The REAL many reasons behind the housing crisis

Aug 16, 2025

The typical answer to the question Why is housing so expensive is this: it’s complicated. There are several factors at play: (1) population increases on average so the demand on housing is increasing because you know there are more people who need houses, (2) people move into cities so density and demand for dense housing such as apartment buildings is increasing, (3) the value of land increases because of zoning laws and speculation, (4) wages have not kept up with the prices of houses, (5) the cost of building materials has increased. These are some of the more obvious explanations.

On the not so obvious side we have explanations such as: rich people buy property to signal status thus raising the prices for all other real estate, gentrification is having a spillover effect on the entire housing market which means when expensive housing is built either on common land or in place of some old housing it tends to increase the prices in the entire neighborhood. The development of common infrastructures such as public transportation or public parks tends to make areas near such useful services more expensive, considering all other factors unchanged.

Then we have the changing climate that can influence the princes of housing. Cities with good weather are more desirable. Cities on the path of hurricanes and extreme weather events will have cheaper housing. Global warming will see the rise in ocean levels to such an extent that cities such as Miami or even London will be under water. That will surely drop the prices of housing in those cities, unless they decide to reinvent themselves into 21^st Century Venice.

Another not so obvious reason is that access to easy mortgages may increase the prices of housing, because when a lot of people who can afford a mortgage chase a limited supply of housing, the effect is that the prices of houses and apartments will go up. This is basic supply and demand logic. But how many people can actually afford a mortgage?

Taxation of property can also affect housing prices. For example, if large properties are not taxed progressively, meaning the bigger the property is the higher the tax, this would allow space on the market for the expansion of properties, which will take up land, leaving less land available for the development of smaller properties. If we did not allow the development of big mansions and suburban sprawl, then having a moderately higher density of housing on the same plot of land, will make them more affordable, keeping the logic of the market. On the flip-side, having a too high density such as Toronto and New York is not guaranteed to offer affordable housing if wages are not high enough, and all other factors I mention in this video.

I think the most fundamental cause for high housing prices is the design of capitalism itself, which allows the accumulation of capital through the market. Since housing is a commodity that has its own market, developers operate under the logic of capital accumulation and profit maximization. Even if the cost of development was not increasing, which is!, developers would still be incentivized to increase prices, simply to accumulate more profit, assuming they had no competition from other developers, or no regulation to stop them. If housing was not considered a commodity and was removed from the logic of the market, then prices would fall down significantly and could even be at the cost of building.

The design of property rights which is embedded in the design of capitalism can also have an effect on the prices of housing. Landlords that have multiple units can artificially maintain high prices for rental units because their property rights gives them that power. This is what I call the doctrine of proportionality in the design of capitalism. Property has fundamentally unique features: the right to exclude others from accessing your property, the right to benefit from its value through rent for example, and the right to dispose of it as you see fit, such as sell it. These exclusive rights have real effects on the market. If landlords become a monopoly and keep prices high for rental units, all other housing prices will remain high simply because of this imitation effect.

This is why a land value tax, which would essentially tax the land that it is being used, not the property itself, is not necessarily a good idea if it does not address the issues of how property rights are designed. If all land became common property, owned by the community for example, such as in common land trusts, then you could probably tax the use of that land instead of taxing property itself. But that assumes that the people living on that land have the necessary income to pay those taxes. A land value tax creates the incentive to engage in some sort of economic activity even if that is not necessary for the wellbeing of the community.

On the topic of taxes, what is super important to remember, is that the purpose of taxes is NOT to collect revenue for the government. That is NOT the purpose of taxes. The purpose of taxes is to regulate economic behavior, to stimulate economic agents and people to behave in a certain way. If government wants to stimulate a certain kind of economic activity they will tax it less. If they want to stop a certain behavior they will tax it more. Central government does not need your tax money to spend on social programs such as healthcare, education, or infrastructure. Central government can always print its own money when its needed. Then they create the demand for that currency by requesting taxes to be paid in that currency. This is how money and taxes work under capitalist regimes that have their own currency. What we have to care about is printing too much money and not having enough people and resources to do the work necessary in society for which the government is printing that money.

So, to say, that housing is expensive just because the rich are buying all the assets, thus keeping the supply low for the rest of us, is a very incomplete picture. Even if we taxed all the rich like crazy, that would still not guarantee that the prices would go down, if all the other factors are not considered, including the design of property rights, including the design of capitalism, including the design of taxes.

I said I was doing a video on housing and I asked for your questions. @Cidavis1964 asked what we do with existing housing, as there is both great materiality contained, and they personify the inequality of capitalist society? What to do with the beautiful, huge, and private homes that form the suburbs of all Global North cities? How to make the deliberately substandard homes that were deemed sufficient for the working class, but never were more than cages, appropriate without committing to replacing vast amounts of material? And how to make homes last for centuries and not decades?

These are all super important questions that are all linked to the price of housing. The very design of capitalism explains what happens to housing. This design hinges or several causal forces, namely the (1) doctrine of proportionality that links power to property which allows power to grow in size in proportion to the size of property and vice versa, (2) the doctrine of dispossession which allows property such as land and common property to be taken by capitalism and turned into capital with our without consent from owners, and (3) the doctrine of hierarchies that links capital to power which allows unelected groups of people to dictate how capital is used in a very anti-democratic fashion. So, to undo inequalities within the system, all these 3 doctrines, or fundamental causal forces, must be phased out. On top of this the incentive to grow the economy without meeting human needs, must also be phased out.

Housing that has been built, such as huge beautiful but wasteful mansions, would need to be repurposed. Sure, it is impossible to demolish them and rebuild instead more dense housing that is ecologically sustainable. But, in the meantime, their ecological footprint should be capped, for example by rationing carbon emissions, electricity and water for all humans, by the same amount for everyone, regardless of the size of their houses, their wealth, their income, or social status. Imagine if we all had the same maximum limit of how much CO2 we can emit, regardless of how rich we are, regardless of how big our house is, then those with big houses might have to rethink how they live. They would either have to invite more people to live with them, if they want to keep the house as is, or they would have to retrofit, in order to create multiple units. In any case, this principle of equality of ecological footprint, which includes carbon emissions but also the entire material footprint of our lifestyle, is the principle on which existing housing should be looked at.

All homes, whether old or new, should be retrofitted to be well insulated and have the lowest possible ecological footprint. For example, new housing should be build according to principles of Passive House, with almost no concrete, very little steel, not higher than 6 levels. Mega mansions, which take a lot of land and have a huge environmental footprint should be expropriated from the super rich and turned into community use. The community can decide, democratically, what to do with them. They can be turned into schools, libraries, learning camps for children, artistic venues, hotels for local tourism at affordable prices and so on. But they cannot be left in the possession of a few rich humans. Nobody needs 10 bedrooms or 20 bathrooms. That’s immoral and indecent. We should also make it illegal. We cannot afford the super rich anymore. This is why I also advocate for a maximum wealth limit of $5 million.

It is very difficult to make something last for centuries and make it ecologically sustainable. Castles in Europe were made of stone, and they lasted centuries but to maintain them is an economic and ecological nightmare. Everything decays with time. It’s because the laws of physics, especially the laws of entropy, on which I touched briefly in the video from last week. So, new housing should be made with ecology and equality in mind first, and consider maintenance always in relation to what workforce and materials are available in the future that are also ecologically viable. Currently, the manufacturing of cement and steel are some of the most polluting industries. And we don’t have yet a technology to make “clean cement” and “clean steel”.

@dinaharem wrote: Excessive lending and debt is one of the leading causes of high housing prices. We need to remove housing as an asset class first, and work towards giving everyone their own personal property without incurring excessive debt on the property owner.

That’s right. Housing should not be a commodity. There should not be a housing market in the traditional sense where housing and apartments are purchased for investment. This keeps the prices high and makes them less affordable for everybody else. All housing should be developed by not-for profit companies with public financing. Sizes of houses should be scaled to the real needs of humans, having in mind the ecological footprint. One room per person should be enough, in addition to common areas.

@daveb wrote: I would love to hear your thoughts on policies or strategies that would allow current homeowners to come into coalition with those currently denied access to the housing market or who have been punished by their choice not to get on the ladder as soon as they could. If I recall correctly the majority of the voting public (and even larger majority of those who actually vote) own the dwelling they live in, and are relying on its continuing to accumulate value for their security in old age, so I wonder if we may be limited to or should focus first on policies that homeowners can see as a win-win.

As I see it, the first step is to decommodify housing, meaning taking housing out of the logic of the market. Landlords should be phased out and banned. No-one should be able to own housing in which they do not live themselves. Everything else can be owned as common property by the community, from social housing to housing cooperatives. This is a massive undertaking but it is doable because both social housing and housing cooperatives exist already. Large landlords should be expropriated with some fair compensation, but not a market value. This will free up a lot of housing stock to be purchased or rented at low cost by those who did not have the chance to become property owners because of the affordability issue. Meanwhile, states should encourage through legislation and public financing the development of new housing cooperatives that could reshape the community where they live in, by producing food locally as much as possible, building common amenities for common use, having basic all services within walking distance, coordinating ecological projects from home improvement, to recycling waste, or even building tool libraries for common sharing. All these require new laws to make them possible and competitive under the current design of capitalism.

Then there is the issue of housing as a store of value for retirement. If housing prices go down and they become more affordable for those who are not homeowners yet, it will make existing homeowners unhappy. We don’t want that. We want to maintain wealth security for retirement while making housing affordable for everyone. To accomplish this, a larger safety net for the preservation of the wealth of the working class must be built, that does not consider housing as a commodity. This involves a reform of the pensions system away from traditional stock markets. This is where public financing plays a huge role. If pensions were guaranteed to maintain the value of wealth accumulated during the lifetime, then the price of housing would become irrelevant because all wealth would be stored in a public financial system that is backed by the strength of the currency.

The value of the house is not worth much if it cannot be sold or if it cannot be lived in. Maybe land has a more durable value but even there, things can happen that would affect the price of land as well, assuming it is maintained as private property. And I argue that it shouldn’t be maintained as private property. The true value of housing is that it provides shelter and quality of life. It should not be considered a financial asset, so we should not base our notion of wealth on the money value of the house, because this is what causes the affordability crises, among other things.

So to recap, why is housing expensive. It is because of the design of capitalism, wealth and income inequality, tax policy, the price of land, gentrification, the access to credit, the cost of building, profit-seeking, climate change, the quest for status by the rich class, the increasing density of population, the general increase in population. In one word: it’s complicated.