The housing cartels

Housing is so expensive in America’s top 10 cities that only the wealthy can afford to buy a home or even rent an apartment. What factor is at play that everyone is missing?

I feel very strongly about this one and I have a bit of a unique opinion.

Housing is astronomically expensive because there isn’t enough of it. There are millions more people who would like to live in our top cities than there are homes available for rent or purchase.

So thats it. Not enough supply. If we could build more housing we would solve the problem. Why can’t we?

Developers are willing and able to build the housing. They can build high rise apartment buildings for $300 per square foot. So if they make a healthy profit of 50% it should cost a consumer $450,000 for a 1,000 sf 2 bedroom apartment. So why does it cost 3-4 times that?

The local planning boards and zoning laws in our major cities limit the density of our housing developments. They restrict the height of our apartment complexes.

Who sits on the local planning and zoning boards? Members of the town. Local property owners.

So the local home owners control the zoning and new development but they also own property in the city. What happens if they limit new development and new housing supply?

Their own home gets more valuable.

Why in the world would the planning boards and zoning boards make it easier for developers to build? They would lose money.

So they don’t. They limit supply of housing to protect their own investments. The local home owners win.

The city loses. The middle class loses. The lower class loses. Local businesses lose. Everyone else loses.

Have you ever been to a town planning or zoning hearing? You should go. Watch the home owners cry and send the developers packing. Watch the “not in my back yard” outcry.

Drive through the suburbs of Boston and look at the yard signs that read “VOTE NO on the Route 2 development”. Every 3 million dollar 5,000 square foot single family home sitting on 3/4 of an acre has one.

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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.