The sale value won't stay flat unless you tax land (or use leasehold like Singapore), because typically incomes rise, and in most places the rate of building new housing has an equilibrium lower than the rate of demand, because profit is needed for private developments to go ahead.

This results in a) higher incomes, and b) higher rents, because landlords can extract some of the increase in income, because tenants don't have enough alternatives to keep the rents low.

Capital value of property is a function of rents, so increases in rents result in increases in sale value of the property.

> The sale value won't stay flat unless you tax land (or use leasehold like Singapore), because typically incomes rise, and in most places the rate of building new housing has an equilibrium lower than the rate of demand, because profit is needed for private developments to go ahead.

Developments can be profitable without the price per unit significantly increasing.

Suppose that an existing unit is $50,000 and it costs $150,000 in construction costs including profit to replace one unit with four. Then you have a stable equilibrium; a construction company could buy one unit for $50,000, convert it into four, sell them for $50,000 each and net $150,000 which covers their costs and profit. They'll stop doing this if the price per unit falls to $45,000. They'll start doing it again if the price per unit rises to $60,000 and keep doing it until it gets back down below $50,000. Therefore, the price per unit remains stable at ~$50,000, even if demand increases, because that just triggers more construction as the price temporarily gets slightly above the breakeven point.

This is why zoning restrictions cause housing costs to increase. If you declare that 95% of the land is zoned exclusively for single-family homes, you can't replace one unit with four or even two in any of those areas. Then the remaining 5% of the land already has a 20-unit complex on it and in order to add units, you have to replace it with a 30-unit complex. Taller buildings require more expensive materials, you've had to demolish 20 units instead of one and only increased the number of units by 50% instead of 300% and land on which you can even do this at all is now more scarce so you're paying even more per unit for the ones you're going to demolish. Now the breakeven price for new construction is $500,000/unit and if growth continues it has to rise to the level that can cover the cost of demolishing a 30-unit building to build a 40-unit one, even though 95% of the local land is still single family homes.

I have tried to explain the sense of "good investment" that is meant by policymakers and voters and the cliche above. You have tried to explain that there is another sensible definition available. I don't disagree, but I think it is beside the point.

I feel like it is the point. The claim being made is incorrect.

If you have to invest a significant amount of capital to own housing and it isn't a good investment then people won't want to do it. But there are reasons we want to encourage home ownership, so if it actually wasn't a good investment then that would be bad. People would stop doing it. So it's important that the claim actually is incorrect; it can still be a good investment even if the value never goes up, because it avoids you needing to pay rent. If keeping the values flat would result in lower home ownership then doing that might actually be a problem, but it isn't.

The real problem -- the thing people actually care about -- isn't that the value has to go up. It's that they don't want the value to go down. If they paid $500,000 for something which is only worth $100,000 they're going to be pissed. But that's also what needs to happen, hence the impasse.

Why do we want people to buy houses? It incurs transaction costs and makes it difficult for people to relocate to be near their jobs and such. It seems like we should optimize solely for the cost of meeting people's needs - either by paying rent or by owning - compared to the sale value of their labor.

Renting contains a lot of inefficiencies. If you don't like your bathroom faucet and you own your home, you go to Home Depot and buy a new faucet. If you rent, that's not yours to change and now you have to negotiate with the landlord or live with it. Also, you might not want to put money into a building you don't own, but the landlord wouldn't want to put money into a building they don't live in. There are a lot of perverse incentives and transaction costs.

That doesn't mean renting should be prohibited -- if you'll only be somewhere temporarily or you can't afford to buy then you still need somewhere to live -- but in general it's something we'd want policies not to encourage.