3x but certainly 1.5x to 2.5x).
There are other factors as well. Perhaps the increased density of housing will lead to increased congestion on city streets; overcrowded schools; etc.
Well the claim being made was that single family houses have become more expensive over the years, in part because they are being built larger, and a big factor in this is that increases in "red tape" have incentivized developers to build larger houses. So it seems like example you point to is not really relevant to this claim.
I can tell you that in my suburb, there is no more land to be subdivided; if someone wants to build a new house, they have to buy an existing house; tear it down; and construct a new one. Thus, there has been essentially no change in minimum lot size requirements. Nevertheless, developers are frantically tearing down houses from the 50s and 60s which were in the range of 1500-2000 square feet and replacing them with new houses roughly double the size. Moreover, this phenomenon is pretty common throughout the big city suburbs in the Northeast. This suggests that the "red tape" of minimum lot sizes is not what is driving this change.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
The thing is it’s worse than what you’re bringing to light, because this problem is endemic to that whole area and it exists even beyond the whole housing market.
We can stick with the northeast, per your reference class. Take housing out of it for instance. How many people do you think have ever actually tried to build a new business in NYC? Not that I have, but there’s a good body of literature people can read on this and it’s clear that from the people that have, the problem of the business side of things looks very similar to the problem ordinary citizens have of it.
For most people, unless you’ve directly witnessed/experienced it, you just would not believe the regulatory/bureaucratic/tax/economic nightmare doing business in NYC is. Just basic things like getting permits can take months to years due to incompetence. And everything has gigantic fees associated with it. Building in NYC is at least 75% more expensive than in NY/CT, just due to fees, taxes and lost time. By itself NYC as a standalone city is uncompetitive and nobody would want to start businesses without some sort of inducement (here’s where we get to policy…)
NYC itself is an archaic disaster of a regulatory/tax regime and this isn’t even debatable. They’ve been the paradigmatic case for years in political discourse when it comes to the poster boy for dysfunctional politics. For example, their zoning and regulatory laws haven't been overhauled since 1963. Just think about how much the city has changed since then. Back in the 80s/90s, the city decided to try and do something about it. So they created entities like the NYBDC and the ESDF (and also others) that have the ability to waive fees, freeze taxes, stop unnecessary overregulation and fast track permitting, etc. just reflect on that. NYC is so messed up, that they’ve created government entities to fight off other government entities. And the worst part about it is you simply can’t begin anew and start all over.
So when the average person complains that Amazon or some other corporation is getting massive tax breaks; that’s an incomplete picture of reality. NYC itself as a whole is uncompetitive, and the NYBDC/CoC/ESDF/etc., in addition to the city of NYC itself waives fees, permits, taxes, and everything they can to make NYC economically competitive at any level. This is all aimed at trying to level the playing field, which is where it should start to begin with.
You can always make the argument if you want that we shouldn't have to give these giant incentives or giveaways to 'lure' companies in. But I think we should already have a tax/regulatory framework in place that makes the city competitive. The reason these policies exist in the first place is because of an enormous failure of the state to create an environment that is conducive to investment.
If you want to look at the mechanics of how this happens on the ground, it goes a little something like this… About a decade or so ago, I remember they were re-zoning a fairly large area in NYC. Investors go in and perform an analysis of things. They identify two buildings adjacent to one another that are for sale. One’s vacant and the other has a struggling business that's just skirting by, breaking even. There's 10 employees, and the two properties when combined get you say $70K year in all taxes (this includes property, payroll, your business license, etc.). So you want to buy the buildings and put in approximately $10 million into development. In just the first year alone, you would be projected to pay $1 million in all taxes and $750k in the second year, etc.; and on top of that, the permitting process could take up to two years. So right there, that’s a deal breaker, and under those terms, you’d just walk away leaving the city/state to collect $70k in taxes. So what happens instead is you work with the city to cap your liability at $700k in the first year and $500k in years 2-10; and additionally they’re expediting all the permitting and sign offs for you. (And don't forget that the $10 million is taxable to the construction companies that are building this thing, and the state gets a cut of that too…)
So now keep going and look at your analysis from the other side. You could look at this and say "This is bullshit! You’re getting a $3 million tax break!" (Which again is $300k in year one and $250k in 2-10) And technically you’re not wrong… Incidentally, that would be the obvious headline you’d see ran all across the news: "Rich assholes get an obscene $3 million tax break at the expense of the people!" And people would rage until they had an aneurysm over this and politicians would say idiotic populist diatribe about it. But that would be an incomplete picture which is so misleading to the public that it’s more analogous to lying than being mistaken.
Now go back to the analysis. Look at what the city is getting… From the status quo, they’re getting a whopping $70k a year from the current arrangement (which is $700k over 10 years) in all-source tax revenue. But look at your project: with the tax breaks, the city is now getting $5.2 million in taxes over ten years (that's an increase of $4.5 million). If an average teacher's annual salary is $75k, then that's nine new teachers that are funded by this project. And this is exactly the negotiations that are had at the local level when you are pitching your project to the city; "even with the tax breaks, we are paying $X millions in taxes versus the $Y dollars you are getting at present." And don’t forget that the project is going to hire X amount of people compared to the Y amount today.
Of course you can still disagree if you want, but the reality is NYC is likely better off with X corporation + tax breaks, instead of X corporation goes to Boston.
I don’t work in this industry and never will. It’s extremely hard, I don’t want to deal the personalities involved; and I intensely hate it with the fury of 49 crackheads, but members of my extended family own and have leased land to local businesses and they’ve negotiated with corporations and local bureaucrats before where I’m from; so I’ve heard a lot of these stories and I’ve been with them when I was younger and watched them do this. Now just imagine how much harder this all is in a place like NYC. This is a city where business is ran on thuggery and gangsterism on steroids. It’s why people like Andrew Yang never had a chance in hell there. He didn’t understand the topology of power and in all honesty, Andrew Yang is a really nice and likable guy. That will get you absolutely crushed and ran right over in a place like that. Bloomberg was able to hold it down as mayor because he was a fucking bulldozer of a personality. If you remember back in 2008 when Lloyd Blankfein and Goldman Sachs went to Warren Buffett because they desperately needed the liquidity to survive the shocks from the crisis, one of the first things they did immediately after it was over was to scramble to pay him back to get him off their credit stack; because it’s well known that behind the “Oracle of Omaha” facade to the masses that you’d get from watching an interview with him on Yahoo Finance, behind the scenes he’s an absolutely ruthless and cutthroat asshole; the happy grandfather vibe is just marketing to the public. That’s the kind of personality you need to run a place like that and fix these problems. You’re dealing with people like this everywhere.
The work is extremely hard from the business side and if it’s difficult on that side you can be damn sure that the “rational voter” really is a myth. Other sources (1, 2).
I'm not an economist, but assuming that NYC is hostile to new businesses, it seems to me that this would help ameliorate the housing issue I mentioned. Because it means that more people will start businesses in Stamford, Morristown, White Plains, Garden City, and so on. All cities which are far more easily accessible from distant suburbs.
So I would argue that the problem is not so much that NYC is a bad place to start a business, but actually the opposite -- that it's too great a place to start a business. That notwithstanding the extra taxes, the regulatory hurdles, the crime, and so on, NYC offers a huge array of advantages.
More options
Context Copy link
More options
Context Copy link
Yes, because the places closer in are already occupied. It's worse in places with Urban Growth Boundaries; you can't build closer in because it's occupied and you can't build further out because that's to be left as a playground for the planners. Then YIMBYs come in and want to replace single-family homes with apartments.
Ok, well anyway you slice it, I think it's a significant part of the reason young people today often feel poorer than their parents. Economic activity and job growth has concentrated in 5 or 10 big cities while at the same time, there's basically the same number of single family houses in locations convenient to those cities. So it's become much more expensive for a young family to get a basic 3-bedroom house in a nice suburb. Anyway, that's my personal theory, I have no data to back it up.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link