> Rents in Megacities Can't Go Up Forever
Yes it can, College Tuition is a great example. Instead of finding the cause and treating it, we just increase the amount of aid people have access to.
Yes it can, College Tuition is a great example. Instead of finding the cause and treating it, we just increase the amount of aid people have access to.
I recognize you're not trying to rationalize this, but you've identified the common factor to each bubble: a new and unsophisticated source of investors being aided by the financial industry.
With the dot-com bubble, it was daytraders and online traders generally (including me). With housing bubble, new untraditional homebuyers who bought homes with exotic mortgages. With education, student who traditionally would not have gone to college going to college.
These could have all been positive examples of American upward mobility at work. But as was especially evident with the housing bubble, the financial industry turned people looking to improve their lives into consumers and, in many cases, exploited them.
With rents in metropolitan areas, it seems to be driven by wealthy investors (institutional investors and wealthy foreigners) pricing marginal middle class homebuyers (e.g. yuppie millennials) out of the market and then turning around to rent to them. Renters, like tech workers and young white-collar professionals generally, can stretch to afford these rents. But they definitely have a ceiling and all of this has been fueled by a growing economy. As soon as the economy falters, aid will dry up and the roof will cave in.
Thats the dramatic shift this time around -- this isn't a bubble propped up by lending -- this is a bubble due to the fact that we are living in a time where the rich _have so much money they dont know what to do with it._
I agree it's not the same kind of bubble we saw when strippers (to borrow the example from The Big Short) were carrying 5 mortgages in Florida. And it explains why housing prices never fell there or really here in Southern California to the extent I was expecting (and really hoping) back after the crash.
Still, I imagine most of that private wealth that is pouring in there and here is either connected with the financial industry directly or indirectly. At one end, you've got the financial industry financing everything, from mattresses to cars to college education, which spurs demand and price inflation.
On the other end, you've got a global wealthy elite for whom all real estate is local. They are small proportionally but still large enough in aggregate to quickly exhaust limited edition luxury items like residential property offerings in San Francisco, Vancouver, London, etc.
Anyway, that's the simplified model I've been operating on for the last few years. A weird combination of the super rich shopping where they please and local middle class Americans, hopped up on credit, trying to compete with them in select desirable areas.
This is a cultural phenomenon. We're "supposed" to get our children the best education we can possibly afford, otherwise we are bad parents. Since colleges don't have price discrimination, this essentially means tuition is set at the absolute maximum that the middle class can afford - squeeze every penny out of them. This is why aid won't reduce the burden of tuition on the middle class (tuition will just rise to meet the aid amount). It's also why tax breaks won't help the middle class either (same idea), although the tax breaks can help those above the middle class (since they have a higher tax rate, and the tuition rises to match exactly the effective aid for the middle class).
Contrast this with college acceptances and tuition. As soon as they get accepted, the tuition can be however high it is it doesn't matter. You still pay it. This culture of spending all and everything on tuition has allowed tuition to rise to maximally extract from the middle class.
My explanation for it is the debt conditions: if students were able to default on their debts, colleges would not charge what they do for majors that dont provide the value to students: if a student spends 80k for poli-sci but his job cant pay for it, he would default, and the college would lose that money , and hence have an ineterest in pricing accordingly to the value it can provide to its students.
But since the debt is federal and permanent, the college's incentives is to increase the price as much as possible since it doesn't have a sustainability problem: the students and the government do.
Just make the loans defaultable, you would have a default crisis by next month, and prices would crash quickly.
If you made student loans defaultable, suddenly they would lose much access to this debt, and tuition would fall.
My points about aid and tax breaks on tuition not working still apply.
> According to the College Board, the average cost of tuition and fees for the 2016–2017 school year was $33,480 at private colleges, $9,650 for state residents at public colleges, and $24,930 for out-of-state residents attending public universities. [1]
1: http://www.collegedata.com/cs/content/content_payarticle_tmp...
I assume that everyone wants healthcare for everyone. I mean, who would want even a stranger to suffer from disease?
The question is what is the best mechanism to make it affordable for everyone.
One answer is: give everyone more money to spend on it. The problem with that is that it drives up the cost for everyone and you may be no better off. You might be worse off.
Another solution might be to spend money on the supply (build more hospitals and train more doctors). I pick this example because it doesn't imply things like lowering taxes or spending less, so it doesn't get caught up in the budget discussion.
The criticism here is just in regards to the first solution, not in regards to providing healthcare.
Another option is improving commutes from the outer boroughs and New Jersey - the Bronx has many affordable areas, but the 456 is a shitshow, and I'd rather move back to Texas than put up with the slow peristalsis that would become my commute. Buses aren't great, either, and suffer from a lot of the same problems that regular street traffic does. My coworkers who come from Jersey typically have a bus ride of an hour, assuming there aren't any traffic problems.
High speed rail into the city (see tokyo). You can travel enormous distances in 40 minutes on HSR.
See my earlier comment to this post: https://news.ycombinator.com/item?id=13940272
Ehhh, that isn't the narrative we've been pushing for the last 20+ years.
> whereas living somewhere is
I think the fact that it's a necessity only benefits the idea of providing people aid for housing.
> you can't really get that for your housing.
I mean, you absolutely can depending on your level of income. It won't make up for being poor, but that's what section 8 housing is.
Even on the more middle-class scale, the government provides tax breaks for home owners (and especially for first-time home buyers) which is basically money from the government.