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Comment by surfmike | Hacker News Reader

People's perceived needs grow but that is not the whole story.

Many people now are spending almost 50% of their pre-tax income on housing, and most of that is the price of land and goes to landlords. It seems that landlords inevitably capture a big chunk of people's salary increases.

Additionally in the US your health insurance is generally tied to your job; even after Obamacare you probably have to work to pay for your monthly insurance.

If housing costs went way down and health insurance were universal, I suspect many people would feel much less need to work so many hours.

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Many people now are spending almost 50% of their pre-tax income on housing, and most of that is the price of land and goes to landlords.

1) That's really not a countrywide thing

2) It's not specifically the landlords, it's whoever was already there. A landlord who bought in just recently is not rolling in dough. The people who capture the gains are the people who got in fifty years ago and sold & moved, or the landlords who got in fifty years ago and are still renting the property.

3) But, yes, from the worker's perspective his salary increases will tend to go towards housing/land. This is a natural state in a competitive housing market. He must compete in the market for the space to live so that he can live near his job. The power of the market will continually optimize for those who make the most money (i.e. hypothetically produce the most economic value) to live in the most desirable housing (e.g. the closest to work)

The people who capture the gains are the people who got in fifty years ago and sold & moved, or the landlords who got in fifty years ago and are still renting the property.

Yes. Silicon Valley's land baron is John Arrillaga, who bought Silicon Valley farmland in the 1960s. He owns about a square kilometer of office space.

It's actually a lot more than just 1 sq km, mate. Waaaay more.

1) It seems to be a worldwide thing. I see the same in most major cities Europe.

It's due to economic centralisation. The level of wealth in Paris and London is disproportionate to the rest of UK or France.

This doesn't happen in Germany for instance. Rent in Berlin and Hamburg (1st and 2nd largest cities) is quite reasonable. Reason is economic activity in Germany is quite decentralized.

It’s not just the natural state in a competitive housing market. The locations with the greatest rise in housing costs tend to have a higher degree of regulatory capture, NIMBYism, and less competition and investment in housing. One reason for the migration to the southeast over the last decade is that housing costs have risen more in line with inflation than other areas. It’s just much easier and less expensive to invest and build.

Not everywhere, but in SF, LA, San Diego, New York, Vancouver, Toronto, Oslo, Stockholm, London....

Would love to see a breakdown of the number of jobs in a given country vs the number of jobs in urban areas with expensive housing markets.

I think this is just a very visible specific case of assets becoming worth more relative to wages

Housing price increase just doesn't go to landlords. It goes to City and state coffers via tax. Chicago had two housing tax hikes in 2017, for example.

Edit: Added links

> For homeowners in Chicago, the average increase is 10 percent. https://rebootillinois.com/2017/06/13/big-property-tax-hike-...

> Summary over past couple of decades

https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015...

Confused by the downvotes here. In almost all of America (looking at you Cali) the property taxes are reassessed yearly to the value of the home.

This is how we want it. The three blocks in every direction surrounding a middle school shouldn’t be populated by 80 year old retirees.

Property taxes are used to fund all sorts of stuff, like a default cookie jar, so to speak.

Chicago used hike this year to fund pensions

This graph is a good summary

https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015...

> Illinoisans’ residential property-tax burden – as a percentage of median household income – has risen 76 percent.

https://www.illinoispolicy.org/reports/growing-out-of-contro...

The increase in city budgets is somewhat independent of the value of houses. If the price of every home in Chicago doubles overnight it doesn’t mean that Chicago would require twice as much revenue to deliver city services. Property taxes are based on assessed values because they are collected relative to other property in the same jurisdiction, not on an absolute basis.

Other factors should have a bigger effect. For instance if crime halved overnight, the city could reduce its policing budget and lower property taxes, regardless of property value changes.

The fact that this is true and it’s really hard to make more land is the entire basis of Georgism, or Land Value Tax.

https://en.m.wikipedia.org/wiki/Land_value_tax

> If housing costs went way down and health insurance were universal, I suspect many people would feel much less need to work so many hours.

Housing costs are directly related to the area per person and the location. If people expect to live in much larger flats or houses compared to e.g. the 19th century and in expensive urban areas, they will have to pay the price.

That’s a cute theory, but housing costs are much more related to the cost of money. When the federal reserve makes money cheap, asset prices increase. Since mortgage rates are at historic lows, people simply borrow as much as possible until their monthly payment is at some threshold. If you want housing prices to return to historic norms, you need to ask the Fed to first return the cost of money to normal.

Not sure why you are being downvoted. The historically low fed rates and economy growth are the main drivers of increased house prices globally.

Buying a house has always been the preferred investment. When you make that easier, it's only natural prices will rise.

IMO, the only feasible way to minimize this trend is economic decentralization.

> If people expect to live in much larger flats or houses compared to e.g. the 19th century and in expensive urban areas, they will have to pay the price.

Your comment could only make sense if you believed housing prices were dictated by construction costs. They aren't. Prices are set based on what is the highest price tag sellers are able to force upon the customers. Buyers also wanto to push the value down but sellers, due to the nature of real estate properties and taxes, profit more by simply sitting on their investment and waiting out for someone opening fheir wallet and offering the asking price.

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