A City Reimagined and The Housing Crisis

Why can’t young people afford houses anymore?

What has happened?

Earlier this month the latest figures were released on the price of houses in the UK. Unsurprisingly they’ve gone up…again (admittedly at a slower rate than in previous years). This isn’t really news these days, but sadly day-by-day the dream of owning a home slips further and further out of reach of many younger people.

Why does this matter?

For most of the 20th century owning a home was a very attainable goal - the average home was usually between 4 and 6 times the average salary. So with a modest deposit and an affordable mortgage, you could be a homeowner. But at the turn of the millennium, the ratio of average income to average house price shot up to where we are today, where on average a home costs 8.5 times the average salary.

This has resulted in huge swaths of the population being completely priced out of homeownership.

But what has changed so much over the last 20 years to cause this?

The broadest reason is Economics 101, where demand outstrips supply so the price increases. Simply put there are more people needing homes than homes are being built. The UK population has increased by almost 10 million people since 2000 and home building just cannot keep up.

However, this alone doesn't tell the full picture. 

In the years leading up to the financial crisis, banks significantly increased mortgage lending due to deregulation and new financial tools. New loan types and lower interest rates made borrowing easier, encouraging more people to take out larger mortgages. This surge in lending wasn't just about meeting demand; it was also driven by banks' incentives to extend more credit, contributing to a rapid rise in house prices as more money flooded into the market.

This has only increased the demand for houses, further pushing the prices up.

As we all know this had disastrous consequences for the economy during the financial crisis, which saw a short-term decrease in home prices but the damage had already been done.

In addition, throughout the 21st century, up until earlier this year, interest rates continually fell and only encouraged more borrowing and again (yeah you guessed it), rising demand for houses, pushing the prices even higher.

Some might call it a perfect storm, but we can call it “we wish we were born in the 1960s and could buy a nice 4-bed house in Clapham for 10 grand”.

What does this say about the future?

Unfortunately, despite some crackdowns on landlords and efforts to increase the supply of houses, it doesn't look like any considerable change is coming. Millennials and Gen Z professionals are in a slight catch-22 where we want higher wages, lower interest rates and higher employment rates but these all come to the detriment of affordable house prices.

Governments have made efforts to build more homes, but developers’ eyes are often on the more expensive (higher-margin) homes than those needed for the masses. Sorry, this wasn’t such a fun one.

Will

City of Praxis

What happened?

Two guys Dryden and Charlie are creating a city. From scratch.

What is Praxis?

Think of your favourite city. What makes it so good? Why is it your favourite? Is it Paris or New York or London? Maybe you love it because of its historical buildings, or the museums, or the climate. Cities evolve: London has been called London since the time of the Romans, but it has burnt down and been rebuilt and survived multiple wars, bombs, and plagues.

With all that said, most people love cities because of the people. Imagine New York without the New Yorkers or London without Londoners. Imagine Paris without the French. Oh wait, that would be great.

The point is that cities are the sum of the things in them, incredible buildings, awesomely long histories, and diverse people.

So could you build a city from scratch? I don’t just mean the physical buildings, I mean, could you create a city from nothing including the people, the place and the buildings? I mean everything

Well, two guys called Charlie and Dryden think they can.

I f*cking love this idea. The dream of Praxis is a city for founders, engineers, and accelerationists: the people building the future. They have published a plan for the city here where they outline the stages: starting with a community of Steel Visa holders, then scouting for locations and land to finally real estate investments and construction. They have even raised $20 million from very reputable investors.

They paint a picture of a city and place that, if true, could be the Atlantis of global innovation.

What’s the problem?

Nothing has happened yet.

So far, this is just an online community that meets fairly irregularly at indie New York bars with not much to show for it. Even when inventors, who are known for being widely optimistic (throwback to our first-ever newsletter about Elontime) about timelines, conjure up projects like these they normally have a reasonable grasp of the engineering challenges involved.

This is not something you see from Dryden or Charlie. The Praxites (that is what I am calling them) float around in idea mazes of essays on ancient Greece, Archeofutrism (whatever that means), and the founding fathers of America.

Having a detailed understanding of the issues that come with running a city, like how you prevent crime or how to make the sewer system work, doesn’t seem like something these guys are too concerned with. Elon was once described as a bullshitter who delivers, but Dryden and Charlie seem to be a little way off delivering anything right now.

However, Thomas Friedman once said, “Pessimists are usually right and optimists are usually wrong but all the great changes have been accomplished by optimists.”

I guess Rome wasn’t built in a day.

Jack