Rancid wrote:Yea, I guess part of this effect is the keeping up with the jonese attitude that people have. Everyone want ths nice house as such and such down the street.
My question is... something has got to give right?
One reason for that increase is that household formation changed, decades ago the norm was having two adults + whatever children. Now adults can perfectly form a single person household, and each of them wants to live independently. That drives demand up.
Furthermore, add the issue of economies of agglomeration (the idea that there may be efficiency/cost gains in geographically clustering economic activity together), which drives demand for living in specific places (e.g. large cities) up. And it can also drive demand for living in specific parts within the cities up for similar reasons (maybe you want to be close to the office, or have access to good public transportation, or have good connectivity for a short commute - along with having all the amenities large cities are known to provide).
At last, consider in some places that zoning laws try to limit density as much as possible, since high density can and does affect quality of life since density causes a lot of noise pollution (we're noisy when in groups), air pollution (due to traffic congestion) and lack of privacy (we're all close to each other), which in turn affects the value of existing homes and thus creates an incentive for existing home owners to vote for restricting densification of their neighborhoods (since they'll take a capital loss if they leave, all out of the largest investment of their lives). These pressures, in turn, limit construction and hence the ability for supply to meet demand, even more so if other regulations in top of zoning are factored in (such as rent controls limiting residential investment in the long term, which in turn means supply doesn't adjust as well, all sorts of construction fees, in some cases labor regulations that make construction labor more expensive as well, etc).
What will give is likely in-person work. If not, then cities will become denser, as I highly doubt there will be a sociological change towards sharing beyond the student and first few working years (as people age we become less willing to do so for plenty of reasons). The pandemic showed that a move towards remote work can be feasible in several industries so I'm guessing this will become more common and, as such, will mean that there aren't as large agglomeration economies as they used to be and hence there won't be as much demand to live in specific places. I can imagine many remote workers moving to the suburbs or even rural areas outside of the cities looking for cheaper real estate, depending on how often they have to physically show up at work and how much they like (or dislike) living in cities/more densely populated places.