The High Cost of a Home Is Turning American Millennials into the New Serfs
thedailybeast.com
thedailybeast.com
Specifically, millennials want to live near city centers, where they can commute to work by foot, bike, train, bus, or Segway. Basic laws of supply and demand dictate that the value of property, and the rents, must go up, since as society urbanizes there are an increasing number of people vying for a fixed amount of real estate.
Part of the American dream of owning a home was predicated on the fact that land would be developed outside the major cities, and homeowners would use newly affordable automobiles to get to their workplace and anywhere else they might want to go. Which led to drab, soulless, lifesucking suburbs and an obsession with gas-guzzling, air-polluting, global-temperature-raising motor vehicles. Ewwwwwwwwwww. How bourgeois, how planet-unconscious, how typically American.
So while millennials may not particularly dislike owning homes, they have made lifestyle choices that tend to make home ownership more difficult. Unfortunately, those are the constraints of modern capitalism. Personally, I think we need to rethink our whole economic system. It'd be great if someone came up with an alternative economic system in which one can have one's cake and eat it too, but until that happens we're stuck with the situation we're in.
Meanwhile, houses in the boonies are cheap. If you can remote-work your way into a boonie lifestyle, you can own a home on a rather modest income indeed.
The trick is to discover and curate small city life so that one can live in a small city without feeling like one went back in time. Then you get to have your cake and eat it too.
1. We wanted a big dog, and that's a non-starter for 90% of apartments.
2. Property taxes were 3-4x what they were just a mile or two outside of the city center.
In Japan, things shake. A lot. Earthquake damage adds up pretty quickly, and is stupidly expensive to engineer against, so most houses are built with an expected lifespan of probably somewhere around 50 years.
They're certainly safe, but there is a strong expectation that a family will live there until the kids move out and the parents retire.
Highrises are economically preferable for a number of reasons. Japan has both an excellent rail transit network and sane zoning laws. So you end up with a cluster of highrises around a train station, where the bottom 1-3 levels are devoted to shopping, recreation, and everything else that you would see in a typical shopping mall.
Life revolves around the rail network, at least in Tokyo. You don't as much go from the Ikebukuro Ward to the Shinjuku Ward as you go from Home to Ikebukuro Station to Shinjuku Station to Where It Is You Want To Go.
I don't see this ever happening in the US, but that's not necessarily a bad thing.
Personally, I would much prefer a larger number of slightly smaller cities, with companies either going fully-remote, or establishing a federated group of (drastically cheaper) offices in multiple cities. You end up with a lot more local flavor, but without the SF or NYC rents.
https://en.wikipedia.org/wiki/List_of_cities_by_population_d...
I suspect these are cities which employ controls to cap the taxes on the property owned by elderly people.
If the city employs an age-blind property tax, then elderly people on fixed incomes get taxed out of their residences, which is an equally problematic phenomenon.
Anything else is how you end up with 60 thru 90 year olds living in housing that was never designed for them, both in that it is too large, and is missing elderly friendly features such as a single story layout. Sure, you can add these things on after the fact if its a single family home, but it often would make more sense to dump the 3 to 4 bedroom home (that you are expanding to 4 or 5 bedrooms with this reno) and get a place with a much lower maintenance burden and way fewer rooms.
Sadly, we often distort reality here in the US with subsidies that incentivize poor decisions such as living out retirement in the home you raised your kids in, despite the burden that puts on those living there, their family, and the community around them.
We should encourage the best possible outcome for everyone involved, by getting rid of tax deductions for having a mortgage against your home, or being over a certain age, as that will commoditize housing and allows people to live closer to where they need to be at a much lower cost. Otherwise, subsidies like this drive up housing costs and you end up like many American Cities.
I think we can find ways to deal with this problem without forcing people to sell their homes. Problems related to old people can often be solved by making sure that they don't perpetuate and waiting.
Why wouldn't you organise things so that property-owning dynasties aren't able to freeload off the appreciation in their property values accruing from the work and taxes paid by others?
I'd much rather sell a $500k house and move because the monthly tax bill is too much for my cash flow than stay there and have the thing repossessed because I owe $15k, then I get nothing.
This is more of the "I'm entitled to ___________" mindset coming out of the baby boomer generation. Yes you paid for your house, but there is a monthly tax requirement to keep it. If you paid the house off in full but can't pay the monthly taxes, you can't afford that house.
You might feel differently if you spend the last 40yr there and intend for your children to inherit it.
Owning a home is not a right, it is a privilege, and a privilege that is based in part on you paying your fair share of taxes as determined by the government you help elect.
Especially for old people it is very hard to get ripped out of their neighborhood. You don't easily relocate your live at 80 (or even at 65) and form new bonds to your neighbors, find new places where you spent your time etc.
I've seen this scenario play out many times, you can either stay put and deal with the large maintenance burden of an older house, while all your friends move or die off, or you can join them and move to a more central location where you don't need to worry about the roof leaking, or the sump pump not working.
If more young people move into an area, rentees or not, they're eligible to vote and should be a large voting block all their own.
I'm surprised than in San Fran, supposedly a tech mecca, there isn't a strong opposition coming from young, able bodied tech workers, with oodles of money on their hands.
Also, what tends to happen is that the young folks move into commuting distance of the centralized jobs. If you BART into SF from the East Bay because you can't afford an apartment in SF, you can't vote for housing policies that would build apartments that you'd be able to move into.
They didn't call it a baby boom for nothing.
>If more young people move into an area, rentees or not, they're eligible to vote and should be a large voting block all their own.
Young people can't move in if you ban building more housing, now can they?
>I'm surprised than in San Fran, supposedly a tech mecca, there isn't a strong opposition coming from young, able bodied tech workers, with oodles of money on their hands.
Once they buy, they, too, benefit from these laws. Also: they make up a small portion of the population
Perhaps, but young people are the children of baby boomers so there ought to be more of them.
Statistics seem to show that intuition is correct:
"Millennials have surpassed Baby Boomers as the nation's largest living generation, according to population estimates released this month by the U.S. Census Bureau. Millennials, whom we define as those ages 18-34 in 2015, now number 75.4 million, surpassing the 74.9 million Baby Boomers (ages 51-69)" [1]
That still doesn't mean that there isn't a greater than expected share of elderly citizens in San Fran. Parts of Florida are quite like that.
Were you saying that there are more elderly citizens (51+) in San Fran than young?
[1] http://www.pewresearch.org/fact-tank/2016/04/25/millennials-...
Retirees vote en masse. Thus the host of government programs taking money from the youth and unborn and giving it to the elderly.
One of my favorites was hearing my professor say, "Now that I have tenure, I think it's a wonderful system!" He had been complaining about the tenure system as capricious, foolish, etc. for a while. He's a great guy, so it's not that he changed his mind, exactly. He knew all his past criticism was still relevant, but he was acknowledging his strong disincentive to fight the system.
I thought that was fairly clever, and should I ever become a landlord, you can be sure that I'll include that clause if legal in the area I'm renting. (The reality is that the tenant is the one bringing the money that pays the property tax anyway; this clause just makes it explicit and helps align the landlord and tenant's interests.)
Language was similar to this (found on the web):
However, if in any tax year commencing with the fiscal year ____________ the real estate taxes on the land and buildings, of which the leased premises are a part, are in excess of the amount of the real estate taxes thereon for the fiscal year ____________, (herein called the “Base Year”, and being the most recent year in which the Lessor has actually received a real estate tax bill for the leased premises) Lessee will pay to Lessor as additional rent hereunder, when and as designated by notice in writing by Lessor, ___________ per cent of such excess that may occur in each year of the term of this Lease or any extension or renewal thereof and proportionately for any part of a fiscal year. The Lessor represents to the Lessee that the term rent set forth in the immediately preceding paragraph (A) does not reflect any real estate tax increase subsequent to the said Base Year. Notwithstanding anything contained herein to the contrary, the Lessee shall be obligated to pay only that proportion of such increased tax as the unit leased him bears to the whole of the real estate so taxed, and if the Lessor obtains an abatement of the real estate tax levied on the whole of the real estate of which the unit leased by Lessee is a part, a proportionate share of such abatement, less reasonable attorney’s fees, if any, shall be refunded to said Lessee.
On the NJ side, Hudson County is very high-density, aside from the Meadowlands which aren't suitable for construction. For one extreme example, Guttenberg NJ technically is the municipality with highest population density in the entire US! Or for a more mundane example, Newport in Jersey City is pretty much all high-rises.
Similar story in Brooklyn for the parts closest by subway to Manhattan. Downtown Brooklyn added so many new giant rental towers that rents actually dropped the past year. Williamsburg got a bunch of waterfront towers last decade and now doesn't have the infrastructure to support more housing. DUMBO is all large buildings that have been converted to lofts. Brooklyn Heights is lower in density, still very few single-family buildings in the first place, and largely landmarked/historic.
Queens is the one place where I'd partially agree with you, but even then, Long Island City has a ton of high-rises. Slightly further out, Sunnyside, Woodside, and Jackson Heights are relatively lower density, yes. But still denser than many major US cities.
1. Remove all government sponsorship of mortgages, gradually spool off all existing GSE mortgages into private markets. Possible exception: owner-occupied homes, limit one per
2. Remove all implicit government backing of insurers and re-insurers of anything having to do with mortgages.
3. Remove mortgage interest deduction.
4. Valuations reported to IRS, property insurers, permitting offices and bank loans link back to publicly-available property tax records.
5. Property developers, not taxpayers, pay for initial costs to extend infrastructure, foot the bill for floating the bonds to maintain the extensions, and residents moving in must pay into the bond fund over time, gradually paying off the initial buyers of the bond; bonds are reissued as old bonds mature.
6. Bill back costs of developing (up to inner core density, with adjustments to purchase fast public transport into inner core) further out from urban core back to inner core residents as increased property taxes spread over 7 years, if inner core residents vote down densification, and rebate some of the collected funds to developers of outer core.
7. Standardize all government building codes to a single set, specifying function/intent/goal and not form, thereby allowing offshore for example factory-built modules to access a contiguous national market, or alternative construction techniques without lengthy permitting.
These and other measures that open up competition for real estate development would be wildly politically unpopular in most areas and constituencies of the US. The US real estate market is superficially capitalist for a number of very interconnected reasons, and I've observed similar dynamics in other nations I've enquired about property within. Property is an extremely special-case asset, with privileged market protections/distortions few other asset categories enjoy.
Number 1 should avoid use of the proposed exception for the same reason that mortgage interest shouldn't be deductible: it's a subsidy that distorts the market and is unfair to the good people who are still renting (who are, broadly speaking, probably not as well off in general, so it's a regressive subsidy where we pay the rich).
You should add a #8 to remove all government subsidies of flood insurance and similar vehicles, especially along rivers and coasts, as they're basically paying people money to build homes (often luxury or vacation homes) in dangerous places.
#6 is an attempt to reconcile the following challenge. Well past the point when developers could foot the bill for infrastructure expansion, we continue levying taxpayers to pay for it all while property developers reaped the majority cash benefits the soonest from the expansion. This heavily subsidizes inner core residents who get there earliest, and regressively penalizes later generations and residents settling the outer rims with increased infrastructure costs that increase as the square of the distance from the core, while outer rim density-based tax revenue functions more linearly. We're saddled with the legacy, but how do we allocate the true infrastructure expansion costs of growing outwards instead up/downwards, not to speak of remedying past distortions that have magnified effects today? I'm fine with not going with my #6 as I'm highly dissatisfied with it as well, but would welcome other cost allocation mechanism ideas, any to offer?
#9 Remove all subsidies, deductions, and tax credits. Including those involving land banking. [1]
#10 All commercial property tax subsidies/waivers/rebates/etc. must pass by a super-majority vote of the ones who pick up the tab for the gap.
[1] http://usa.streetsblog.org/2013/01/09/450-billion-in-federal...
Banks search for reserves after finding customers to lend. If they are not able to find it in the interbank market, they always can go to the central bank. It's by manipulating that rate that the central bank have some control in how "hot" the economy is. If the central bank wants to cool the economy it will make money more expensive to the private banks. Selling bonds to the private banks have also this effect.
It's the responsibility of private banks to grant that the new created credit is used in solid business.
If there are not demand for credit or there are not solid business, never mind how much reserves there are in the system.
I'm sure there's a large core subset of rules that would allow prefabicratiom of framing, for instance, but as a guy who JUST finished building a house, I can tell you that it isn't the framing that gets you. Permits and land are by far the single biggest line item expenses.
Besides no one mass produces foundation slabs which would vary on frost depth, they mass produce kitchens and living rooms and bedrooms.
Also for sheer cost of truck shipment reasons most houses would be manufactured near where they stand, perhaps across a state line maybe two small ones at most, sure.
I would agree with the "its mostly a money grab by the system" as being accurate. $25K of wear and tear on that planning commission rubber stamp, uh huh. Cable company can connect service for free in a couple hours of labor but the electric company is required for an occupancy permit, and they know it, and they think they can squeeze $10K out for new service installation, uh huh.
The difference with cars is that save for some small tweaks, you're not dealing with completely different driving environments for decades or centuries on end. California has their own emissions standards, which they manage to meet (or cheat). But largely fuel efficiency is fuel efficency. Safety is safety. A seatbelt works the same whether it's rainy or sunny.
Houses should be designed to emphasize the local environment needs. I don't want a flat roofed stucco house in Portland. That would be a freaking nightmare.
I'm sure there's a set of federal regulations that could be applied to new construction, plumbing and electrical codes could probably mostly apply. General safety and minimum wind shear requirements. But the vast majority of the codes we had to deal with were regional and dealt with water runoff, moisture build up prevention, soil erosion, and a list of other things that I could see as being entirely not applicable to other areas of my state, let alone the rest of the country.
I was going to use industrially produced food as an analogy although maybe that's not seen as a winner. But its not out of business, which is something, I guess.
As it stands I can pick one of a dizzying array of products that adhere to all kinds of regulation across many jurisdictions.
However, where it begins to be problematic is if we (returning back to clothing) say ALL belts must be 4" wide and made of genuine leather. Well, now that coat you wear that has a belt around the waist that is purely decorative is completely out of regulation and can't be used. Even though you and I both know it's just fine. Or the swimsuit that ties around the side gets classified as a belt because of some inane interpretation. You'll get that times a thousand for every single room in the house.
Like the argument I had to have with the plumbing inspector about my ridiculously expensive dishwasher not needing a breather valve because it had mitigating features built in. Showed him the spec sheet that called it out and pulled up customer support with him there. In the end? The rules say breather valve, put one in. No common sense or room for interpretation. The intent is to keep dirty water from back flowing into your dishwasher. But now years later you have minions that don't understand the intent, they just know what the regs say.
Building plans are drawn up including metadata references to relevant code section(s) from the beginning. This part still requires human judgement and negotiation of which section(s) are applicable, but perhaps an online marketplace of pre-configured plan modules with pre-certified section(s) tagged to the module's components can help mitigate that complexity.
Merchants would certify products they sell are compliant with the "why" of specific section(s) through a number of insured certification authorities, who become (perhaps limited) jointly liable for their issued certifications against gross negligence (to avoid rubber-stamping behavior). Products are shipped with a cryptographically-signed RFID stamp ensuring authenticity and enabling remote building inspection. Can't avoid all "how's", like for example spot-checking to see that bare copper isn't laid exposed to house insulation because someone stripped off too much wire insulation and couldn't be bothered to re-run or fix the mistake. But with all the data we collect today, there has to be a better way to permit, construct and inspect buildings.
Then we open up the housing market to vendors with better mousetraps to solve the "why's" expressed in the building code, adding enormous dynamism to the economy.
Fix the market failure and free markets will create more housing. Renters will pay less for housing, there will be less commuting which causes less pollution. There will be more disposable income which can be used to pay for goods and services thus stimulating the economy and employing more people.
Says who? The article doesn't:
"Overall, more than 80 percent of millennials already live in suburbs and exurbs, and they are, if anything, moving away from the dense, expensive cities"
Some of it is due to cost, as it has always been, but there are hundreds of other lifestyle factors at work. Backyards are neat too, as it turns out. So are excellent public schools. So is your child riding their bike to the park.
Nearly all of my friends and I lived in the city after college, got married, had kids, and moved to the burbs...just like our parents did.
I'm in a low tax state which means the schools are chronically underfunded. Our school in the suburbs relied on parent fundraising to cover a lot of extracurricular stuff. Our city school relies on the density of the student body and the density of property taxes to fund extracurricular programs. It seems like everyday he's sent home with something he wants to sign up for. We sold he car, bought bikes, and ride everywhere including the park.
We gave the suburbs a shot, it didn't work, so we left. My brother, on the other hand loves it. Big house for him and his spouse, the kids, and their dirt bikes.
In Austin we paid $406 million in state recapture in 2016. That's one third of AISD's budget for the year. That money doesn't come back to us, to be clear. I wouldn't be surprised if something similar were in place in other states.
In addition, I believe the state has plenty of laws that control what each county can do tax-wise, I'm too lazy to find them all right now. My point is that the state matters a lot.
(Note: I'm not saying that I'm against any of this, necessarily.)
Did the other kids in your neighborhood mostly play in their backyards or inside at home?
When I was a kid, we were expected to go out and play in the front yard, or the street, or go ride our bikes to a park or open field or creek or convenience store, with the main restriction being that we be back for meals. Most suburbs kids were what would now be called a "free range" kid.
When families would go to a sporting event, or to a movie, or on a camping trip, it was common for their kids to be allowed to invite a friend to come along. There was enough interaction between the kids of different families that the parents had to talk on occasion, and so families tended to become acquainted somewhat through the relationships among their kids. If their kids participated in organized sports, parents would meet and talk with other parents in the stands while watching the games.
I wonder if the decline in free range kids is what caused the empty parks and insular behavior you experienced?
We're back in the city now, not the downtown corridor but where the residential apartment buildings are. Lots of kids here. 3 parks within walking distance. 1 has an Olympic pool and kids splash pool. And in the week he's been enrolled lots of new friends. He's learning Spanish as well, not school Spanish but actual living Spanish. If he's like his father he'll learn the curse words first :-)
I think the poor planning of suburban neighborhoods caused the decline. Parks are too far apart. There are no sidewalks. Everyone is in a cul-de-sac making it difficult to pass by. I believe the suburbs are designed to be actively hostile to social interaction. This is the same adults as well as kids.
What planet are you living on where this is true? Do you work for Segway's marketing department or something?
Boonies aside (that's not the suburbs, that's literally in the middle of nowhere, and in a work environment where more and more managers don't allow remote-work), I don't think your argument holds water.
As for travel time, unless you are really lucky I don't think it is possible to consistently have less than 1 hour of travel time per day unless you move house every time you change jobs. Even in NYC moving just a few blocks can add or subtract 15 minutes to your commute.
I think a lot of people on HN would do well to remember that any time you're discussing real estate, places like NYC and San Francisco are very much the exception, not the rule.
Even if you build government housing in town centers and give it to people for cheap, you haven't really changed the dynamics. You only subsidize a lucky set of people (the ones who get to live near the town center). How will they be chosen? Adherence to the party line?
The interest that you pay on a mortgage is tax deductible, which is essentially a subsidy exclusively available to people who make more than the amount of money required to own a home where they live. This subsidy for decentralized living is equivalent to a tax on the vastly more efficient centralized plan.
It's not intrinsic to our economic system.
If you purchased around my house two years ago, your mortgage would be less than $800. But current rates have it at about $1,300. As a rental, you can start renting that at $1,300/month even though you bought in when market rate was $800.
Plus, there's a huge number of tax benefits to investment property ownership, far more than for owner-occupied [1]. If you're going to remove the tax advantages of owner-occupied, you should also reduce the benefits of investment properties. But then you'll likely see rent rates hike as a result and the bar will tip in favor of ownership again.
[1] http://www.nolo.com/legal-encyclopedia/top-ten-tax-deduction...
It depends on the market. Price to rent ratios can vary a ton.[1] The link is from 2016, but the extremes are:
San Francisco 48x (housing price is 48x monthly rent)
Detroit 6.5x
The neutral rent to price ratio is ~15. If it's higher than that, it's better to rent. If it's lower, it's better to buy.
[1]https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...
That's not how the rental rate is decided. The rental rate is based on vacancy and income, ie supply and demand. If rental is harder to make money on, the only effect will be to drive down the cost of the property as the actual number of houses is fixed.
What's your source for this? I've rented in and around the Boston area for 10 years now, and my husband and I just purchased a home last week. Our rent for a 975 sqft 2br apartment on the seventh floor of a large complex out in the suburbs was $2,100/month. No balcony, no yard, no storage, although utilities are included. We definitely weren't getting a good deal, but our rent had increased from $1800 over the last 3 years.
Our house is in a better location (more convenient to public transportation, better schools, "cooler" restaurants), much bigger (1410 sqft, 3br/1.5 bath, office, plus unfinished basement with 6'6" ceilings, attic, front and back decks, backyard, 2 car detached garage), and our monthly costs -- INCLUDING taxes and estimated utilities are $3,200/month. Renting a house like this would run you $2400-$3400 month, if Craigslist is any indication (searched for 3br full houses in the same neighborhood as ours -- near a college, lots of rentals).
So, yes, we're on the higher end of rent, and we have to do our own repairs, but the costs of rent are paying for far more than just interest on a mortgage. The tax benefit is nice icing on the cake, but it barely factored into our decision to buy, rather than rent.
so a house just sits there, generating money. This means that it has an investment value. That value is "determined" by the cost of comparable investments because of arbitrage. If I have some money invested making less than 1 rent/month (minus expenses and so forth), then I will happily buy the house for that money. Likewise if there is some cheaper investment which will give me the same return on my investment, I will sell the house and switch, pocketing the difference.
One example of such an investment is the mortgage itself. as a bank, by signing a mortgage with someone, I am extracting the interest rate on the value of that house every month (plus some portion of the principle).
I mean, you can sit there all day and say "well, it doesn't make sense that people would buy instead of rent if it were economically disadvantageous, so the market must be relatively balanced." But that's simply not the case. You can look at actual numbers to show you this.
When you buy a mortgage in the US, the payment and interest is fixed. Even taxes are, occasionally, protected from market inflation. When you rent a home, you have absolutely none of those protections. Rental costs go up, nearly every year, for the rest of time immortal.
Even if there is no tax benefit to home ownership, I would always choose ownership, because it's the only way to protect myself against extreme housing cost increases. (And before someone says "that's just NYC and SF, live somewhere cheaper" I'm already in small-town Midwest US, even here 10-15% yearly rent increases are common).
Were unemployment to rise, the price of real estate would similarly drop non-linearly. The price of your house is extremely volatile, don't let anyone convince you otherwise.
http://www.nakedcapitalism.com/2017/01/the-obama-administrat...
Lots of people can't. Most people don't work in tech, and probably can't. Telling service workers to live in the boonies and commute an hour and a half by car to their minimum wage job is stupid and tone deaf, obviously there are better solutions.
>use newly affordable automobiles to get to their workplace
Many metro areas are so congested automobiles are no longer the convenient affordable choice they used to be. For some mass transit is less about being planet-conscious and more about not wanting to sit in traffic for half the day and spend $300/mo on parking.
Property is hardly an optimal free market and there's lots of things we can do to improve the situation other than making fun of "Millennials". Most people I know would happily pay less to live outside of the city so long as they were still well-connected to the city center by the transit network. Expanding and improving commuter rail access and building denser more appealing suburbs will be big wins imo.
>And those people 'just moved' to NYC after all.
When the rich get priced out of downtown, they don't move to KC. They move to cheaper areas outside of downtown and drive up prices for lower-income people living there. When four young professionals pile into an old single family home because there aren't enough apartments, that drives up prices for families who have one or two sources of income, not four. This affects everyone who lives in a city, not just wealthy transplants. Yuppies are not the ones being displaced. The solution is a steady increased supply of market-rate housing.
Politically induced zoning density restrictions which benefit landholders over tenants and those who wish to buy housing should be reversed and then allow markets to create more housing. The cost of the high cost of housing is for this reason -- a market failure called "rent seeking." Fix the market inefficiency, -- the market failure -- and everyone but landholders benefit.
Sometimes, you just can't have everything you want.
I've done Southern suburbia life, and now North East city living and I can tell you N=1 you'd have to pay at least 5x my salary to even tempt me into going back.
The marketing message might be that urban living is the only acceptable life choice solely because of the date of your birth (astrological reasoning) but apparently only a very small percentage of people are getting that message. Enough are, such that prices are out of control in the fad areas, but almost no one lives there on a nationwide basis so it doesn't matter as a national issue, which is why its not getting fixed.
A good analogy is every christmas season has "the toy" that is in insane demand that perhaps 95% of the population do not want, but the demands of an extremely vocal tiny minority always result in a human interest story on TV. Doesn't mean its important or a universal desire for all humanity, just means its good clickbait.
There's a luxury downtown apartment building a block from where I work that I acknowledge exists. Approximately 120 rental residents have gotten the message that urban is the only way to live and suburbs are passe and unstylish, and they pay five times my mortgage in rent for the "privilege". However, I live in a burb 20 miles away with an eighth of a million other people unwilling to pay five times more than our mortgage as apartment rent. And our schools are top of the line as opposed to the urban district being reported as worst in the nation. Similar, predictable street crime stats. And my burb doesn't have panhandlers lining the freeway ramps and homeless people pooping on the sidewalk, but somehow I survive the lack of those cultural attractions at my home.
"About 1 in every 38 people living in the United States resides in New York City." [1] I wouldn't call that "almost no one".
>There's a luxury downtown apartment building a block from where I work that I acknowledge exists.
I wouldn't complain, if those "luxury" downtown apartments didn't exist, your nice little suburb would be more expensive, those people have got to live somewhere. "Luxury" is a meaningless buzzword that developers like to put on their marketing materials.
[1] https://www1.nyc.gov/site/planning/data-maps/nyc-population/...
I earn a 95%th percentile income for my area. The only urban housing being built is for people paying 5x as much as my income. That is a very small fraction of the local population. If income were linear instead of exponential that would be less than 1% of the population can afford urban living, the other 99% will have to live in the burbs or somewhere other than urban areas. If someone earning five times my income were kicked out of their apartment, they'd likely be living in a place much nicer than my burb, not that its anything bad, but its probably only the 3rd wealthiest burb in the area. There would be effects in the border areas where 120 people would be pushed downwardly mobile thru all the neighborhoods.
Granted the 'burbs aren't that far away compared to other cities—but our public transit's also terrible (likely too spread out to every have great public transit, no matter what) so you'll always be driving.
Nailed it. If I could drive 10-20 minutes and catch a high speed rail of < 1 hr to get to work, I would certainly do so.
Instead I rent a room from a person much wealthier than I a mile or 2 from the city center.
There are enough things to like, but this aspect is something I'll never get used to.
[0]: http://www.masslive.com/news/index.ssf/2017/02/easthampton_t...
This doesn't describe me or most of my friends. Sure, I know a couple of people who have moved to the city, but most of us have chosen to stay in the suburbs.
Most of the people I went to college with and still keep in contact with either a) rent or own a house in the suburbs or b) live in a suburban apartment complex (i.e. sprawling fields of 2-story buildings).
I personally split the difference and rent a townhouse in the suburbs.
I have one friend who lives in one of those suburban mixed-use developments that's becoming popular now, but that's only because he's legally blind and can't drive. He's told me multiple times that if his retinas worked right, he'd own a car and drive everywhere.
I love the suburbs, I love sprawl, and the same goes for most of my friends. I also hate noise and hate crowds. We don't want to live somewhere that has a "soul": we just want a place that's safe to live and have lots of space. My friends who have kids also want a place that has good schools. We're pretty bourgeois and proud of it. We're not hipsters, and in fact we're more likely to make fun of hipsters than anything.
That said, I don't think people in urban areas would say they love crowds or noise (and I really don't think I encounter much of either in central Austin). I'm curious what you do with all of the space. The idea of loving sprawl is odd to me.
I grew up in the burbs and hate the idea of raising my kid in a place where so much of your time is spent in a car. The idea of getting a car to go anywhere or do anything crushes my soul. I think if I moved out of the city I'd mostly miss being able to walk/bike (or bus) to so many things.
That's true.
And it also helps that I work in the suburbs (at both my current job and my last job): all my coworkers live in the burbs too, even the ones who are the same age as me (32) or younger.
Of course, I live in the Dallas area, where 90% of the tech industry is in the northern suburbs, and so are all the ethnic enclaves. You want to work in the tech industry? If you live in the city, you'll have to commute to the suburbs, so living in the burbs means you have a shorter commute. You want authentic {insert Asian ethnicity here} food? You have to go to the suburbs for it.
> I'm curious what you do with all of the space. The idea of loving sprawl is odd to me.
I have a lot of stuff. Also, I just like to have room to breathe; I'm slightly claustrophobic.
And I just really like the look and feel of the way the northern suburbs of Dallas are laid out. I don't know if I can put it into words; it's just aesthetically pleasing to me.
I've recently been toying around with the idea of moving out of state (because a. political reasons, and b. after my cat died last week, I kinda want to disappear and start over where I don't know anyone), and for aesthetic reasons the only other parts of the country that appeals to me are parts of SoCal, specifically Torrance and Orange County. They're the only places that have the same kind of aesthetics I like about the Dallas burbs.
> I grew up in the burbs and hate the idea of raising my kid in a place where so much of your time is spent in a car. The idea of getting a car to go anywhere or do anything crushes my soul. I think if I moved out of the city I'd mostly miss being able to walk/bike (or bus) to so many things.
I'm actually childfree, so I have no intention of raising a kid, but if I did, I'd like to raise my kid in an environment like the one I grew up in. I had a front yard and a back yard to play in, trees to climb, a large neighborhood to walk and ride my bike around. I still have fond memories walking or riding my bike down the winding alleyways and residential streets of Far North Dallas. I feel sorry for my friends' kids who are growing up in apartments (suburban apartments, yes, but still apartments). Apartment complexes just aren't conducive to that kind of atmosphere.
There was no crime, no homeless people shouting things at me on the street. I went to highly-rated public schools... my family didn't have to worry about burning $$$$ on a private school just to get me a good education.
Oh, and speaking of homeless people shouting things at me on the street... that regularly happened to me when I worked downtown from 2012 to 2014. I constantly had homeless people demanding I give them money or cigarettes, and they'd call me a liar when I told them I don't carry cash or that I quit smoking. I wouldn't want to subject a kid to that. During that time, I fervently wished I had a car so I could just roll up the windows and not have to deal with them. I'll always equate "not taking a car to go somewhere or do something" with "being subject to street harassment". Oh yeah, and when I worked downtown, I was too early in my transition for me to really get catcalls; if I worked there now, I'd probably be catcalled to hell and back. No thank you. I'd rather have the safety and the security of a car when I go places.
Also, your name sounds really, really familiar. I think we may have gone to high school together. Did you go to HS in Richardson, TX in the early 00s?
(no, you won't recognize my name... I changed my whole name -- first, middle, and last -- a few years ago)
I'm glad you like North Dallas, I enjoyed it as a kid, but hated it once I moved to uptown Dallas and saw what a walkable life could be like. (To be clear: uptown was just an intro, I don't find the area that appealing anymore)
And also to clarify, I'm not in a downtown highrise, and don't think I would enjoy one at my age. I have a house with a yard but it's about a mile from downtown and walking distance to a lot of great (and not so great?) stuff. I hope my kid(s) will have the best of both worlds. I also want them to see more socioeconomic and racial diversity than I did. This is definitely a privilege, but I did have to make tradeoffs (I could have a much larger home further out, or could have already paid off one of the same size elsewhere, etc).
Wouldn't trade it back for anything.
Our apartment (in the suburbs!) is great, driving everywhere is great, trees on trees on trees are great, the food is great and we manage to find something to do every weekend. Ironically enough, everything I need is about 5-10 minutes away from my apartment now. Walmart is 2 minutes away. TWO MINUTES!
This was not the case at all when I was in NYC.
Want/have to move into ig cities for work->you want to live bourgeois style city center.
want to stay in the boonies for cheap housing/nature/lifestyle-> you think you are entitled to a job here, jos aren't coming to you, you have to move to big job centers...
Now pay no attention to who has siphoned the money you would have had out of the system so you can't have it, isn't it more important that you hug trees?
Cities have soul, I mean, spirits, I mean lots of places to buy spirits, I mean bars, and alcohol consumption is the only important cultural activity in life, why being drunk is the definition of being cultured.. Other than that, there's nothing to do in the city other than cultural activities that tend to be too expensive (if you had money you'd be living in the burbs and commuting to the activity like all the participants) and nobody on a percentage basis attends those cultural activities. Probably 100000 people say how great it is that we have a theater for off broadway musicals for every person who buys an actual over priced ticket. There are no bars in the burbs (LOL). In fact there is nothing to do in the burbs. Yup people should definitely be encouraged to stay away and stop crowding my burb.
You can, but then you're stuck with all the downsides of living in the boonies: you're far away from any cultural activities, shopping, good grocery stores (i.e. not Walmart), and all the people around you are probably culturally very different and even downright distasteful, unless you happen to like extremely religious and conservative people asking you about your personal relationship with Jesus or what kind of guns you like.
And this isn't all "boonies" either; some of them are pretty pricey. I live about 75 minutes from DC in a pretty rural area currently, and houses here are not that cheap. However, if I moved near some family members (about an hour SW of Richmond VA) houses there are much cheaper. And the benefits are somewhat similar: either way it's roughly an hour to get to some decent shopping, though DC's stuff is much better than RVA's, but RVA does have some cultural attractions plus some higher-end shops, just not as much as DC. But being surrounded by people you have no interest in meeting kinda sucks; at least when you're right in a city it's easier to find groups or people you get along well with who aren't too far away.
Anyway, this all assumes remote work. For the Millenials, this might not be that helpful. Most jobs still require you to be on-site, and that's not going to be doable if you live in the boonies and don't want a long commute. And that's just computer work; very little non-computer work can be done remotely.
What we really need is real estate development laws which push for the construction of more affordable housing, though that would probably mean more high-rise condos, rather than single-family houses. Instead, developers always target the high end of the market, building "luxury condos" and the like. There's a limited amount of real estate anywhere, so the obvious solution is to build up, not out.
Finally, another thing about those "cheap" houses in the boonies. I live in one of those currently, and the heating bills are atrocious. New, nice houses out here are expensive; the cheap ones are older and horribly inefficient. They're not building a lot of new houses in the boonies, so it's mainly older stuff. The new houses in the boonies are giant mansions built by rich people as getaways. Any "new" houses in the boonies are crappy little manufactured homes.
Don't get me wrong, it's not completely unusable. For the basics and pre-packaged foods, it's fine. But the selection is limited, and they don't have that much in the way of fancier brands. Also, lots of people complain that the produce section in Walmart is generally poor.
Where I am, Wegmans is a much better choice. The prices are just as good, and the selection is far, far better, and they have much better produce and deli sections, plus seafood, meat, etc. which Walmart doesn't seem to have at all where I am. And Wegmans isn't that high-end (it covers both regular brands and some fancy brands too): there's also Whole Foods and Trader Joe's which will have stuff you won't find at Wegmans, let alone Walmart.
Coupled with the fact that soon state tax might not be deductible, and there may be an entire class of people who find it better to sell their home and live elsewhere.
This seems more like a way to shift the tax burden to the middle class.
IANAA, but interest on a rental is a business expense, therefore will be be unaffected by this change.
Mortgage interest is an itemized deduction and can be quite high, thousands of dollars of saved taxes a year, so there's incentive to owning a home and paying the mortgage.
Under he proposed plan it will be much harder to beat the standard deduction, so they'll be less incentive to have mortgage interest since you likely won't be itemizing your taxes.
Not very popular in the states yet, but we'll see.
I could see capsule rooms going for $100 a month.
Some friends and I ate lunch with him the day before he left, and he mentioned that living in Japan isn't too expensive if you know where to live, and he knows how to only pay $300/month in rent. So I asked him if he meant capsule hotels. He told me what you said, and then he said that he meant hostels. Hostels are dirt cheap, even if you pay extra for a private room. You can probably live in Japan for less than $300/month rent if you're willing to sleep in the hostel's common area.
They're also expensive (10-15€ hour), but I guess for a long lease (weeks) the price could be better (around the 20-30€ day in Osaka/Tokyo) because the ROI will happen quickly.
* They have a captive audience and no competition inside the security area in the airport - people who want to sleep between flights, but can't/don't want to go through passport control, customs and security to a hotel,
* They have to be cleaned between each visitor, many times per day.
I imagine there are a lot of people in my camp as well.
"If a man could fuck a woman in a cardboard box, he wouldn't buy a house" - Dave Chappelle
I don't think you would be able to agree to get someone to come immediately to your house here unless you were already friends. (inviting or going to someone's house alone == sex).
The Hong Kong housing market has more experience with long-term residents of ultra-small housing, but either the optics or value aren't good. [2]
Lots of situations popping up evocative of immigrants with loads of Millenials/people cramming into a single dwelling to hit around your number are leading to more municipal occupancy ordinances around the country aimed at curbing that. Boulder, CO had an interesting civic interaction between these "illegal co-ops" and NIMBY's last year, and the co-ops got terms they could live with.
I can imagine very stiff resistance to any solution in the US from NIMBY landowners, but the numbers would be interesting to work out to see if your $200 USD price point can be sustainably hit in a top 40 US MSA. Factors you didn't mention I'm curious about, did you envision paying $200 USD per month:
* ...and be able to lock your belongings in the bed/capsule while you are away?
* ...and use a communal group (i.e., not private) shower?
* ...and have no kitchen or even refrigerator/freezer included in rent?
* ...and have no noise abatement like described in the NYT article?
* ...and have no control over HVAC?
* ...and access to only rate-limited WiFi (but LTE/5G signals and paid upgrades available)?
* ...and not be able to bring non-paying visitors (also, those visitors you do bring have to be same gender)?
* ...and have no parking (unless paid for)?
* ...and cannot smoke or drink on premises?
* ...and use a laundromat next door or on premises?
* ...and be able to eat in a communal dining room?
* ...and use your own towels?
Details, details....
[1] http://www.nytimes.com/2010/01/02/business/global/02capsule....
[2] http://www.cnn.com/2016/11/17/asia/luxury-cage-homes-hong-ko...
I own almost nothing. I sleep on the floor. I eat very simple food (and cook almost everything in an Instant Pot). I can't justify paying over $200/month for rent.
Likewise, I can't believe there no demand for that.
If you're serious, you should check whatever small ads website is popular in your region and see if there are people offering the same thing.
[1] https://www.gumtree.com/p/1-bedroom-rent/bed-in-triple-room-...
I actively don't want to own. I don't want to have to worry about paying for my own maintenance or landscaping. I rent a townhouse in the suburbs, and I'm perfectly happy with it. I guess I kinda split the difference between the "stereotypical Millennial" and the reality the article points out: I prefer living in the burbs, but I don't want to own.
Here's something that happened to me last month: something in my downstairs toilet broke, and it caused the toilet to repeatedly fill up its tank and dump it on the floor. Imagine my shock when I came downstairs to find that the carpet on a third of my first floor was soaked through, with the bathroom having a few inches of standing water. What did I do? I pulled out my phone and called the leasing office, telling them I had a plumbing emergency. Within an hour, the maintenance guy was here, and he fixed my toilet at ho cost to me. He also told me he was sending for a guy with a wetvac. An hour later, the carpet cleaner showed up to wetvac the carpet and replace the padding, again at no cost to me.
Also, in the past I've had several problems with my air conditioner. I've had the fan die, I've had the AC unit die, I've had the internal AC unit start dripping water on the carpet. All of those times, I just called the leasing office, and they sent someone out to fix it at no cost to me. Meanwhile, one of my friends who owns his own house has ranted on Facebook several times about how his AC problems are bankrupting him, and he's already sunk five figures into replacing stuff.
Why would I ever want to own when I get free maintenance and don't have to worry about a down payment?
Doesn't matter if I don't have the cash on hand to afford to replace a dead AC unit in addition to having to make a mortgage payment that month. A fixed monthly rent payment is easier to budget for than having to worry about every unplanned maintenance emergency, even if the rent payment is larger over the course of decades.
I looked up my friend's post about his AC problems... he was looking at $3-6k when his compressor died ($6k for a new unit; if he can just replace the compressor, $2k for parts, another $1k for installation), and that was after his AC broke three times the previous year.
We live in Texas. Air conditioners break all the time because the massive heat we get in the summers (100°F for several weeks isn't uncommon) places a huge strain on the AC.
> You will constantly have to move when rent increases.
I've lived in the same place for a decade. My salary has risen with rent.
If I ever move, it'll be because I want a change, not because I'll be priced out of my current place.
> You will raise a family with children never having a single frame of reference for what "home" is or was.
See above. Also, I'm childfree (I've even chemically sterilized myself), so I'll have no children to raise in any kind of home. On top of that, I've seen homeowners who sell their home and move every few years because they keep taking jobs out of state.
> You are at the mercy of the market.
So are homeowners. Remember the subprime crisis a decade ago? Remember all the people who ended up with underwater mortgages because their property values fell? Can you imagine being stuck with owning a home that's worth significantly less than what you owe after you've lost your job and can't find a new job that pays enough to afford your mortgage payment?
> You own no land.
That's an awfully medieval way of thinking, and it doesn't apply to the modern world. You could say the same thing about people who own luxury condos in New York and San Francisco.
"You own no land" is just as relevant to me as "you own no cattle".
> A sub-commoner among commoners.
And that's just unsubstantive rhetoric.
Most people do not want to move frequently.
I think you'll also find most people do not want to be childfree.
Homeowners are not at the mercy of the market. People paying down a mortgage are not true homeowners. They are paying off a mortgage.
"Modern world" or not, "serfs" still exist, and they certainly exist in the perception of others looking outward onto other people's lifestyles.
You can absolutely say the same thing about people who own luxury condos. They're being luxury charged for something they don't own.
You don't own land? You don't own a house? What about a car? You lease that, too? Lifestyle choices stop being lifestyle choices when you can't afford the alternatives.
Well, no, you keep the place itself, whose value may be the same, more, or less than the money you paid for it.
Let's say you buy a house with the intent to live there the rest of your life, and you make good on that. You pay mortgage every month for X years, then you continue paying property tax. You never see a dime back.
Let's say you buy a house and then a few years later you take a job out of state, so you sell your house and buy a new one. Most of the money you made by selling your old house goes towards paying the rest of your mortgage, and most of the rest goes into the down payment of your new house. And if your property values plummeted since you bought it (e.g. thanks to an economic crash or a natural disaster), you may very well end up still owing money on your mortgage even after you sell the house.
If you actually want to keep your money, then your best hope is to wait until your mortgage is paid off, sell your house, then move into a house that's worth much less than your old one, and pocket the difference. But that takes decades; my mom had a 30-year mortgage on her house! She didn't get to stop making mortgage payments until she was 60!
> pay a bit more for quality stuff that doesn't break.
I live in Texas. Air conditioners here break down constantly because of the summer heat. When you have consecutive weeks of 100°F+ temps, that puts a lot of strain on the AC.
Because in fifteen years, you'll be paying 2x to 3x your current rent, but your neighbor who owns his/her place will still be paying the 1x rate you pay today.
That's why common advice is "rent for short term, buy for long term" (for various definitions of "short" and "long").
---
If maintenance is your sore spot, you can hire maintenance and insurance services for your own property. Unless your landlord is personally fixing your problems, that's likely exactly what he/she is doing too.
No, of course not. If life changes, you sell it.
Because my mortgage (aka rent) hasn't gone up in 3 years...in fact it's actually gone down because I refinanced and is now cheaper for me to own than what I would have paid to rent in this area.
Add to that the considerable appreciation on my home, and what you've got is a recipe for long-term wealth.
You don't get free maintenance, the whole cost of maintenance, as well as all other costs of ownership of the unit, as well as as much profit as the owner can get away with, are already included in your rent.
Why is editing so poor these days?
The irony of California having anything in common with Florida would drive some people insane. Those are exactly the kind of people I want to see driven insane.
The difference between renting and buying isn't just the monthly payment. It's also the range of outcomes. If you buy a place with 20% down, and the property price goes up by 20% whilst you're living there, you've doubled your net worth.
In some US states (e.g. California) mortgages are nonrecourse[0], so it's a bit with unlimited upside, but capped downside. If the property price crashes to 50% of the purchase price, you can walk away, losing only your initial deposit.
[0] http://www.financialsamurai.com/non-recourse-states-walk-awa...
Or have 4.7 years of rent for the same place. After which you're likely to get tired of SF anyway and move somewhere else. Oh and in the 4.7 years you've been paying rent out of savings, you've saved up enough for the next 4.7 years of rent in NYC ... or many many years of rent anywhere else.
So yeah, I for one am def not ever buying unless I can cash it out in one go.
Then again, there are many things you could do for a million dollars in cash. Like retire for 10 years and do cool shit.
That "range of outcomes" isn't a free upgrade, though: you pay for it directly with a higher mortgage interest rate.
Right, the trick is to not move, but buy and hold.
Moving is a major disruption, and I don't think moving frequently is the norm, nor so I thinkost people like to do it.
In the US where owning is fairly common people do move less than other parts of the world where owning is not common.
Either owning or renting can be good. They both lead to very different life style decisions.
As always location location location. The are some areas where rent would be twice your house payment for similar sized places. There are some areas where rent is much cheaper than a house payment. Most people buy something much bigger/nicer place than they would rent - this is a smart thing as they will be spending more time there.
Until, you know, it does - and it does occasionally. That's why we talk about them in history classes.
NO one wants to be labeled a serf, though, so modern folks are rarely actually given that formal title. It'd be bad for other people's business.
I recently read that in London which has a green belt used to create land scarcity, the cost of land as a proportion of housing has risen from about 2 percent to 75 percent of housing costs.
In NYC, taxi medallions were valued at $1.2 million because government created artificial scarcity limiting medallions to 13,000 for a population of 8.5 million. Taxi drivers who leased cabs paid high costs because of the medallion scarcity and passengers would pay much higher fares. Then Uber/Lyft/Gett/Via came along and relieved the politically induced scarcity. Now, not only are bailable cabs much, much more available, but prices have come down, sometimes substantially. The price of the taxi medallions decreased from $1.2 million to $500,000 to $700,000.
Happily, the fix to high housing costs does not cost any money. It simply needs laws reversed that created artificial scarcity of land. This would require millennials (and others) to get an education that teaches them at least the most basic of economics and then to vote out of office politicians who are for the zoning density restrictions and the high cost of housing.
David Ricardo in reference to combatting the "Corn Laws" of Britain first discussed "rent seeking" -- the use of politics to create market inefficiencies and scarcity benefiting special interests. In that context, there was an import tax on any grain including wheat to make bread. This lead to a higher cost of food. British farmers would receive more money for their grain which enabled the landowners of the farms to charge a higher lease for their land. So, workers were forced to subsidize landholders because of the politically induced scarcity "rent seeking" of grain. David Ricardo, a wealthy broker, joined Parliament to reverse the Corn Laws.
Yes, it seems so in the real GDP numbers, but it defies the rising standards of living that surround us, showing up everywhere but the numbers. Would anyone here want to live like the average Joe of the eighties, using only goods and services available then?
Traditional GDP and inflation figures seem to be losing usefulness
They clearly don't capture most of the tech gains (which have been huge).
And I suspect they don't adequately capture quality improvements.
Because it's not about whether you can have Netflix and modern gadgets and Uber, but whether you can afford shelter, whether you can provide for a family, whether you have to work like a dog and miss your whole life, whether you'll be able to pay your debt (student loans etc), whether you'll be able to afford healthcare, being able to retire etc.
Living with only "80s goods and services" is much better than not being able to afford basic today's services, but having a smartphone and broadband internet.
And of course wealth is relative to societal norm, not absolute. If you live in the USA like a 18th century peasant with the "goods and services" available to 18th century TODAY, you're not lucky just because you don't live in cavemen-era "goods and services".
Mobile payments, video calls, mp3s, social networks, wikipedia, google, driving directions with live traffic updates, Coursera, YouTube, Uber, Upwork.
These are not trivial changes. Coursera, for example, was a life-changer for me as it allowed me to switch careers long after college.
Inequality and inefficient healthcare are big issues, sure, but I wouldn't trivialize the benefits of technology because of that.