On: Housing Costs

Originally posted on Medium in 2017

I don’t claim to have a solution yet, but I’ve been trying to define the problem for a long time and here’s another puzzle piece.

The spectrum of housing

On one side, the status quo: some house or condo that you buy and pay a mortgage on for 30+ years, and you pay that debt off through working at an unrelated job, likely for a set wage directly trading time for money. This also includes renting, the financial distinction is basically a wash on average.

So time spent = work = housing.

On the other, full on hippy: some converted VW van you put a straw mattress bed in the back of and cruise around getting kicked out of parking lots for overstaying your welcome. Or, like the above, some sort of earthship (etc.) that you’re grunting physical labour into instead of working for money as an intermediate medium for value.

So time spent = work = housing.

But in the end, we have to ask: what is the exchange rate?

And this is where it gets highly fluid, contextual, and interesting.

A Regular House

These are just stats for my area, obviously they’ll be different all over the world as no where is identical. Calgary’s average house price is a hair under $500k (CAD) and our average salary is roughly $50k (I’m trying to keep the numbers napkin math-y here).

So a house is 10 years of work, assuming you could spend 100% of your salary on it. For Alberta, your after-tax income is going to be roughly $40k, which is $3333 a month.

A $500k mortgage for 30 years at 2.6% is $2000 a month, or 60% of our housing-to-income ratio, twice the ideal standard.

You can see why, on average, housing is beating people to their knees.

$2k a month x 12 months is $24k which is a mere thousand shy of exactly half your working time being dedicated to your housing.

Working 40 hours a week for 30 years is 240 000 hours of work, so you’re trading 120 000 work hours of your life for your house.

A Hippy House

I should probably find a less derogatory sounding word, but I mean it with really impartial, perhaps even admiring tone.

The other end of the spectrum is this area of earthships, converted vans, living off grid, yurts, cabins, shacks, couch surfing and so on — lifestyles that are very cheap monetarily, but perhaps expensive in other resources like time, effort, comfort and so on.

It’s harder to find good reference for these stats, but from some cursory searching it seems like most people buy their vans between $3k and $10k and outfitting them is another couple thousand. It’s also hard to put a price on this stuff: the thrifty lifestyle here is often freecycling wood scraps and whatnot in such a way that a camper conversion could be dirt cheap.

So let’s call it $15k in the end. 3% of the house cost. Just over half of one year out of the 30 year mortgage and you’re done.

You can see why this is attractive to people.

But, indeed, you give up amenities: you’re living in 60 square feet, you don’t have a toilet or shower or storage. Your kitchen is basic, you might only have a tiny fridge and perhaps no freezer. You have to be constantly moving lest you wake up with a security guard tapping on your window. The rest is easy enough: lights, wifi and a bed, a small desk with a laptop. Jetstove ramen.

I would bring up aspects like maintenance and insurance and fuel, but given the proportionately expensive bills and repairing a house every year I would expect they’re probably about even. Only the renters come out ahead. That, and homeowners usually own multiple cars anyway, so probably already paying those vehicle costs (and perhaps multiples thereof).

So when we frame it like this, we’re essentially paying $485k out of $500k for running water. For a toilet and shower and a better kitchen (though, I’ve been watching a lot of cooking shows and I’d argue there’s a heck of a lot you can do with just a really nice induction hotplate)

Hypothetically, if you use your toilet three times a day, 365 days a year, that’s roughly $15 each time you flush. If you shower once a day + flush three times, that brings it down to $11 per use.

Imagine if your bathroom had a vending machine style slot, and you were feeding it tenners every time you wanted to use anything.

Now, of course this is the most ridiculous example we can stretch the math to: there’s other advantages to having a house you can stand up and walk around in. For me as a single guy it’s easy to say my living space is basically a bed, a desk, a kitchen and a bathroom. I don’t have to raise kids or store christmas trees or have different bedrooms for people or have a huge fridge full of food, or a dining room that seats 20 for Thanksgiving dinner.

Keeping myself alive and comfortable is relatively easy, and that’s a contextual thing certainly. This isn’t a denouncement of anyone’s lifestyle.

But I do think there’s room in the middle of those zones. I don’t know if it’s tiny houses, I don’t know if it’s prefab manufacturing or better designed residential architecture that prioritizes space towards what people actually use it for. The truth is, and this comes back to my millennial architecture posts, lifestyles are changing: we’re increasingly single, with fewer kids and less time spent at home vs. out in restaurants and parks and such. The nuclear family housing designs don’t often apply to us, and it’s no wonder we don’t have much interest in bending over backwards to indebt ourselves for them — they’re wrong for us on every level.

Or even, if your goal was the same: having that exact identical house. If you’re working for 120 000 hours to get it, and that house took 1200 man-hours to build, that’s just 1%. Even if you were completely unskilled and had to stumble through youtube tutorials (or heck: go to tradeschool for a few years) and it took you 10x that long, you’re still 90% ahead of the mortgage.

Like, obviously there’s reasons we don’t just go around building ourselves houses, but at a sheer time level it would pay huge returns to do it that way. Plus, you could do custom things exactly how you wanted them, which goes to the point above about design priorities.

I don’t know. If you’ve been following my writing for a long time you’ve heard these thoughts swirling around for years.

It seems preposterous to me that we continue to abide these status quo deals when they don’t seem to even make financial sense. Usually when you ask why things are the way they are, you follow the money and come to some sort of uneasy end point where it justifies itself somehow. You might not like it, but there’s reasons for the cost to exist in that way. There’s fees to any convenience, sure, but the margins here are enormous.

I’m not saying I’m angling to buy myself a van any time soon — that’s an extreme end of the spectrum I can only lean towards but not fully commit to — but there does feels like there should be something in between.

Next time you turn the handle on your shower or oven or basement storage space, every time you use a dining room or a walk-in closet or a microwave, feel the price of that action. If everything you did made a little cash register ca-ching sound and charged you: I simply ask, which are worth it?