Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


How Hyperloop Would Solve America’s Housing Crisis

The United States has a serious housing crisis that Hyperloop would help solve. That solution would totally disrupt the housing market; but make conditions better for average Americans.

The solution is based on a circumstance that is also at the root of the problem: geography. Geography actually gives America two housing crises; a shortage of homes in some areas, and an overabundance of housing in others. This is why housing costs are dirt-cheap in some areas and sky-high in others.

The Cause of America’s Housing Crisis

A typical example is in Colorado, where the average rent in Eagle County in the ski country was $2,325 a month in July 2016, according to Trulia. Just 177 miles away, in the old steel town of Pueblo; the average apartment rented for $678 a month. These can be contrasted with the average rent in the United States; which was $889 a month.

Beautiful Downtown Pueblo

There are several reasons why rent is so high in Eagle County; where Vail is located. They include: a limited amount of land; much of Eagle County is national forest which cannot be developed for housing, the location of a popular resort in town which makes it more profitable to rent units to skiers than workers, and a desirable location. Another problem is that Eagle County has a lot of mountainous terrain; making building costs prohibitive.

Pueblo enjoys a large surplus of housing because of a weak economy; its primary industry is steel which is slowly dying, and lots of empty land. The average house in Pueblo sold for $116,700 in July 2016; and the average mortgage payment in the city was $682.33 a month. The average home in Eagle County was selling for $455,000 at the same time, leading to a housing cost of $205 a square feet.

The vast gulf between rents in Eagle County and Pueblo exists because each community has what the other lacks. Eagle County has lots of jobs; but little or no housing, Pueblo has lots of housing, but few jobs.

Nor is commuting under current conditions the answer; Pueblo is a three hour drive from Eagle County. The direct route from Pueblo to Eagle County; US Highway 50, to US Highway 24, to Interstate 70, runs right through the heart of the Rocky Mountains. That’s some of the most rugged country in the United States, and it is often blocked by snow.

A person who lived in Pueblo, but wanted to work in Eagle County would have to move there. Yet he or she cannot because of the high housing costs. The distance means that there is no way for an Eagle County resident, to take advantage of Pueblo’s low housing costs.

How Hyperloop would solve the Housing Problem

A functioning Hyperloop would solve this problem; because it would reduce the commute between Pueblo and Eagle County to 10 to 15 minutes. That would make commuting between Pueblo and Eagle County; or Denver and Eagle County, or Grand Junction and Eagle County, a practical endeavor.

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Since Hyperloop is enclosed in a large tube it would not be vulnerable to the elements. That means it would function year round; making it possible for a person to hold a job in Eagle County, but live in Pueblo or Grand Junction. The city of Grand Junction; which also has lots of empty space and affordable housing, is just 147 miles west of Eagle County.

Hyperloop makes such commutes possible because of its high speed up – to 700 miles an hour in some estimates. It would also be fairly cheap to operate leading to relatively low commuting costs.

The costs might even be lower if government would subsidize Hyperloop construction. Since government already subsidizes other forms of transportation including highways, airplanes, buses, high-speed rail, commuter rail, subways and light rail, adding to Hyperloop to the mix would not be a radical change.

How Hyperloop would disrupt the Real Estate Market

The first effect of a passenger Hyperloop between Pueblo and Eagle County; would be to significantly lower housing costs in Eagle County, and raise them in Pueblo.

Many landlords in Eagle County would end up underwater; because the rent they could charge, would no longer cover their mortgage payments. That would lead to a wave of foreclosures in Eagle County. Speculators would begin buying and renovating homes in Pueblo, or building new housing to take advantage of Hyperloop.

An added disruptive factor would be speculators using Airbnb to rent places in Pueblo to skiers or snowboarders; who would use Hyperloop to reach the slopes. That would significantly reduce the rates that hotel operators and condo owners in Eagle County could charge.

This effect would be repeated around the country; for example in Los Angeles, where workers could live in Bakersfield just 111 miles away. The average house in Bakersfield cost $215,000 in July 2016, according to Trulia. The average house in Los Angeles cost $480,000. Since the average commute between Bakersfield and LA by Hyperloop would be about nine minutes the effect on the real estate market is clear.

An even more disruptive factor in Los Angeles would be the ability for workers to move to Nevada; where there is no income tax. Las Vegas is just 269.4 miles from LA, or a half-hour trip via Hyperloop.

Pueblo, Colorado

Therefore one of the first noticeable effects of Hyperloop will be to crash the real estate market in some areas of the country. Another will be to alleviate the housing crisis, by making affordable middle class housing available to many more workers.

Apartment building owners may not like this, because a lot of their tenants will be able to afford a split level ranch house, a half hour away for less than the cost of their rent. Neither will a lot of real estate agents who will no longer be able to collect ludicrous commissions on overpriced housing.

Some local governments would also see property tax revenues plummet as housing values collapsed straight into the toilet. Even some posh resort areas would end up dealing with a foreclosure crisis; and lots of empty property.

The effect on housing is simply one of many ways in which Hyperloop would disrupt our communities and our lives. We had better get ready for this disruption because Hyperloop might be coming whether we want it or not.