In the 1950s, a California teacher's annual mortgage payments were 14% of salary | Hacker News Reader

In the 1950s, a California teacher's annual mortgage payments were 14% of salary

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74 pointsDoreenMichele102 comments

As commented in the thread attached to that tweet, the comparison of statewide numbers in the 50s to just San Francisco today is an apples-to-oranges comparison. It honestly comes across as a bit disingenuous.

I'd be more interested in the comparison of just San Francisco numbers from the 50s to now. Or statewide 50s to statewide now. Or how much an effect the San Francisco numbers are having on the statewide numbers, in either time period. But all that probably doesn't fit into a tweet.

It's even worse, it compares wages for "Pacific region" of 50th, whatever it is, with current San Francisco. Its not even apples to oranges comparison, more like apples to stones or something like that. I'm pretty sure it was more affordable back then before the tech boom, but the numbers provided don't make sense.

If everyones' salary was raised so they could buy a house at today's prices, the housing prices would rise until they couldn't.

The laws of supply & demand cannot be repealed. When you've got 100 people and 30 houses, 70 are not going to get a house one way or another.

"When you've got 100 people and 30 houses, 70 are not going to get a house one way or another."

Unless you make people share houses.

There are solutions, even if some of them may not be palatable in the current political climate.

No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.

More like we've got 100 people and 80 houses, but somehow 70 people aren't going to get a house one way or another.

One of the large problems is people buying up second+ homes to rent out or AirBnB.

I don't think San Francisco has a bit problem here, all Airbnb units are registered with the city [1], and even before registration requirements, there were only ~11,000 units listed [2] in all of San Francisco, which is a tiny fraction.

Vacancy rates are also extremely low in San Francisco:

http://www.deptofnumbers.com/rent/california/san-francisco/

so investment properties being idle is also not a problem.

The real problem is lack of supply to meet demand. A state law from the 1970s forces municipalities to produce Regional Housing Needs Assessments (RHNA), and nobody in the Bay Area is close to meeting their planned housing needs ([3] Table 4.1) for moderate or lower incomes. Overall in California, 97% of cities failed to meet their own housing goals [4] (Please note that this source is highly pro-housing, so take it with a grain of salt. I am also very pro-housing but want to be open kimono about it).

[1] http://money.cnn.com/2017/05/01/technology/airbnb-san-franci...

[2] https://www.sfchronicle.com/business/article/Airbnb-loses-th...

[3] http://reports.abag.ca.gov/sotr/2015/section4-housing-goals-...

[4] https://www.thebaycitybeacon.com/politics/of-california-citi...

Of course more housing needs to be build. In a sane manner, though, that focuses on the actual needs of the community rather than building more and more expensive condos than only the rich can afford.

I wasn't talking about investment properties being idle. I was talking about them existing. They drive the rates up just by existing, since the owner wants to make more per month than they paid on it. If people weren't allowed to own more than one home, then all prices for housing would drop.

Also 11,000 units is a good bit. Could house probably at least 10,000-20,000 more people if Airbnb was banned.

And the blame lays on the teachers of the 50's (and other people), now retired homeowners artificially restricting housing supply for their own personal gain.

Made possible by California's plutocracy, uhhh I mean plebiscites.

TL;DR, a democracy does what a democracy does

In the early 60s, a relative of mine was a new engineer with a $12K salary. A new car was around $3K and the house he bought was around $24K.

How many people have starting salaries these days that are 50% of a typical suburban home in an area they can find work in?

Same for my neighbor in an LA suburb. Started as plumber in the 70s with 24k salary. Bought house for 40k. House will probably sell for 800k today. He says a plumber will probably make 60k-80k today.

Probably not common, but still possible for those with professional degrees in many places in the US. After all, the median home price is still around 200k.

Student loans are probably more of an issue then housing prices for new graduates in lower cost of living areas.

In the early 2000s I was making $55k and bought my first home for $130k. It was possible, although harder now as money is too easy to get.

You have three problems... over consolidation of industry, over consolidation of capital and inflationary pressure via easy credit.

Bay Area real estate is a shitshow in many perspectives. The root problem is that the money people are all there, and would rather not travel. It’s dumb for all stakeholders, corporate, capital and working that such an important and large component of the US economy is dependent on the Bay Area. It’s doubly stupid as the whole region could be leveled by an earthquake at any time.

I’ve worked on projects where significant numbers of people contributing to the project have been on other continent. It defies all reason that we don’t have the ability to finance business in Omaha, Buffalo, or Nashville.

Nashville's getting pretty expensive, too, thought it's nothing compared to the Bay Area.

An earthquake remains the only plausible fix for the California NIMBYism.

Easy credit was one of the primary drivers of the death of the America dream. All anchoring to intrinsic value was lost when people could pay the markup on the product and carry the debt burden on top.

So they made today's equivalent of about $98k and bought a house for $196k. Did he buy the house the same year?

Outside of major areas like NYC, SF and LA, a professional starting at $45k and buying a starter house for $100k is doable.

Your example is anecdotal, here's mine. I know several people who were making $40-50k in professional like sales or engineering after just a few years of college and bought wonderful little starter houses in the $60 - $100k range. This is Rochester NY which has a cost of living score of about 82 out of 100 in the US. (LA is a 166, Austin, 117, Philly, 99, Chicago, 110.)

A starter house in the Northeast now costs about $350k, while salaries have stagnated.

Are those relatively recent numbers? 60-100k seems quite low based my experience with the urban Midwest (Madison, Minneapolis) - probably 50% what I'd expect to see. Maybe out in rural areas, but then you have more limited professional class jobs (sales/engineering).

And what percentage is it for a single google/apple/facebook employee? If they make 250k a year, and the mortgage is 10k a month, thats almost 50% of net.

Sounds like its extremely bad for everyone.

It's pretty awesome for property owners.

If their view their house as an investment. There's a good amount of people who are in the Bay Area simply because they like the weather, outdoors, and have family here. They didn't buy a house because they knew prices would go up. They bought because they wanted to settle down here.

What? The weather in the bay area sucks.

The statistic I saw today is that the average house in San Francisco is making $60 an hour in equity gains. That's 4 times the minimum wage.

It's super not.

Look, if you got a starter house let's say 5 years ago for let's say $800k, and now that house is worth $1.1M, but what you want to do is move into a 3/2 or something that used to cost $1.1M, that same better house now costs $1.5. Instead of having to add $300k equity, you have to add $400k. But actually, what's happened is that houses in like the 6th to 8th decile have appreciated more than houses in the 1st to 4th decile, so you probably have to add $500k.

The only people this is good for are people who own a separate property purely as an investment, and people who are moving out of the area or downsizing their houses.

Sure it is. You leave.

A guy I grew up with did this in Queens. He bought a house in the old neighborhood for $200k in the 90s, sold it for nearly $2M, bought an estate upstate for around $500k. His drive to Manhattan is about the same as the shitty bus/subway odyessy without the bullshit. If the weather is awful, he gets a hotel in the city.

HN is weird about this. If we had a king that ended zoning, everyone would be displaced anyway. When your block was ruined by apartment towers and street retail. That’s what happened to my friends former neighbors when his former 50x100 lot was turned into 18 condo units.

>HN is weird about this.

Can you show me people who don't think this way?

Anyone who owns a home where encroachment of commercial property is a risk.

How is that bad for the single Google et al. employee? That still leaves 10k+ a month for everything not housing-related, which is plenty. Outside of housing, SF isn't that expensive (groceries, for example, aren't ~7 times more expensive than the national median like houses are). I have a friend living in SF, making about that amount of money, with a stay-at-home wife and a kid, and they're quite comfortable despite a 7k+ monthly mortgage. This is bad for people who make <100k a year who may never be able to afford a home in San Francisco, especially as the prices keep rising.

Because a house is a 15 or 30 year loan. Their job market or high pay may not extend that long

In Bay Area 250K will get you around 155K post-tax. It means you would have about 2K/month after morgage which is insane.

Insane, yes, but 2k/month is still a lot more then most American families live on after paying their rent/mortgage.

Lets not forget property taxes, which would wipe out again half of that if not almost all of that.

I mean if we handwave away the mortgage. A 10k/month mortgage is a $1.4 million dollar house on only a 15 year mortgage. Push to the 30 year and you're at like $2.2 mil. Besides 2k/month after mortgage isn't so bad, I wish I knew what the median after taxes and rent/mortgage income is but I guarantee it's nowhere near that high and it comes with nowhere near as nice of a house.

A 7k+ monthly mortgage for a single-earner family is dangerous -- if you don't believe me, ask anyone who lived through any of the previous two downturns. Unfortunately you cannot just turn off a mortgage, nor can you guarantee your next job pays 250k.

That's almost 50% of gross. And depending on their tax situation it could be almost 100% of net...

If you have a 10k/month mortgage, it's because your mortgage is for $2M. Housing prices around here are high, but they aren't that high for perfectly reasonable houses. If you house costs $2.4M (ie, you paid 20% down and got a $2M mortgage), then you paid a lot more than you had to for a house.

The 10k a month figure is fairly unreasonable. For a two bedroom, that figure will be closer to 5k a month.

This says more about California's very high cost of living than teacher's salaries.

Given that teaching, almost by rule, occurs locally this says something about the relationship between those two things.

Despite this, the student to teacher ratio in the bay area is still 19:1 - 23:1. Hardly a change. So clearly teacher pay is not a big issue.

How does student:teacher ratio impact whether or not a teacher can afford to live in/near a community - which, presumably, they need to do to teach there?

> which, presumably, they need to do to teach there

Clearly they still can. They can afford to live there or commute. If they couldn't the teacher-student ratio would go down.

But couldn't you substitute teacher with any other job. It's not about teacher pay. It's the price of housing has skyrocketed compared to average salaries in general.

And in the 50s people bought land and order house kits from Sears. You can google image search "Sears house kit" and see hundreds of designs that might remind you of the houses in your own neighborhood that you grew up in.

https://insme.info/wp-content/uploads/2018/01/sears-house-pl...

Exactly. In the 50s the average home size was 950 sq ft. In the 2000s 2,320 sq ft.

People still do this. Watch HGTV's Texas Flip N Move. Awesome link BTW.

We need an Elon Musk for housing. If Donald Trump could solve this problem he’d win 80% of the popular vote in 2020. Housing cost is a huge tax on propsperity for the next generation.

I understand the article is about the fact that teachers salaries have not scaled over time.

I wondered whether Housing inventory vs Price (homes available for sale) by decade might shed some light on the authors conclusions, and found the following Forbes article, with data from Trulia (in 2013) showing Homes built vs Asking Price, by Decade [0]:

To me, it looks like Asking price increases semi-linearly starting in the 40s

https://b-i.forbesimg.com/trulia/files/2013/05/Chart_Templat...

[0] - https://www.forbes.com/sites/trulia/2013/05/02/american-home...

Because the planet was effectively larger (i.e., less developed) and the population was MUCH smaller: supply and demand, no?

It honestly comes across as a bit disingenuous.

It was definitely careless in regard to accuracy. But the original Trulia article it misread from comes a lot closer to making the comparisons you're after.

So what's the solution?

World War III but it comes with other side effects.

Tall buildings and subways.

What prevents said structures from being built?

Zoning and a culture that prefers detached homes.

So how would you go about fixing either?

Fix the zoning and also prevent tiny minorities from having veto power on new housing.

Last year, SB 35 improves this process for developments when a municipality is not yet meeting their planned amount of housing build.

This year, SB 827 is up for consideration which would force municipalities to allow taller buildings close to rail and ferry terminals.

These are radical changes for a state that, 30 years ago, said "we're full" and had a massive political movement to stop housing development. However, commercial office space development did not stop at the same time.

Magic?

Serious answer: trying to get the US to move away from single owner cars, detached homes, meat or the 2nd amendments is a near impossibility in the current social paradigm. Continued removal of non-urban economics (consolidation of farms, slow death of retail, etc) will probably force that to change in the next 30 years, but if you're trying to get today's people to buy into that, seems difficult.

So then you would conglomerate farms, reduce retail (and replace with what? Edit: Oh, you must mean the shift to online retail.) and I suppose also work on changing what is taught in classrooms, so that the next generation willingly sells their cars and moves into tall buildings?

These are not hostile questions by the way, I'm genuinely curious.

There are plenty of people that want to live in dense housing with walkable (retail, groceries, etc) neighborhoods, but there's nowhere near enough supply to meet that demand. This is because people living in sparse communities want to prevent others from living in dense communities. So if, for example, somebody proposes building an apartment building, the planning commisssion meeting will be filled with people who don't even live near the proposed building coming up with whatever laundry list of reasons they can to prevent it from being built.

Today I learned that California has more of a direct democracy. Is what you described maybe a side-effect of that? Where a tiny minority can out-voice a majority?

Yes, in many ways it's a direct democracy where only a tiny percentage of people participate. Who has time at 11:00 AM on a Tuesday to give feedback about a random building proposal? Not those who have the most to gain from a larger housing supply, those who need to work or have families to raise. Those who do show up want massive financial gains on their property because they artificially restrict the housing supply. Or they want less traffic on streets. Basically, when they moved in, things were perfect, and now that they got to move in, they don't see why anybody else should ever get to.

It's a tragedy of the commons type of thing: self-interest by a few ends up harming the majority in large ways. For the type of person that stops housing, the only way to get them to listen is to speak in terms that benefit them personally. So, for example, saying that their children will never be able to afford to live nearby is not an argument for changing the system. However, shift that slightly and saying that they'll miss the first steps of their grandchildren because their children live too far away will convince them, becaue now it's about them again.

Talking to these types of people, like reading the comments on newspaper websites, leads to a very dim view of humanity. However, just like newspaper comments, these meeting-attending NIMBYs are not representative of the population, they are just the ones that want to control things towards their own benefit.

How would you fix this?

I'm not a policy maker, and I don't have enough experience to create wise and smart policy. But my general goal would be to let these small groups have less power. In the most extreme, all plans that meet codes and zoning would have to be approved within a short amount of time (6 months, perhaps?), without any local input on what gets built.

This idea is called "by-right" development, where you only need to meet local laws. By-right development terrifies the older homeowner bloc that controls local politics, however, and is probably completely infeasible, politically.

Another venue might be to have this streamlined permitting imposed by the state onto any municipality that has a jobs:housing ratio greater than, say, 2:1, or something like that?

But again, I'm only an amateur policy maker, and that's the last thing that California needs. California's biggest problem is that its direct democracy has lead to all sorts of amateur policies like extremely restrictive residential zoning, or the terrible property tax laws that have starved municipalities and created perverse incentives for homeowners.

Outcomes like these seem to be why the founders of the United States wanted to avoid setting up a direct democracy, instead opting for a constitutional republic.[1]

[1] http://factmyth.com/why-did-the-founding-fathers-choose-a-re...

I wouldnt prefer a detached home if there was ample space for things like sports equipment, tools and a place to work on mechanical things.

Apartment living is far more than just location, its also an entire shift in choice/opportunity (from many to few).

Eventually, the government bubble will burst (they'll have to print money to pay for the unfunded liabilities such as social security) and then there will be some tough times.

So, in their roundabout way, the politicians are already working on a fix.

inflation is generally how markets handle this situation, but there is real weirdness going on wrt food prices being controlled

Accept the fact that, if cities don't want to allow for high density development, then that is their right, and to move your tech startup somewhere else.

There is a very attractive draw to California and places like the Valley for the potential for money to be made with the right connections and people.

So a tech startup would likely consider the high cost of living to be just another startup hurdle to clear. When rent costs $7k/month but the potential (dreamed?) payout is $50k/month, and this payout does not seem to be as attainable in other locations due to fewer connections, that would seem to me to be a no-brainer, were I the CEO of a tech startup.

Thus, teachers' salaries become collateral damage in the tech startup's quest for greater earnings. I can't see how taller buildings and subways could fix this; they would only delay this problem.

I'm not in California, these are just my observations. It seems to me that California is a victim of its own success.

Germany. Appartment prices are very stable - risen only 0.05% per year, 1970-2003.

And it starts with politics,law I think: there are strong rights in the German constitution for people who want to build on their land - which can override zoning.

And the salary of leading local officials is tied to their city's revenue ,and the only way to increase that, is to increase the number of local citizens.

And that creates competition between localities.

I also like Japan's zoning scheme which is based on maximum allowable nuisance. With the exception of some extremely heavy industrial zones, there really aren't places where you can't build housing due to zoning laws.

http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html...

Such a great write up. Could that ever happen here with our hypermicrolocal zoning boards everywhere? Short of Donald Trump vengefully smiting NIMBYs because they blocked his condos in the past I don't see how it's possible.

> And that creates competition between localities.

That's intriguing. Sets up locations as a sort of free market, if I am not mistaken. Prices are controlled by where people want to be instead of artificially enforced.

Remote work so you can live in Fresno but work in SF.

Disallow people/corporations to own more than one piece of residential real estate.

Even landlords renting property?

Yes, especially them. Let the state own all the apartment buildings, then at least the rent can go for something useful to the masses rather than just enriching some person who was already rich enough to own two pieces of property.

If a teacher wants to afford a house they can move to any of the 90% of the states where its doable. I live in San Antonio, where teacher starting salary is $50k and you can easily buy a house for $100k.

Which I suppose would create a vacuum for teachers in CA, which I suppose would cause a schooling crisis, which I suppose would cause the people to cry out for increases in teacher salary to fill the positions, which I suppose would cause greater debts to the state, which I suppose would lead them eventually into default, which I suppose would cause a dramatic reduction in the available budget for public welfare, which I suppose would cause an increase in crime and an exodus from the state, which I suppose would cause property values to drop, which I suppose would cause a further exodus in population, which I suppose would finally make housing more affordable.

So perhaps this is a self-regulating problem? :-)

I see no problem with home ownership being out of reach, so long as housing is affordable.

IMO all asset classes are at risk of exuberance and thus we cannot stop investors from over pricing them. However, their underlying value (rent price) should remain sustainable for those who need somewhere to live. How is this possible? Simple, someone who has capitalized in the past is free to rent for far lower than someone who has purchased in the present. Someone who bought in 1970 likely has extremely low operating costs and thus is free to lower rents to meet market demands, some asset owners may go bankrupt in falling rents/asset prices... Thats just how capitalism works.

IMO we should be building far more supply to cause an eventual shock and real drop in housing value. Make those who are doing idiotic things like paying more than asking price for a home learn the lessons of capitalism .

>home ownership being out of reach, so long as housing is affordable.

But it does not work this way, if we actually talking about capitalism. House ownership is having an asset (stock or house) and affordable housing is a cashflow (rent + house deprecation, or dividend) which this asset generates.

These two are interconnected, always. If your house provides you with 2% rent and your S&P500 portfolio gives you 0.02% dididend yield, it means that house is overvalued or portfolio is undervalued.

So, point being, you can't have 3M houses ("home ownership being out of reach") AND 24k/year rent ("affordable housing"). House prices should fall or rents should rise.

People aren’t rational.

There are many people around here in Toronto that will buy a home and rent it at a loss because “home prices always go up”. I did the math and my previous landlord was losing money on a cash flow basis renting to me; the rent could not have covered the property tax, condo fees, and mortgage interest (or inflation / opportunity cost if he owned outright).

My long distance girlfriend at the time also knew a family who owned a $2m house and left it empty while they lived in HK. We used to stay in it when she was in town. They were too rich to care and “home prices always go up”.

>So, point being, you can't have 3M houses ("home ownership being out of reach") AND 24k/year rent

Sure you can. Because previous investors capitalized at the old market rates (ie, what they really have is a $300k house investment w/ $24k annual cashflow). The main issue I see with that is competing uses of the capital, ie, if they can sell the $300k house investment for a $2.7M Profit and reinvest it at something > 1-2% w/ similar risk profile.

But if we can put a lot more housing stock on the market the prices will decline and money will go elsewhere looking for returns.

But why should anyone buy a house for 3M, if you can rent it for 24k/year? 3M gives you 125 years of renting.

In fact, you can set aside 100K for 4 years of rent, and allocate the rest - 2.9M - into working somewhere else, like bonds.

Look, you put 2.9M into bonds yielding very conservative 3% per year (say, a mix of AAPL bonds and US treasuries), and you have 87K per year. 24K covers your rent, you have 63K to spend on drinks, you are not tapping your main capital, _and you live in 3M house for free_. Buying the same house commiting all your capital into it is very definition of insanity.

Obviously it's too good to be true, so rents should rise.

As @gracels pointed out, the title is misleading.

> You switched from “in California” to “in San Francisco.”

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