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Culture War Roundup for the week of May 15, 2023

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So much has been said about housing prices. Scott even jumped into the fray recently. But I think there's something missing from every analysis. Here's my take, which I offer with low confidence, but at least it's not the same regurgitated shit:

Housing Prices are a Meme

Something changed around the year 2000. It wasn't an economic change. It was a mental change in how much people are willing to pay for a house. Before, people might have balked at paying 50% of their income on a house. Now they do it. And why not? With few exceptions, housing always goes up. Once you digest that, then there's almost no amount that's too much to pay.

Prices in San Francisco are not high. Compare San Francisco to Vancouver. Compare it to Hong Kong.

San Francisco is the richest city in the world. Yet, prices in San Francisco are not really too much different from much poorer cities like London, Vancouver, or Hong Kong. In San Francisco, a software engineer might spend 50% of his income on a house. In China, he would spend MORE THAN 100%, relying on the accumulated wealth of parents and grandparents.

Housing prices are a meme. Fortunately, this meme is less strong in the United States than it is in Europe, Canada, or China. But it's getting worse here. To break high housing prices, we need to break the meme. We need people to learn that housing prices go down. To do that, we need to create government programs that make housing a shitty investment, which is the opposite of what happens now.

If you want to see what happens when the meme finally gets broken, look at Japan. Housing has been a shitty investment in Japan for a long time now. People don't hoard houses hoping for appreciation like they do in other places. As a result, it's affordable. People have been trying to figure out what makes Japan different. This is it. This is the reason.

If we want lower prices, we need to break the meme. Everything else is just nibbling at the edges.

Housing in Japan isn't affordable. Houses are small, probably roughly half of the sqft you'd get in most of the U.S. for the same dollars (my "huge" house in the countryside that shocked my co-workers was just over 1400sqft and it had 4BR, lol). The construction quality is shit, very poor insulation, crappy building materials that degrade significantly in the first 10-20 years. And all this for the low prices of 30,000,000 to 45,000,000 JPY if you want something new, or 25,000,000 to 35,000,000 if you want something used. And get ready to live in a 1000sqft "house" with maybe 1-2 meters of "land" surrounding your house, if that. (Yes, even in the countryside -- they build houses 1 meter apart even in the midst of massive open spaces.) AND! You get to pay for it with your Japanese salary, which PPP-adjusted is worth about half of an American salary.

As for why this is, the most plausible reasons seem to be that

  1. Brain drain to the cities is extreme and WFH hasn't taken off nearly as much -- most people are still trying to cram themselves into Tokyo

  2. Home construction is a racket -- There are a handful of massive national level builders that sit on top of a truly insane byzantine network of contractors, sub contractors, and sub sub sub contractors so that building even with shitty materials becomes horribly expensive due to the sheer number of parties taking their cut. This also makes QC'ing your house nearly impossible because there's no single "contractor" to hold accountable, it's buck-passing all the way down

  3. Penalties for sitting on land are very low -- the attitude towards owning property here seems to be "sit on it and hope you win the lottery." I personally know people who own land in the countryside and who have zero plans for it -- it's just there, it's costing almost nothing, and maybe someday someone will want to buy it, who knows? And of course there's the famous inheritance/ownership problem, where a piece of land gets passed down to half a dozen grandchildren, only some of them cannot be located (and might even be purposely avoiding being located in order to dodge taxes) so nothing can ever be legally done with the land and it just sits in limbo forever.

Interesting! Maybe it's time to take the "Japanese housing is cheap" idea out to the river and drown it.

What do you think of the previous discussion where we talked about a (shitty but functional) rental in Osaka going for $150/month?

I haven't seen that discussion, but it sounds possible. Places like that are usually exactly what you'd expect, some combination of:

  • Extremely small

  • Filthy and/or damaged

  • Old

  • Structurally dangerous (predating latest earthquake safety laws)

  • In a natural disaster high risk zone (flood/tsunami/landslide)

  • Terrible location (far from public transit, or next to factories/noisy train station/graveyard/sewage plant etc)

  • Tainted by association (usually a suicide or high profile crime)

  • Shitty neighbors (almost by definition)

$150/month might still seem outrageously low given the above, but I again have to emphasize that these are usually basically pod "apartments" that would probably violate building codes in the U.S. for being so small.

150/month for 'old pod in natural disaster zone' is still amazing tbh (provided you get a day or two's warning for the disasters, and just move to other pods).

that would probably violate building codes in the U.S. for being so small.

Are there any good reasons such building codes should exist? There'd be a bunch of new requirements for the specific constraints such small apartments ofc, building codes in general are useful, but as far as I can tell generally prohibiting them is pure deadweight loss