How Reverse Game Theory Could Solve the Housing Shortage

https://www.noemamag.com/the-architecture-of-cooperation/

by bookofjoe • 4 months ago

35 76 4 months ago

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xnx3• 4 months ago

Hugged to death? Archive: https://archive.is/yZYMa

peder4• 4 months ago

Leftists doing anything except just building more housing

Rent is falling all over the Southeast where housing has been built in droves, and actually in greater quantities than new demand. The only solution is just flooding the market with housing.

fn-mote• 4 months ago

Yes, hate to say it but there is only one way to lower housing prices.

Also I have limited sympathy for people who move to high COL areas and then are upset by housing prices.

WarmWash2• 4 months ago

Also I have limited sympathy for people who move to high COL areas and then are upset by housing prices.

*Move to a high CoL area to get a high paying job, and then are upset by housing prices.

Many people would be overall better off with a lower paying job in a lower CoL area

01HNNWZ0MV43FF• 4 months ago

It's true.

There's no one silver bullet, it will have to be a multi-front push:

1. Just build more

2. Zone for multi-family housing

3. Get rid of minimum parking and minimum lot size requirements

4. Allow mixed-user residential and commercial buildings

5. Shift property tax towards taxing the land and exempting buildings from tax, to force speculators to sell vacant land and derilect buildings for development

6. When things start moving, invest in walkability and public transit to support dense urban cores. Cars are great for low-density, but paying for miles of road and polluted air in dense city cores is silly behavior

bpt311• 4 months ago

#2 - #4 are really just specific ways of accomplishing #1.

Most people don't want to live in dense urban cores, so #5 and #6 can easily backfire and stunt progress on #1.

Just let people decide what to build where, both as individuals and communities. If dense urban cores truly are the "better" way of living, it will prove itself soon enough without the urbanists trying to force everyone down their path to their own detriment.

profsummergig2• 4 months ago

I've noticed that it's super-rich leftists who oppose permits for new housing, not all leftists.

An interesting group of people they are, the super-rich leftists. The way they weaponize the environment to prevent others having what they want... really makes you wonder.

cucumber3732842• 4 months ago

It's not even the "super" rich. They don't care what you do. They can afford walls, hedgerows, extra land as a buffer, the finest sound deadening windows, etc, etc, etc. And they can afford to live among people like them so pretty much all that is only of limited relevance to begin with. They make the rules of the game so they make money and their assets go up either way.

It's some jerk who makes $200k who can afford the house but can't afford to not care what their neighbors do that drives all this at scale.

He's the one trying to scheme up some way to get the government to use other people's tax dollars to threaten them if they try and do something he doesn't like, because that's his only lever to pull. And there's enough of these jerks the government(s) pander to them. The result is everything gets stifled and red-taped. Can't run a bar here. Can't have an apartment building there. Can't have too little parking, but if you have too many cars you're running a junkyard, and on and on and on and on. It's these people in aggregate that result in the existing body of regulation of which there always seem to be a few lines that can block any given development.

And then they have the gall to turn around and whine about the sum total of all this. Not enough housing, not enough amenities, what does get built is ungodly expensive.

"man, this park sure is dirty" <throws cigarette butt on ground> "I wonder how it got that way".

potsandpans• 4 months ago

Can you please give examples of people you consider to be leftist? Kindly, name five "super rich leftists"

scythe• 4 months ago

Certainly, building new housing works well at a policy level. But calling for new housing doesn't seem to work at a political level. We've been fighting this fight ever since the financial crisis and every election cycle brings us a few victories with an equal number of reversals. And it isn't only within the left that the opposition arises; it wears red in progressive neighborhoods, but it seems to have a taste for brown when that's convenient.

I don't think that the urbanist movement can succeed if it is driven by policy wonks who want to throw out the rulebook and impose reforms from the ivory tower without a real small-d democratic political strategy. Many of us are used to fighting the political battle against climate change by being Absolutely Correct and expecting that Science with her indefatigable armies of Reality will guard the flanks. A fully economic fight like this one just doesn't have the same kind of inevitability. Every step forward on the ground weakens the sense of urgency in the legislature, leading to an equilibrium trap without a vigorous political movement that can hold momentum.

Nerds do not usually want to do politics, but in housing you have to do politics.

bpt311• 4 months ago

IMO, this is largely because the government's job is to stay out of the way, and people who hold elected office in areas where this is a problem (the Northeast Corridor and West coast generally), mostly have a certain something in common that indicates they are likely to think they need to "help" the market along.

It's not a coincidence that the "housing crisis" continues unabated in places like NYC that are losing population, yet appears to be solved in areas in the south that are absorbing those people.

Tade03• 4 months ago

China built a lot of housing and it didn't do anything until the ponzi scheme started unraveling.

Asymptotically what you said might be true, but before it gets there years might pass as they did in China. It's not clear how long this madness would last if not for COVID.

nradov3• 4 months ago

Outside of the major city cores, much of what China built wasn't "housing" in the sense that most Westerners think of housing. The buildings often looked superficially like housing but were never really usable for that purpose. They were more like physical "tokens" used as speculative trading vehicles. Now some of those are being demolished, either due to lack of consumer demand or because the "tofu dreg" construction quality was so bad that they aren't safe to occupy.

peder4• 4 months ago

Housing prices cratered in China, because, yes, eventually supply catches up and then the ponzi schema has nowhere to go but down. Lots of people hold real estate thinking it's an investment just by itself, so it's been a vicious cycle of prices going up. But if you build enough supply, the market stops treating property that way.

I don't think the Chinese real estate market will ever truly "recover" to the Tulip Mania levels it hit before. Especially with a declining population.

lux-lux-lux2• 4 months ago

San Francisco has more homes per capita (~2.0) than any of the southeast states (2.1-2.4).

nearting• 4 months ago

Unless this is a very generous approximation, 2.0 is less than 2.1-2.4.

Even setting that aside, homes per capita is not indicative of supply and demand - if everyone in SF wants to live in a house alone, it really won't matter that SF has slightly more homes per capita.

kbelder• 4 months ago

I voted you up because you're correct, in that the only solution is construction and there are people that are doing everything in their power to avoid that truism.

But I don't think it is a left/right issue. In certain regions it may be the left, in others the right, but generally it is subset of both that have investment in artificial scarcity. It's just the justifications that change depending on ideology.

justonceokay• 4 months ago

See NIMBYs all down the west coast. I bet 90% of city dwelling homeowners would identify as “democrat or further left”, but are very conservative with the character of their neighborhood.

In my experience the bulders and tradesmen who are more right-wing have more to gain from allowing more and faster construction and are more interested in removing laws and restrictions.

A lot of this comes from the attitude in the 60s and 70s where the liberal strategy was to sue the government to stop them from destroying the environment. People from that era saw the smog and the flammable rivers and are generally against development , even though today’s development processes are starkly different from back then.

peder4• 4 months ago

Right, it's not an inherently left vs right thing. Today NIMBYism has been largely a left-wing phenomenon, with really high end housing developments that are politically untouchable by housing projects.

The answer is always the same tho: make it easy to build housing, and build more housing. Keep building housing until there's a glut of supply.

deeg• 4 months ago

I'm very progressive in some ways but I do think progressives make this particular problem worse, often with good intentions. Both sides are equally NIMBY but liberals also have:

- More environmental regulations that can be used by NIMBY.

- Attempts to solve the using various forms of rent control, which make it worse.

- Related: conservatives favor less regulation, which leads to more construction.

- Liberals hate for (or at least distrust of) landlords. Some of this is well-deserved but I've seen liberals oppose good policies because it will "help landlords".

Lastly, home owners--including liberals--like to see the value of their property go up and tend to favor policies that make it so. It would be nice if we could get people to stop looking at their homes as financial investments.

gadders• 4 months ago

Leftists doing anything except curbing immigration.

Fixed it for you.

lukifer2• 4 months ago

Half-agree: zoning restrictions and non-essential building regulations are a de-facto government handout to existing property owners.

At the same time, apologists for rentiers will do anything except taxing unimproved land value (which among other virtues, functions as a vacancy tax to reduce unproductive speculation, and incentivize development).

The blunt reality is a zero-sum tension: homeowners and landlords want number go up, new buyers and renters want number go down.

bpt311• 4 months ago

Half-agree: zoning restrictions and non-essential building regulations are a de-facto government handout to existing property owners.

The government represents existing property owners, so they are effectively a handout to themselves for creating and/or sustaining a desirable area. I don't see why things would be any other way.

At the same time, apologists for rentiers will do anything except taxing unimproved land value (which among other virtues, functions as a vacancy tax to reduce unproductive speculation, and incentivize development).

LVT is a terrible idea. There's a reason why leftists support it, which is that it centralizes control over property values (and therefore control over said property) in the hands of the state.

If you want development, you don't need to incentivize it. You need to just stop getting in the way of it.

tharmas• 4 months ago

I thought it was development companies that build houses? And why would development companies build so much housing that the value started to drop? Are you saying that "leftists" put up barriers to new housing such as regulation that helps drive up the overall cost of building and hence the price of housing? I would agree with you there. Are you sure "housing has been built in droves" is what brought the price of rent down?

House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.

Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.

High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?

Cue the downvotes.

bpt311• 4 months ago

I'm not going to downvote you, but all of your preferred solutions are exactly the problem. Everyone who thinks more oversight and "support" will fix the problem has their own specific bogeyman responsible for higher housing prices, "bans" it, fails to actually ban it, and then all they have accomplished is that it's now at least slightly more difficult to build housing, and therefore at least slightly more expensive.

And why would development companies build so much housing that the value started to drop?

Because they have very healthy margins currently, and would probably continue to build if their margins drop from around 20% to around 15%. At some point it would become an issue, but we haven't seen that in the areas where building is keeping up with demand or even exceeding it slightly.

Are you sure "housing has been built in droves" is what brought the price of rent down?

Yes. What else could it possibly be?

House prices went sky high because of investors/speculators increasing demand (and massive immigration). Maybe if the government regulated more who buys housing (home dwellers not investors) rather than regulating what gets built. Also, have more sensible immigration levels.

That, plus the many, many artificial restrictions on increasing supply, which actually are the issue. Hint: "speculators" are a tiny portion of the market and aren't leaving homes unoccupied for extended periods of time, and "massive" immigration is also a very small portion of the increased demand for housing. Also, if you want to understand the alternative to population growth, see the Rust Belt in the 1980s.

Since developers will be less likely to build with falling prices perhaps the govt can build rent to own housing for lower income earners. Or incentivize private developers to build affordable housing.

This already happens. It's ineffective.

High prices doesn't necessarily mean its purely a supply problem. If profit is high with low supply for developers what incentive would they have to increase supply?

Because its literally how they make money, and new participants in the market are not barred from entry?

xnx3• 4 months ago

The only solution is just flooding the market with housing.

Definitely true, but much harder to do in areas that are already built up and near jobs vs. building in empty desert for retirees.

conorcleary• 4 months ago

In this vane, I'm tired of the 'right' pointing out the dystopian and ugly 'communist' or 'socialist' mass housing that the USSR and China did during the Cold War. Sorry about aesthetics I guess? Should be more concerned about Evergrande ghost cities, contemporarily.

h-c-c• 4 months ago

Exactly, building in areas where people want to live and work are exactly what these strategies are designed for. You can't ignore the competing interests in these areas and reduce the argument to "build more".

jerlam• 4 months ago

Retirees increasingly don't want to live in the empty desert. They want to live in the convenient and familiar places. Except that's where everyone else wants to live too, but since the retirees have the money, the existing land, and the voting power, they're blocking everyone out.

Reptur• 4 months ago

Liberals*. Leftists don't believe in capitalism and do not solve problems within that framework. They are faux leftists.

antisthenes• 4 months ago

Montgomery county is one of the worst places in the entire US for housing shortage.

The whole first part of the article tries to highlight the success of the 1972-era zoning policy, but ends up making the opposite point, whereas agricultural land is preventing enough housing being built in the north of Montgomery County, whereas Virginia has successfully incorporated density (and more jobs as a result).

Not sure if that was author's intention, or how game theory is even relevant here. It's just zoning and housing policy and understanding of the zero-sum dynamic for desirable land. Some other examples from the article don't make much sense either (except Houston).

Source: DMV native for 20+ years, also an economist (by education, not profession).

I suspect the publication paid the author to write a very particular opinion, because the article reads more like a NIMBY-defending piece.

neutronicus• 4 months ago

I was gonna say - as a Baltimorean MoCo is the last place I would hold up as some triumph of YIMBYism.

All they do is elect Republican governors who kill our transit projects.

bpt311• 4 months ago

They are definitely pandering to central planning supporters, and I don't think the author had to be prodded to support this position given her primary job chasing grants.

jerf• 4 months ago

If you want to understand a fairly non-trivial amount of the brokenness of the world, pondering the implications of "Hey, what if we thought about what our incentives will actually do instead of what we want them to do, and made plans based on that?" being a brilliant and bold breakthrough in the world of governance rather than common sense can take you a long way.

pixl97• 4 months ago

That's the fun thing about common sense, everybody has a different definition of it.

The only way to know what your incentives will do is let them play out. Now, you can make educated guesses on what will happen, but much like computer security, people find surprising ways to break things.

chrchr• 4 months ago

It's funny that they call it "reverse game theory", like it's a new thing, when it's actually just regular game theory.

greggyb• 4 months ago

Title is annoying and the article doesn't bear it out. This is not "reverse" game theory. It's just game theory and incentives: something you'd learn in any course of study of economics.

But yes, if you change incentives, you can change behavior. And if you can find a way to create and enforce incentives that push toward an outcome you want, then you get more of that outcome. This is a good lesson to remind people of: incentives matter. So often---especially in discussion of public policy---we see conflation of stated desires with incentives, and of incentives with "cash paid to someone". The former is fallacy, and the latter myopic.

mindslight• 4 months ago

St. Patrick’s Cathedral used the new [air rights] system in 2023, selling some of its rights in a deal worth as much as $164 million to fund its maintenance

I don't see how this creates a sustainable dynamic, rather than merely making a more comfortable journey to that same financialization attractor (ie Moloch). It's easy to feel good about this church (or that farmland) was given a cash infusion and could keep on running its same cute bespoke non-IREAM (inflation rules everything around me) operation, but what happens when that bolus of cash has been inevitably spent and they need another one?

It feels like this is the fundamental problem with every heady touting of market-based reforms. Of course the initial trend is consensual and both parties benefit (positive sum) - otherwise it wouldn't happen! But then as the feedback loops from market optimization set in over the longer term, those positive qualities gradually disappear in favor of a dystopian nonconsensual dynamic.

(FWIW I'm personally undecided whether the root problem here is that capital inevitably coalesces and therefore government intervention is required to keep it distributed, or whether the agglomerating dynamic stems from the centralized money-printing fountain that flows to the politically connected. But there is enough dumb money sloshing around these days that the distinction is probably moot)

avidiax• 4 months ago

I agree with the general principle that game theory is a powerful tool for public policy, but the idea of these transferable development rights or "air rights" seems a bit absurd to me.

What the government is saying by allowing these rights to be sold, is that the place to which they are transferred to has arbitrarily restrictive zoning. In my mind, the value of transferrable development rights should be zero. Zoning should actually have some hard principle behind it that isn't bendable by allowing the non-development of some other desirable piece of land. Either a building is too tall for the neighborhood or it isn't. It should be "too tall unless you pay a farmer 10 miles away".

Why is uneven, concentrated development some kind of public good?

How does this position unroll? How does the farm eventually get developed in 50 years? Do they have to buy TDR from someone else? Does an "equivalent" TDR have to be demolished?

noahbp• 4 months ago

Why is uneven, concentrated development some kind of public good?

Because of agglomeration and the incredible desirability of mixed-use walkable neighborhoods (see rents in walkable neighborhoods of NYC + SF + Boston for proof). This farmland is only desirable and sought out by developers because of zoning restrictions elsewhere.

How does this position unroll? How does the farm eventually get developed in 50 years? Do they have to buy TDR from someone else? Does an "equivalent" TDR have to be demolished?

These are all great questions which reveal that TDRs are not a very forward-looking policy solution to the housing crisis. Maybe planners believe there will be more appetite for taller buildings in the future, or that land prices will rise enough that the owners' support for zoning reform will overcome opposition. It does seem absurd, and more like a way to bribe property owners so that local politicians can avoid making public decisions in meetings that 90% of NIMBY cranks disagree with.

If you can get a payout for "selling" something without having to actually sell any part of your property that you intend on using, and nothing will change in your neighborhood, why wouldn't you sell it? And if property owners and residents in a neighborhood are crying to anyone who will listen that the world will end if four-story buildings give way to six-story buildings, you now have a big incentive to show up to those same land use meetings and push back.

vonneumannstan• 4 months ago

Do you really need Game Theory to figure out you need to build more houses and can't let NIMBY's be in charge of the decisions for where and when that is done?

latenode• 4 months ago

Housing policy fails because everyone is playing a different game. Zoning boards, developers, homeowners and renters all have completely different incentives and nobody is solving for the same outcome.

howdyhowdy• 4 months ago

Go read about things like rent maximizer from yardi then come back. Another reason people can't afford to buy housing is because companies like these enable apartment complexes to collude on pricing under the guise of software. Rent is higher than a mortgage payment in some places, and folks can't afford to pack any savings away. So they rent until they fall behind, then they rent something less ideal, then they leave the area or live out of their car. Either way it's garbage. The only reason I could afford my home is because I managed to find a private renter who was charging significantly below market rate for years so that I could build a down payment, and I managed to buy at the right time. Two years after closing the 'value' of my home jumped 60% and I would have been priced out, it's all just bullshit.

Maybe instead of going around our elbow to get to our asshole we should just call a spade a spade and make rent 'optimization' illegal. Then once people can actually afford a home we'll have a better picture of how many should be built. Because ultimately? People just want to be able to live without the stress of bills and the looming worry of maintaining a roof over their heads.

7e• 4 months ago

The housing shortage is due to humans breeding and overrunning their habitats. It’s not something to be fixed. It’s badly needed backpressure which keeps the planet livable. Do you want to live in a concrete jungle? Do you want to kill the earth? Do we need any more people?

Selfish influencers are trying to get housing built in “cool” spots, (because they don’t make enough money) rather than wait their turn or make other neighborhoods cool. Ignore them and their campaigns to ruin everything.

tancop2• 4 months ago

im not convinced about this. its way more simple to delete zoning laws and replace them with a resident vote. that means the community can decide directly in a bottom up local way without affecting the whole city. layer a tax incentive on top of that where part of the property tax rate is calculated from local average rent (of course thats impossible in cali with prop 13) so areas that want to keep themselves exclusive pay more and that money can go to public housing in other places with better neighbors.

tancop2• 4 months ago

add on to that - the big problem i see here is getting all the details right because its a radical new way to do things thats never been deployed anywhere afaik. like what should the default action be when theres not enough votes, we can prob agree it should be yes for apartments and no for factories but what about the rest? how do we calculate the impact zones to figure out who is affected by a new build? how do you prevent developers from gaming the system with a flood of new renters paid to move there and vote, maybe make it 2 year + residents only? what about vulnerable minority groups do they get special protections? theres a ton of hard questions here but i still believe its worth it.

gtrplyrjimi• 4 months ago

Housing is a capital G, Government, issue. There are geo-political forces at play that make it hard to deal with housing rationally. The first starts at the border; you have to ensure you can count accurately who is coming and who is going (as well as who plans on coming and who plans on going). This doesn't mean lock down the borders. It means understanding the inputs and outputs. Which leads to the next force. Homelessness.

We must have sensible laws and process from those who are unhoused. Is it financial, medical, psychological, addiction, abuse, etc? Each of these has a different solution; and the law needs to have enough teeth to enforce those solutions.

It's a gradient of solutions. If you fall out of a bracket, there should be a more affordable bracket that is humane. The threat of living on the street doesn't help anything. Plus, in California alone, enough has been spent to solve the problem tenfold. I suspect devious forces at work behind that....

So we've controlled our population inputs / outputs from one vector, we've put a cap on homelessness, we now need....... affordable, mass, fast public transit.

Look, we all can't live in NY or by the beach or in all the fun places. Uprooting the entire economic system is a no go with too many unforeseen consequences. Supply is only way to possibly lower the costs in desirable places, but you are competing against the world.

The bare-minimum is that from anywhere in the country you live. You are not far from fast transportation. Bullet trains and things of that sort. That means you can actually develop farther and farther out, but still have those people participate in the main hub's economy.

If you sort those things out, you will allow people to decentralize and will force commercial entities to do the same. This will put immediate pressure on the already over-stressed commercial real estate market. Once that relents, we may see the cost for housing come down everywhere.

How Reverse Game Theory Could Solve the Housing Shortage

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