What are plausible solutions to the housing crisis?

Other than removing obstacles to, and incentivizing the development of, dense housing?

acardboardmonkey

This is an issue globally. Curious to hear what possible solutions could come about over the next few years?

There is only one: build more housing.

If you are asking  how to effectuate that, well... that is a more complex issue.  But in general, take approval rights away from local zoning boards which are dominated by homeowners and turn master planning over to people who know what they're talking about and can craft comprehensive local/regional plans without being influenced by NIMBYs or special interest groups.  

I'm looking at it from a Toronto perspective.

Change the balance of supply and demand. That's literally the only way.

Reduce demand by banning foreign purchases, investors buying more that 2-3 properties per person, cut immigration, reduce student visas, ban airbnb.

Increase supply by approving more housing starts, opening more land to be developed, either promote or force developers to build dense housing (towers provide more housing than townhomes or short apartment buildings).

Plenty of housing and room for more in the US of A. Issue is blue controlled areas are causing people to flee at a higher rate than red controlled areas can build. Until the population center of the country shifts back towards the east coast the problem will persist. 

Literally just get rid of the NIMBYs in local governments that block/slow path to development.

We need a greater amount of supply so people can't raise rents to absurd levels since tenants would just go pay a mortgage and own or they would move to a less expensive apartment. But, public investment can only go so far. Could governments operate as REITs and develop and operate housing on a break even basis? Perhaps. Is that a likely scenario? No. So that means they would look to the private sector to help develop rental properties and for-sale properties. Since they are different strategies let me break them out separately.

Rental: No one in the private sector is doing a deal that they don't benefit from, that is a pretty well established fact. So, the equity sources need an equivalent return to the amount of risk they are taking (which I don't really need to go into, especially on here). The ways to hit those returns are either: continually raise rents to outpace or match operating expense costs to have the same margins that they underwrote initially, or reduce costs in either up front capital (construction costs/acquisition costs) or operating expenses to maintain rent levels and margins. So, since private owners don't want to take a haircut on their sales price lets remove that as an option. That leaves lower/maintain op ex levels, lower construction costs whether it is hard costs/soft costs/financing fees, or land cost, or we just have to keep raising rents. BUT we are under the assumption that raising rents is the issue we are trying to tackle so lets remove that option. So, lets start with the OpEx piece...these costs are usually materials, internal labor, or external contracted services along with fixed costs like RET or INS. If we want to reduce these costs we either need cheaper materials or people to want less money for their work. I think it's safe to assume people don't want to make less money though so there would need to be a decrease in materials costs substantially enough  that it offsets the rising costs of labor (which is unlikely). Capitalism doesn't want any of these options to happen since someone is making money from each of these and so no one wants to lower costs. The only other option would be government subsidizing landlords to maintain OpEx at certain levels so the spreads between Net Operating Expenses and Net Rental Income is the same. Now lets look at the alternative to OpEx decreases...construction costs. This is pretty similar to OpEx in the fact that contractors, architects, engineers, lawyers, etc. don't want to lose wages or profit margins themselves so reducing costs isn't a likely option. That leaves financing costs and land value. Well lets assume the $1T banks like JPM aren't going to lower their rates and not going to give 90%+ leverage. This leaves land value and like I mentioned previously, owners don't want to take a haircut on the price to help someone else out. Once again this leaves us with the only option of public subsidies, potentially in the form of increased leverage and potentially decrease the financing costs, or public subsidies on hard costs. The only alternative to this would be greater supply in the number of OpEx services (landscaping, utilities, maintenance, etc.) or increased supply in contractors, architects, engineers, etc. to lower the construction costs. This is a never ending rabbit hole of increasing supply of EVERYTHING to bring prices down that's just not realistic. So the best option is for governments to provide subsidies, tax breaks, etc. to landlords to make their returns better and increase investment in this space. There is one more alternative which isn't remotely likely but for the sake of thoroughness I'll mention it, a decrease in returns in other asset classes that make real estate returns the most attractive in the market. If public equities, corporate PE, fixed income, etc. all went to crap and the best returns were in real estate then people would accept a 8-12% IRR and deals would get done much much more. Again, this isn't likely but it is worth mentioning. 

Ownership: This is pretty similar to the above, so I'm not going to repeat myself with the construction costs part. However, since there is no OpEx since the strategy is to offload the product on completion, there is a lot less avenues here. Private investors in the homebuilding world still have desired returns for the risk they are taking with their money. So, to increase supply that means there needs to be a steady stream of buyers that are willing to help them maintain their levels of returns and keep investors in this space. But, since people can't afford houses it is a downward spiral  of less sold=need for greater returns to make up for lack of deals= raise prices and so on. The way to counteract that would be for public funding to step in and either help lower costs and keep sale prices stable, or the public funds would supplement the purchase price to offset the rise in costs and keep margin healthy. Unless the government wanted to outright buy the houses themselves and sell at a discount, I don't see private investors requiring lower returns similar to the example I laid out above.

In general, the housing crises needs a combination of public and private investment to increase supply and have people compete to lower their prices to keep tenants in their buildings so to not lose them to ownership (which would become more affordable) and to other apartment complexes. There is always the high barrier to entry in real estate so the amount of REPE/Dev Cos/ REITs are more limited than ideal, but if every deal becomes 20-25% because of government subsidies then every pension fund, sovereign wealth fund, and large investment entity will be throwing cash at developers and REPE shops since those returns would be more attractive than other forms of investment. 

I never understand why users of this website have such a hard time wrapping their head around supply and demand when it comes to housing…the laws of supply and demand still apply…The ONLY solution to lack of housing is…more housing… like what other solution is there? If you have 100 families and there is only 1 house…there is no other solution to housing the other 99 families than to build more houses… I suppose other solutions could be to defy physics for example if you could invent Hermione's purse where there is infinite space then you could have infinite housing. Another solution would be to drastically reduce the population…you could do this in a number of ways 1.) introduce another black plague, 2.) world war 3, 3.) if you are incredibly convincing, convince a decent amount of the population to commit suicide so the rest of the population can have more affordable housing. These are possible "other solutions," but in my opinion, building more housing is a lot easier and more ethical. Now there is only 1 reason why we can't build more housing…zoning laws and NIMBYISM. Basically homeowners don't want more housing in their neighborhoods…this is a fact. Recently the residents of a very wealthy town in my state just voted to approve a bill that would require a 24 month demolition delay on all properties…think about that…if you are a real estate developer, you have to pay cost of carry for 2 fucking years before you can do any work…this makes the cost of building homes much more expensive which ultimately inflates the price of homes and this is just one bullshit strategy NIMBYs use to prevent development. If we no longer had restrictive zoning laws on housing and every parcel of land could be an apartment building instead of single family homes, I guarantee that we would not have a housing crisis. But for some reason idiots on this site (and the world) think that mandating affordable housing requirements, banning investment properties, or other dumbass regulations are the solution instead of simply building more housing 

There isn't a housing crisis in the US. We have a crisis of people feeling entitled to live in the most expensive places in the world regardless of income level. If there truly was a housing crisis, the rent in Philadelphia wouldn't be 1/4 of what it is 90 miles up the road in NYC.