The Housing Paradox

Yes, I am on a bit of a housing rant these days, what with rents increasing rapidly.

But as a venture investor, it pains me to see the prices of housing in relation to nearly every single good and service we offer in the economy. Nearly everything today is faster, better, and cheaper than before. Computers that once took up entire rooms to calculate a differential are now sitting in our pockets, and cost less than $1,000 to boot. Content has gotten to the point where the marginal cost is vanishing toward zero. Even taxis are getting better and cheaper!

Then you look at housing, and suddenly all of this progress -- all of our dreams of the future -- seem to have stopped.

Housing hasn't gotten more affordable over the years; rather, it is more expensive than ever. The quality of that housing isn't even necessarily better, particularly in cities, where the housing stock often hasn't changed in a century. We are literally paying more for the same or worse shelter. There seems to be little improvement in the thinking of how to construct housing since the Levittown post-war boom period.

I recently had to find an apartment in Boston, and my only two criteria were in-unit laundry and some sort of air conditioning. You could argue these are "luxuries," but I would argue that it's 2015 -- both technologies are approaching 100 years old. And yet, the housing supply in Boston is so old, that the intersection of these requests represents just a handful of buildings in the city. That search was in comparison to a friend of mine in Korea, whose $300/month apartment has in-unit laundry. It's all about competition and what consumers are willing to pay.

So the paradox of housing is that something so simple is getting more expensive all the time, while everything else in the economy is getting cheaper. That's a function of land, certainly, but it is also a function of consumer competition and restrictive laws around housing supply. This isn't a small problem, but rather the most important.

Image by Dennis Jarvis used under Creative Commons.