Cheap Housing and a Good Economy

[Jacob]

Interesting article on the cost of housing, government interference, and the results on the economy: https://www.forbes.com/sites/eamonnfingleton/2014/02/02/in-worlds-best-run-economy-home-prices-just-keep-falling-because-thats-what-home-prices-are-supposed-to-do/#276eb3436ad0

Rather than keep their noses out of the economy, German officials glory in influencing market outcomes. While the Goerlitz authorities are probably exceptional in the degree to which they micromanage house prices, a fundamental principle of German economics is to keep housing costs stable and affordable.

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000. Broadly equivalent properties in New York City and Silicon Valley were selling for as much as ten times higher.

Although conventional wisdom in the English-speaking world holds that bureaucratic intervention in prices makes for subpar outcomes, the fact is that the German economy is by any standards one of the world's most successful. Just how successful is apparent in, for instance, international trade. At $238 billion in 2012, Germany's current account surplus was the world's largest. On a per-capita basis it was nearly 15 times China's and was achieved while German workers were paid some of the world's highest wages. Meanwhile German GDP growth has been among the highest of major economies in the last ten years and unemployment has been among the lowest.

It seems to suggest a positive outcome from direct government intervention in the economy.

[Valmy]

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000. Broadly equivalent properties in New York City and Silicon Valley were selling for as much as ten times higher.

I may have made a terrible mistake. I should go learn German.

[derspiess]

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000. Broadly equivalent properties in New York City and Silicon Valley were selling for as much as ten times higher.

I may have made a terrible mistake. I should go learn German.

Wow, maybe I'll retire to the ancestral homeland of Rhineland instead of Argentina.

[The Brain]

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000. Broadly equivalent properties in New York City and Silicon Valley were selling for as much as ten times higher.

I may have made a terrible mistake. I should go learn German.

Wow, maybe I'll retire to the ancestral homeland of Rhineland instead of Argentina.

Detroit has cheap housing.

[Malthus]

Interesting article on the cost of housing, government interference, and the results on the economy: https://www.forbes.com/sites/eamonnfingleton/2014/02/02/in-worlds-best-run-economy-home-prices-just-keep-falling-because-thats-what-home-prices-are-supposed-to-do/#276eb3436ad0

Rather than keep their noses out of the economy, German officials glory in influencing market outcomes. While the Goerlitz authorities are probably exceptional in the degree to which they micromanage house prices, a fundamental principle of German economics is to keep housing costs stable and affordable.

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000. Broadly equivalent properties in New York City and Silicon Valley were selling for as much as ten times higher.

Although conventional wisdom in the English-speaking world holds that bureaucratic intervention in prices makes for subpar outcomes, the fact is that the German economy is by any standards one of the world's most successful. Just how successful is apparent in, for instance, international trade. At $238 billion in 2012, Germany's current account surplus was the world's largest. On a per-capita basis it was nearly 15 times China's and was achieved while German workers were paid some of the world's highest wages. Meanwhile German GDP growth has been among the highest of major economies in the last ten years and unemployment has been among the lowest.

It seems to suggest a positive outcome from direct government intervention in the economy.

The problem is the old one of attributing causation. The article implies (hell, pretty well outright states) that German economic success is caused by German interference in the housing market to make houses affordable.

I didn't see any proof of that, though.

What if causation goes the other way around - if German economic success means that Germany can afford policies that interfere in the housing market and make houses affordable?

[Admiral Yi]

A shame the article glosses over the federal payment to municipalities and the housing consumption tax.

[dps]

The problem is the old one of attributing causation. The article implies (hell, pretty well outright states) that German economic success is caused by German interference in the housing market to make houses affordable.

Somehow, I think the Marshall plan had something to do with German economic success.

[viper37]

A shame the article glosses over the federal payment to municipalities and the housing consumption tax.

yeah, and also that prices are kept down by the government making sure there is always land available to build.  Germany produces less&less agricultural products relying instead on eastern europe for that.  Not sure that system could be exported to the United Kingdom, Canada or the US.  There's already a lot of pressure on agricultural lands.

[Admiral Yi]

yeah, and also that prices are kept down by the government making sure there is always land available to build.  Germany produces less&less agricultural products relying instead on eastern europe for that.  Not sure that system could be exported to the United Kingdom, Canada or the US.  There's already a lot of pressure on agricultural lands.

It would be no problem in the US.  We have plenty of land.

[HVC]

Interesting article on the cost of housing, government interference, and the results on the economy: https://www.forbes.com/sites/eamonnfingleton/2014/02/02/in-worlds-best-run-economy-home-prices-just-keep-falling-because-thats-what-home-prices-are-supposed-to-do/#276eb3436ad0

Rather than keep their noses out of the economy, German officials glory in influencing market outcomes. While the Goerlitz authorities are probably exceptional in the degree to which they micromanage house prices, a fundamental principle of German economics is to keep housing costs stable and affordable.

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000. Broadly equivalent properties in New York City and Silicon Valley were selling for as much as ten times higher.

Although conventional wisdom in the English-speaking world holds that bureaucratic intervention in prices makes for subpar outcomes, the fact is that the German economy is by any standards one of the world’s most successful. Just how successful is apparent in, for instance, international trade. At $238 billion in 2012, Germany’s current account surplus was the world’s largest. On a per-capita basis it was nearly 15 times China’s and was achieved while German workers were paid some of the world’s highest wages. Meanwhile German GDP growth has been among the highest of major economies in the last ten years and unemployment has been among the lowest.

It seems to suggest a positive outcome from direct government intervention in the economy.

The problem is the old one of attributing causation. The article implies (hell, pretty well outright states) that German economic success is caused by German interference in the housing market to make houses affordable.

I didn't see any proof of that, though.

What if causation goes the other way around - if German economic success means that Germany can afford policies that interfere in the housing market and make houses affordable?

A homeowner would try to keep the prices high. You're the enemy

[dps]

yeah, and also that prices are kept down by the government making sure there is always land available to build.  Germany produces less&less agricultural products relying instead on eastern europe for that.  Not sure that system could be exported to the United Kingdom, Canada or the US.  There's already a lot of pressure on agricultural lands.

It would be no problem in the US.  We have plenty of land.

True, but a lot of it isn't good for agriculture.  Even a lot of our most productive farmland depends on irrigation.

Ideally, you'd build the housing on the less productive land, though that makes the distribution system critical.  Of course, in some ways, we're already there, and shipping foodstuffs from the Great Plains or California's Imperial Valley to, say, Boston is shipping them further than shipping them from Eastern Europe to Germany.  OTOH, we have paved over a lot of good farmland to build housing subdivisions and malls.

[viper37]

It would be no problem in the US.  We have plenty of land.

Having land in Dakota is not useful for someone working in New York.

[Zanza]

Rather than keep their noses out of the economy, German officials glory in influencing market outcomes. While the Goerlitz authorities are probably exceptional in the degree to which they micromanage house prices, a fundamental principle of German economics is to keep housing costs stable and affordable.

Görlitz perhaps because it sits on the Polish border. But in urban areas like Munich, Frankfurt, Stuttgart or by now even Berlin, prices have grown way faster than income growth since the financial crisis. There is a bubble growing thanks to the no interest monetary policy. Munich especially is not affordable for average earners anymore.

Although conventional wisdom in the English-speaking world holds that bureaucratic intervention in prices makes for subpar outcomes, the fact is that the German economy is by any standards one of the world's most successful. Just how successful is apparent in, for instance, international trade. At $238 billion in 2012, Germany's current account surplus was the world's largest. On a per-capita basis it was nearly 15 times China's and was achieved while German workers were paid some of the world's highest wages. Meanwhile German GDP growth has been among the highest of major economies in the last ten years and unemployment has been among the lowest.

Those figures show an unbalanced economy, not a outstandingly successful one.

It seems to suggest a positive outcome from direct government intervention in the economy.

There are good arguments for a strong role of the government in the economy, but the quoted part is not it. Read books by Ha Joon Chang for a good argument.

[Zanza]

yeah, and also that prices are kept down by the government making sure there is always land available to build.  Germany produces less&less agricultural products relying instead on eastern europe for that. 

I doubt that. As far as I know the heavily industrialized agriculture here exports lots of meat, milk etc. Do you have a source for less output?

[Jacob]

There are good arguments for a strong role of the government in the economy, but the quoted part is not it. Read books by Ha Joon Chang for a good argument.

Could you recommend one or two as a starting point?