CA has prop 13 and we currently have incredibly low mortgage interest rates. SF has an amplified effect, but housing is going up faster than wages pretty much everywhere. Prices are up more than 40% in the desirable cities and town outside of SF (Austin, TX for example).
I don't see any simple ways to fix this, interest rate hikes will slow price growth, but payments will still go up. Some incremental changes (additional taxes on empty houses, rezoning, etc.) may have small changes, but do not seem likely to bring down affordability. Any small dip in affordability in the desirable places will likely see more migration there, unless we hit a huge recession, which based on my experience in 2008, still means most of us will miss out, as the price won't dip enough and the major asset holders just get to buy at a discount.
> I don't see any simple ways to fix this, interest rate hikes will slow price growth, but payments will still go up. Some incremental changes (additional taxes on empty houses, rezoning, etc.) may have small changes, but do not seem likely to bring down affordability.
That’s not how asset owning class uses low interest rate environment in their favor. Say you bought a house in SF in 2010. Well your market value of the house has already doubled if not more. So 5yrs later you borrow against that asset to buy another rental unit in even lower interest rate. Which in turn has doubled.
Meanwhile if a first home buyer like me wants to get in I have to not only have 20% down payment, but also clean credit and a secure job. Do I get to use the low interest rate in my favor? Let’s see credit card interest rates are still 10%+.
>I have to not only have 20% down payment, but also clean credit and a secure job
Have you talked to a mortgage broker lately? In my locale, very few first time buyers are going to be in a place where they have to put down 20%. There are so many state programs available for first-time buyers and so many different loan options. I understand you are in SFO, but a lot of the frustrations you are expressing in your posts above are very localized to California and to SFO and don't really match the left/right politics of the rest of the country.
I mean for primary residence buyers, payments will still go up with interest, even though the asset price increase may slow or even decrease in value. So no, low interest rates are not really in your favor unless you already own the asset and are seeking new financing. Yes, people owning units and using them to buy new units while still being able to cover all their payments is seems like a problem, but it's almost a self-sustaining loop as long as they are able to keep increasing rents. It seems like this loop only stops in recessions. Some moves to make rents less attractive long-term might be helpful, but then you get the problem of who builds new housing if there isn't much profit in it?
I think phasing out mortgage interest deductions over time beginning with a cap would be one positive, but as we saw with the recent SALT cap, that effect is mostly overridden by other factors at least today.
I don't think there is a single entity or action that can be pointed at, there are many inputs, with only recession (in one city or the whole country) seeming to have a strong enough signal to override all the other inputs for the most part. Hiking interest rates to 15% ala the 80's also might work, but I don't expect to see anything near that.
There's a simple solution: move to a less desirable area. But for some reason people don't want to compromise and think they're entitled to live anywhere they want. I don't get it.
I don't see any simple ways to fix this, interest rate hikes will slow price growth, but payments will still go up. Some incremental changes (additional taxes on empty houses, rezoning, etc.) may have small changes, but do not seem likely to bring down affordability. Any small dip in affordability in the desirable places will likely see more migration there, unless we hit a huge recession, which based on my experience in 2008, still means most of us will miss out, as the price won't dip enough and the major asset holders just get to buy at a discount.