U.S. rent has increased 175% faster than household income over past 20 years
phys.org
phys.org
Yes, homeowners collude to restrict housing supply via regional politics. But the real problem is the centralization of jobs within big cities. This is bound up in the history of manufacturing in the west and the forces of globalization.
Remote work has the chance to reverse or at least slow this trend. In the short term it may lead to an explosion in real estate prices in areas within commuting distance of the big cities. In the long term I hope it leads to people spreading out a lot more and making housing affordable again.
The claim that a house doesn't produce anything seems incorrect to me.
I know it’s not super common in the US for various reasons, but it’s certainly possible to build a house that will outlast you, your children, and their children.
A lot of homes and construction in the New England area is brick and I bet it will last quite a long time.
Another interesting tid-bit is that while older houses are much draftier and usually less energy efficient, this "airiness" of the house allows them to dry out and avoid rotting. There have been countless class action lawsuits in the US because builders in the 80s and 90s created situations where exterior wall assemblies trapped water against the studs and didn't allow them to dry out in an effort to make the "air tight" and energy efficient.
The brick cladding on old New England style homes either have an air barrier between the brick and wood framing or weeps holes in the mortar to allow water out from behind the brick. This allows them to last much longer.
And of course, there are a lots of factors which are totally outside of the individual's control— a falling aquifer could make digging a usable well prohibitive, for example, or maybe your land is on the coast of Florida and will be underwater at high tide in another few decades.
2. There’s plenty of reasons land can lose value: people moving away, economic, environmental (climate change), cultural changes. Population growth is projected to peak in 2070.
3. (Land appreciation - inflation) has to be higher then property taxes at least. There’s also opportunity cost of not using that money to buy another investment instead.
Related: https://www.frbsf.org/economic-research/files/wp2017-25.pdf
While you might be correct looking at other markets, you would be surprised how average it is for Canadian Housing prices across Canada. It is impossible to not to earn a minimum of 20 % on any Real Estate transaction withing a year. It is very possible with a little luck to almost double your money on certain purchases in a very short time. I understand how difficult this is for people outside of Canada to understand but I'm not making shit up, it is reality and there is no limit to what the Gov will do to make sure it continues.
I'm pretty sure you can find well over 11.5 million peoples'-worth of regions to pile up into a counterexample for what the post was saying. I think the point is that "across canada" is a broad brush to use for this.
There is no reason to think he isn't talking about Toronto. Two years ago the average price in Toronto was around $800,000. The assertion was that they are increasing in price by $30-50,000 every 10 weeks for the last two years. That would be an increase of $330,000 over those two years. The actual increase, as of the latest figures[1], is only $245,000. And the latest figure shows up as an extreme outlier. One month earlier the two year growth would have only been around $160,000.
Housing is by definition in these circumstances a poor long term infrastructure investment.
The cities that have had less crushing affordability problems are the ones that have been able to continue expanding outward - the outskirts land that used to be empty now has housing (and got more valuable as a result of this development) and the inner areas (slowly) has been getting denser, especially as old industrial property gets redeveloped and such. But many of those cities have just as much zoning and restrictions around density as NY or SF (usually more!). The difference is that they were able to go outward to better keep up with demand increases. I don't think any US city has been able to address rapidly rising demand through upzoning and density alone - redevelopment of existing residential will always be much harder and slower than of empty perimeter land. Density, on the other hand, has seemed to ultimately cause demand increases in NYC and SF greater than the supply increases it has provided.
If population growth stops, though... all this changes. Or even if just the net migration to various cities shifts around!
Listening to people that have owned land you hear things like:
- A creek was at one edge of our property right outside of it, and the state required us to build a bridge, getting the license for the bridge was costly and time consuming
- The creek changed course and cut across our property, the federal government had new requirements that had costs and approvals necessary
- We lost money on the property, despite land being a finite resource and all the dreamers being perma-bulls on land ownership, there was no way we could turn this into an income generating property that would be profitable.
You really don't. Dirt lots coated in rusty chainlink, gang tags, weeds, and tents are traded hands all the time, even in Downtown Los Angeles, for top dollar. Maybe you hire a crew to weed wack once a month if that. Even land zoned for a single bedroom bungalow goes for a lot of bread, because one day in the future that zoning can change and there is always demand in a big city with a lot of jobs near a major harbor and airport for more units, and parcels in big cities are finite.
That's why there are big development companies. The advantages of scale apply here as much as anywhere. Lose money on one, make money on others to offset the risk. What you call a "simplistic fantasy" is a century-long phenomenon in the US at this point of increased population in major urban areas leading to rising land values and the conversion of empty fields into developed areas.
There's no guarantee that population growth will continue to increase demand, or even that demand in developed areas will stay high - there have been a lot of cycles in that time as well, with extreme examples like Detroit to balance out the SFs of the world - but that's a very different argument than "we need to increase development so that we make housing less of a good investment," which I'm claiming is a blatant contradiction when it comes to the value of the land that is being developed. A shitty house in NYC is worth more than a nice house in Austin not for the building, but for the value of the slice of land it sits on, because the area has been developed more which has resulted in more demand.
The point is that you have to be as discerning as a homeowner or even more, and this can limit the supply of decent land to own or highlight how impractical it is or how it isnt a solution to anything
Even the other sister replies shifted the goal post, this is a thread about housing supply and people talk about squatting on land in urban environments as a rebuttal to just owning land in the vast expanse of space available, which further reduces the possibility of alleviating the housing supply
A portion of a constructed apartment building on your lot may be more valuable than your current house is there, but...
A) There's no guarantee that the value of your land to the apartment developer exceeds the value of your current use... after all, they have to pay to demolish and then improve it, and...
B) You and your neighbors may have put down roots, that have a substantial value, if difficult to directly economically measure.
C) Moving, itself, has substantial economic costs.
D) If an apartment building built next-door decreases the value of your single family home by 20%... there's no guarantee that there's demand or the possibility to build another one on your lot... and even if there is, the apartment-builder's estimate of your land value will be 20% less. You'll meet in the middle between (0.8 x your previous home value) and (the apartment-builder's estimate of the value of your land to him before improvement).
For (D), though, I think this is generally overblown. There are no guarantees, and situations vary, of course, but trend-wise, I don't believe "partial" in-transition up-zoning has been a value-killer overall. In parts of the US that are densifying, these sorts of things are generally radiate outward from high-demand areas. But the single family homes in the high-demand city core areas still have more value than the ones further away, and if you look at the appraisal reports, it's because of the land value, not the structure. In the long run, that development cycle creates the demand that pushes up your own land value even if yesterday vs today, it was more attractive in isolation as a single family home next to another single family home. "Location, location, location" is a cliche but a valid one.
As long as your location stays in demand - and in our current city planning paradigm that's not been something that's been threatened before potential post-COVID reorganization - you're more likely to hit a virtuous cycle for property value here than a vicious one. The types of developments/apartments that are gonna be put up are gonna be determined in part by how much it cost to get the land, so if it was already valuable land, building a slum next door won't make any sense to the developer.
So unless land is generating revenue to offsets the ongoing costs like taxes and operating/maintenance costs, it's a loser, operationally speaking: it has a negative cash flow.
If the asset doesn't generate revenue, it has to go up in value to offset costs, as well as to account for inflation, in order to just break even for its owner.
Land is a great cash cow for the state. People are permitted to "own" a parcel of land, but they are really just renting it from the state. Secondary, it's great for landlords.
People have to live somewhere, so if they don't pay for their own maintenance costs and state rent, they have to pay some landlord. Thus they mentally discount those things in order to justify the buying of land. When their property goes up a little bit, they think only of the difference between the new value and original principal, forgetting to looking at how much they sunk into the property, because all that time they had to live somewhere, and they take it for granted that you always have to pay people and cover costs in order to live somewhere.
The only owners who unconditionally profit from landlords. If you own just one property that you live in, that's good for you only in a climate in which properties are appreciating. If you own multiple residential or commercial properties that generate rent, then you're laughing to the bank; you generally don't have to care about whether they go up, or not nearly as much. You are more affected by vacancies, during which you have to cover maintenance, taxes and other costs like mortgage, without any revenue. That's particularly true about commercial properties in a recession.
The same issue persists irrespective of supposed NIMBYISM.
The primary, most obvious driver is historically low interest rates. How much we can attribute to that is hard to say but it's #1 for sure.
During the 2008 crises, the Fed took toxic housing loans off their books, which 'saved the banks' but it also 'saved millions' from foreclosure i.e. creating a moral dilemma there as well and signalling the Fed won't let home prices crash.
I don't think the problem is low interest writ large, but specifically attempts to prop up the homeownership market with debt.
There's a reason that post-2008 private lenders have basically backed out of the mortgage market and let Fannie Mae & Mac hold the bag, even in the context of so much more money chasing yields.
Demand does.
The notion is ridiculous - housing is extremely affordable in the US.
There absolutely is no affordability crisis.
There is merely 'a lot of people who want to live in SF and NYC'.
You don't have a right to move to a place and demand they tear down their homes so you can jam yourself in with others in a flat.
What is causing prices to increase is either:
a) more people b) interest rates or c) higher wages.
a - isn't happening rapidly (though partly) c - isn't really happening it's b, consistently over time causing greater and greater leverage.
Even with a very generous look at the general price index for homes, it is going up at a much higher rate than inflation. There's a reason that younger generations are buying homes at a much lower rate. The idea that there is no affordability issue just isn't rooted in reality.
> You don't have a right to move to a place and demand they tear down their homes so you can jam yourself in with others in a flat.
I'm not demanding that anyone tear down their homes. I think that if someone voluntarily sells their property to someone new, and that new person wishes to build a new construction on that property, they should be able to. It is a very new historical phenomenon that doing so (voluntarily building on your own land, not demanding that others tear down their homes) is difficult in major urban areas - that has not historically been the case.
It's pretty ridiculous to demand that people who "got there first" get to demand restrictions on how the "newcomers" get to use their legally acquired property.
Now go try and get that to happen in San Francisco in less than a decade.
This doesn't align with the last 20 years of housing prices, which have dramatically risen/fallen/risen while the interest rate has barely budged.
As interest rates stay low - the amount of leverage in housing increases, which creates more volatility.
The economic crises is obviously the primary forcing function during the crises and subsequent recovery. This will cause pressure one way, and then the other.
The amplitude of the swing is a function of the fact interest rates are so low, and leverage is so high.
They have been really low for a long time relative to the return on other assets, ergo, the leverage maintains and increases.
Obviously this is amplified by other aspects of easy monetary policy.
Put inversely: if rates were up 3 or 4 points, I don't think we'd see this kind of bubble in housing, not remotely.
We are living in weird credit bubble, and thanks to COVID it may never let up - i.e. this could be 'the new normal'. It's like Earth's gravity has shifted for good and we're all having to adjust to a new reality. Part of that new reality is crazy home prices.
2000 interest rate - ~8.5%
2020 interest rate - ~2.8%
By December rates were under 4%, setting the stage for all the years that followed.
ref: http://mortgage-x.com/general/national_monthly_average.asp?y...
Is that not when housing prices started continuously increasing?
There are some nuances that supersede this point but I've run out of steam and lost the thread I was following.
Of course since demand outpaced supply the added funding just caused even more inflation. (Sure, it caused some new entrants to the housing market, but since the place where people want to live is still constrained due to zoning and NIMBYism, the prices literally skyrocketed in those areas.)
That is literally the cause.
NIMBYISM cannot be a 'cause' of anything - there is always more demand than supply in SF and in many places (also - people have a right to manage their own communities as they see fit.)
If a million people try move to a village, the price of the houses goes up - the cause is 'zoning'? Or is the 'cause' the the people trying to move into the village? (Propped up with huge leverage due to ever decreasing interest rates?)
Since 1938 US government is backing housing via guaranteed mortgages. These are "money supply-side" policies that boost demand.
I'm saying that just like with healthcare and higher education, since supply is fairly limited dumping more money into those markets just raises the price.
> there is always more demand than supply in SF and in many places
That doesn't mean much. The equilibrium point is what matters. If there were more supply prices would be a lot lower. Of course desirable lots/houses/apartments will be priced higher. The problem is that house prices are going up too much, the barrier to entry (to join the community) is going up, also rents are going up (the price to stay part of the community is going up).
Plus, it's not like the demand is infinite. Let's say 10 million people want to move to SF. That's a very finite number.
And I'm not saying sure, let's build HongKong2.0.
> (also - people have a right to manage their own communities as they see fit.)
I agree with the spirit of self-determination, but alas I'm not well versed enough in the ethical problems with determining which group's interest have primacy when groups' interests overlap. After all if someone commutes every day to SF they are just as part of the community, and they might like to move closer. They want density. But this obviously quickly leads to the tragedy of the anti-commons. Everybody in that "SF community" has a vested interest in living in a nice and healthy city, but they would have to agree on how to manage housing. Usually nobody wants to voluntarily give up their advantageous spot. Nobody wants a big construction and high-rise as their neighbor. The common resource (land) gets under utilized. (NIMBYism. Plus gentrification as people who want money sell their houses to exploit this situation, which then pushes up prices of local services, which puts even more people into financial peril, who then increasingly feel that selling their property and moving is their only option.)
(You might have read this recent story about newcomers and old timers in Austin: https://news.ycombinator.com/item?id=26567350 )
> If a million people try move to a village
That sounds like a disaster or a gold-rush. What's the fair way to manage this? A quota system? First-come first-serve? The current system is rich people only.
Yes you are.
If they removed controls and zoning, SF would go radically vertical, and over 30-50 years, it would be NYC/Hong Kong like.
There is no 'ethical' problem here - there is plenty of land, people can move towards Sac. and other places. Those other places could feasibly chose to build taller builddings and more density as well.
Far away plentiful land is irrelevant. People want to be close to where people want to be. Close to work and amenities. Close to SF proper.
> There is no 'ethical' problem here
Oh, ok. Great. Then maybe I'll just copy-paste my previous comment here to kind of try to indicate my disagreement? :D
The cost to take 4 single family lots and build a 12 story building to fit maybe 100 units.
The actual per unit construction cost is like $100k ($10M for the building), but that is because they are all custom.
Mass producing housing would easily drop prices 50%.
Let's say these 4 lots with houses on them are worth $1M each.
In the mass produced housing model, the price per unit including land is $140k.
This is ballpark a 10x difference. Why is the spread so high? It's not interest rates.
(FYI the cost of the building it not hugely relevant, it's the land.)
Imagine that you can afford some kind of monthly payment for your mortgage - as interest rates go down, the larger the loan you can afford i.e. 'leverage'.
The longer people believe that interest rates will 'stay low', the more confidence they have in taking large loans. The longer the process goes on for, the longer people believe we are in a 'new normal' and feel confident in their purchases.
Ironically, the big swings in prices in real estate are a function of leverage (i.e. low interest rates): if an economic crash hits, fear causes a crash and then upswing commensurate with the leverage in the system.
NIMBYISM does not cause an increase in demand. Only 'more potential buyers' with 'more income' and 'more leverage' can do that. Since cities are not rapidly expanding in size with NIMBYISM, and wages are not radically increasing, it's likely a function of continuing high leverage.
I don’t disagree with what you say. But affordability can only be solved by increasing supply. Everything else is just shuffling the deck.
But it is true that politicians don't like increasing property taxes and other policies that could draw down the housing market.
Overcoming the psychology of that is politically hard.
To be a "good investment" owning housing doesn't have to have a better ROI than the S&P 500, bonds or the interest in a savings account. It just has to burn money more slowly than renting which is the alternative you'd be forced to spend that money on. That's a really low bar. One's primary residence can both be a good investment and affordable.
With that said, there seem to be pretty significant stability and psychological gains to owning a house that may outweigh financial considerations of this kind. That is doubly true if the investment + renting option is within the same ballpark as the ownership option.
Say your home is $100,000(i know, i know lol). Your 20% down payment is $20,000.
You have to factor in the interest that $20,000 would generate in say index funds or whatever you would do with it, when comparing buying to renting--along with all of the other stuff people usually factor like taxes & upkeep.
In some areas this can make renting actually the cheaper option.
Unless you have enough cash to pay for a house, you are either renting money or renting a place to live.
You also need to take into account the opportunity cost of owning land. You can rent and invest the difference in other assets like stocks.
If an asset class has much lower risk-adjusted returns than easily available alternative asset classes, I think it is fair to call it a poor investment.
In the same way that a house is often the majority of the network of Americans, a job is often the majority of the income. This fact does not cause most of them to advocate for enforcing immigration laws, even though this choice reduces payrates for all Americans.
Perhaps most important is to understand that zoning and open ended environmental review has added huge costs and risks to building and has effectively slowed construction. This is the primary reason that there are not enough units and most other problems we see emerge from this. There are important other factors such as the financialization of housing creating a situation where demand is essentially infinite and relates only to investors and not to families or income from labor.
As far as affordable housing goes, the majority of affordable housing is in older buildings. As buildings mature they tend to get paid off and reach a point where operating costs remain low until the structure needs to be rebuilt or replaced. This may be awkward to model, but realistic observation of markets shows that affordability is something that more or less inevitably happens to a property unless it gets removed or rebuilt relatively early in its lifetime because of a hot market.
Property values are traditionally supported by incomes. The current environment where property values grow well beyond incomes has little precedent and there is little reason to think this situation is stable. When people in the past talked about their property not losing value what they meant that there would be both income opportunities and reason to live in the area. When opportunities dried up or communities became undesirable then the housing values would crash. That is entirely different from expecting housing values should increase beyond incomes or inflation.
The average 30-year mortgage rate in 2020 was 3.11%. The same $2500/month payment with 20% down buys a $730,892 house.
Ignoring down payments (which differ greatly between the two examples) and other expenses like property taxes, the 2020 mortgage rate allows someone to buy 172% as much house as they could in 2000. This doesn't translate perfectly to rental prices, but property affordability via low mortgage rates is heavily correlated with increasing rent prices.
Not a perfect comparison, but it shows how much mortgage rates are driving the housing price boom. Scary to think what's going to happen when (if?) rates start going back up.
Source for historic numbers: http://www.freddiemac.com/pmms/pmms30.html
It’s not a perfect relationship between the two—affordability does fluctuate, and the movements have a lot of latency between them—but on a societal scale the relationship holds.
You'd think so until you factored in vastly higher insurance costs - between 2000 and now.
source: five years of insurance increases more than doubled our 2000's monthly home payment
For those who bought when rates were high and sticker prices were low, declining rates brought higher valuations. Additionally, the ability to refinance at lower rates meant that monthly payments were able to decrease along with total interest paid out on the loan.
For those who bought now (me!) at high sticker prices and low interest rates, the mechanics don’t work in our favor. Interest rates are only likely to go up, which doesn’t allow refinancing at a cheaper rate. At the same time, (inflation-adjusted) sticker prices will go down.
So while renting gotten ridiculously more expensive, home ownership also looks like an increasingly worse deal.
Home ownership is still probably a decent deal overall (I bought two years ago). But home ownership was an incredible deal for boomers who have been able to refinance at progressively lower rates while seeing a disproportionate rise in home value.
Millennials now are stuck buying those homes with highly-inflated prices with not nearly as rosy a probable future. While it's certainly possible that housing prices continue to rise drastically, my own read of the available information shows that this was chiefly a side-effect of declining interest rates, which frankly can't get that much lower.
The reason this rate cannot be negative is that demand will immediately fill it up and use it for arbitrage (shove the money under a mattress and pay back the loan later) before it can become negative.
Who cares about inflation adjusted price when you have a mortgage ? Your rate will be X for Y years, as long as your income keeps up with inflation you'll get a net discount. Buying a property with loans is a good way of betting on inflation - I don't know if it will happen but if it does you'll win.
Worst case scenario is recession, you have reduced income and housing prices plummet - I don't see this playing out, running low interest rates to high inflation seems likely to me.
And the standard case scenario is rising interest rates, where your highly-leveraged asset drastically underperforms the market (and may even produce negative real returns, if it doesn't keep up with inflation).
I don't see realestate underperforming inflation without some massive changes either.
And in case of rising interest rates, the first thing I expect to pop is overvalued stocks and money parking commodities.
Low interest rates and high perceived inflation causes people to take on increasingly higher amounts of debt. In some cases, it makes sense to borrow at 3-8% interest if you expect an ROI of 12-20% and you set aside 1/3rd of your gross return for taxes.
However this system has some positive effects. If you go out and build 3 homes and people buy them, you’ve effectively created 3 homes worth of wealth.
This ignores the fact that, in some countries at least (e.g. Denmark), you reduce your debt if you refinance at a higher interest rate.
For example, if you financed your house with a $200,000 2% fixed-rate 30 year Realkredit loan, and the rate of interest increases to 4%, then you can refinance you existing mortgage at 4% but now you only owe $100,000.
This is how bonds work in general: a doubling of the rate of interest halves the bond price, and a halving of the rate of interest doubles the bond price.
You got in at low interest rates. Why would you have to refinance? Why is not being able to refinance an issue?
Except what's happening I live is that now the $423,870 house costs $730,829. As well, for someone who doesn't already have a house, the down payment isn't something you can just handwave away.
In nominal dollars this is correct, but the $423,870 2020-dollars is equivalent to $660,449 2021-dollars, or only 11% more house in "real" terms, not 72%.[1]
>>[...] it shows how much mortgage rates are driving the housing price boom
I think the dual combination of mortgage rates and inflation-adjusted real value caused the increase in nominal housing prices.
>>Scary to think what's going to happen when (if?) rates start going back up.
Given that lower mortgage rates were essential to keep affordability barely within reach, we are in complete agreement here that higher rates will be really ugly, even if they might be necessary/inevitable.
The funny thing is, all the rich people living in these cities would never be able to survive without all the poor people commuting into the city to support them. The more expensive the city gets, the longer those commutes get. It's a horribly regressive system because now the poor people are spending multiple hours a day commuting, which is a huge opportunity cost of time that they could have spent advancing their social mobility.
At some point something has to give. You can't just keep filling cities with rich people if nobody is there to keep them running.
Rental prices are to the point where even apartments are out of range for the average person who lives here. If you rent they want your income to be 3x your rent price. So currently if you are a single individual looking to rent that means you need to earn ~$36k/year to be eligible (also, a clean criminal and financial record as well). Issue is the minimum wage is $7.25/hr still...and if you work foodservice they can pay you ~$3.50/hr because your tips offset it.
We have a steady influx of people buying houses at over the already inflated asking cost because it "seems cheap" to them compared to where they live. What they do not realize is that if they lose their remote job (or if their pay is scaled to the region) they will have little/no chance of finding employment locally which will pay the amount they need to simply "live".
About 4 years ago University of Idaho released a study saying that 22% of the people living in this town cannot afford to do so...I wonder what that rate is now. I am starting so see more and more people sleeping in cars parked near the recreational areas and parking lots. Tons of multi family houses. Things are going to get bad really soon.
I can't speak for every area of the country...but in our case I suspect a large part of this is the waves of real estate investors who came through in the last couple years to buy up homes and are leaving them vacant (or vacation rentals). It seems like inventory is being artificially limited. To the people investing it is a win-win...either the house is vacant and you make a ton of money...or it gets rented as an airbnb for $3k/mo and they make even more. I suspect if they were to impose a 2x property tax on any property vacant for more than 6mos or vacation rentals it would very quickly effect the issues we are facing...but being as this town was structured by the tourism/real estate industry I do not see much hope.
https://cdapress.com/news/2021/feb/22/housing-market-heats-n...
The housing pinch has already hit Twin Falls if you can believe that. One would have to move all the way to Idaho falls to know what it was like in the Boise area 10 years ago.
I wonder how many people would move to Coeur d'Alene if they would have made the lake a superfund site...like they did the Silver Valley which drains into it. The whole bottom of the lake is heavy metal contaminated...but they don't show you that in the real estate ads. :)
I make a lot of money as a software engineer and I don't think I'll get a home until I'm 45.
So yeah.
More generally, I'd encourage you to question the mental model that made this sound like a potentially true claim in the first case. An economy where most people are paid minimum wage would be incredibly different than the one we actually have.
It is kind of fascinating that people have such wildly different ideas about what the objective facts are, and how that must flow downstream into their worldviews and politics. Between 51.6% and 2.3% is not a small difference! Those are very different worlds we could be living in!
[0] https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm#....
Here is a recent BLS study called "Characteristics of minimum wage workers" https://www.bls.gov/opub/reports/minimum-wage/2019/home.htm
"In 2019, 82.3 million workers age 16 and older in the United States were paid at hourly rates, representing 58.1 percent of all wage and salary workers. Among those paid by the hour, 392,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.2 million had wages below the federal minimum. Together, these 1.6 million workers with wages at or below the federal minimum made up 1.9 percent of all hourly paid workers."
So I'd guess closer to 10% of people make the minimum wage in their jurisdiction (1.9% x 4 + I assume more people make min wage when it's higher)
Very interesting though that 3x as many people make below the min wage as actually earn the "minimum" wage.
There is a large portion of the population in jobs like nursing, banking, tourism or real estate but they are not the ones who are doing the jobs we are talking about.
Who is going to serve/cook the food? Where will they live?
Teachers make $29-49k in my area. Nurses $39-68k. (based on glassdoor).
Average hourly rate is $17.39 (payscale.com)
If you work 2000hrs/year your pre tax income is ~$35k. Right now there are 1bd apartments going for $1100/mo (albeit brand new with amenities such as pool/weight room).
So if you are lucky enough to make the "average" pay in the area that means you can get a 1bd apt...assuming you qualify. A very low end house you need to make $75k/year to purchase...again assuming you qualify.
I think in many parts of western Europe average earners can’t even afford a 1bd apt.
Extreme inequality combined with familial support. It's not uncommon now to have one or more kids living with the parents into their 20s while they go to college and build up their career, right as the homemaker enters the workforce with limited professional experience so you get 2+ minimum wage earners and one established professional bringing in support. Throw in the gig economy, which hoists capital and operational risk onto the employees (sorry, "contractors"), and you've got a majority of the working population making minimum wage.
It's even worse in university towns, where the college kids are almost guaranteed to be working for minimum wage while receiving external funding from loans or parents which can skew the numbers even more.
But it is a right to work state. I suspect that is part of the issue. There is very much a "Good ol' boys club" in town which has a tendency to employ people due to favors or connections (regardless of qualifications).
Even in the 90s when we had Agilent, Itron, and several other large companies in Spokane the area directly across state line was significantly cheaper to operate in. So we ended up with a few electronics contract manufacturers who got their start being basically sweatshops (yes...solderers get started out at minimum wage or barely above it).
I know a person who in the 90s was making $50/hr as an EE...last I heard he was making $25/hr to do the same job now. (When Agilent shut down it flooded the local market with engineers and techs).
edit: Adding this link for more data. Look at the percentage of renters below poverty level http://www.city-data.com/poverty/poverty-Coeur-d-Alene-Idaho...
This is why San Francisco doesn't work anymore and isn't equitable until the electorate decides to build new housing. We shouldn't downplay a move to cities like Austin, Charlotte, and Atlanta that have no qualms with building lots of housing and affordable housing.
Why have a non-trivial percent of funding go to rent seekers, anyway?
SF's infrastructure doesn't seem that it can handle more people. traffic is bad. Restaurants are full (have you been to a brunch?). Buses are full. More homeless than ever.
Letting the price rise, so people/companies will go elsewhere seems like an okay strategy.
Well, it's pretty clear from the explosion in housing prices that it's not growing nearly fast enough. I'd love to see some citation as to what "too fast" is and why you think SF is at risk of hitting that number.
> SF's infrastructure doesn't seem that it can handle more people. traffic is bad. Restaurants are full (have you been to a brunch?). Buses are full. More homeless than ever.
More housing = more people = more revenue. That revenue turns into more infrastructure, more restaurants, etc. In fact more density makes infrastructure more economical to operate on a per capita basis. Think Hong Kong.
Part of the reason there's more homeless people is they can't afford houses, which building units would help alleviate.
> Letting the price rise, so people/companies will go elsewhere seems like an okay strategy.
That's not a very free-market attitude!
The cost of upgrading infrastructure in a busy city is enormously expensive. San Francisco is on a peninsula with no room at all to expand outward. The only solution is to build up and that’s a real problem in an area prone to earthquakes.
Plus there are a lot of people that like the character of their neighbourhood and don’t want to live in an apartment building. It isn’t their fault that SF became the global tech capital.
So having more people to split that cost with would help! To be clear Hong Kong island is far harder to build on.
> Plus there are a lot of people that like the character of their neighbourhood and don’t want to live in an apartment building. It isn’t their fault that SF became the global tech capital.
They’re also not entitled to that. In a democracy the many decide.
Actually, yes they are. San Francisco is a participatory democracy. Between a large # of ballots voted for each November, we elect our board of supervisors and attend supervisor meetings to tell them how to vote.
If people don't vote, well, that's their fault.
I say that as someone who owns property in San Francisco.
In a democracy the people who inhabit a place decide. Not the people who want to inhabit it. That's not democracy, it's colonialism.
Colonialism: the policy or practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically.
We did decide, and continue to do so in supervisor meetings and in the ballot box. You might want to read up on federalism.
People always ignore this fact. Infrastructure isn’t free. When all is said and done the Central Subway extension will likely have cost over $2bn for 1.7 miles of subway. [1] The new transit center cost $2.2bn [2]. Rebuilding 1/2 of the bay bridge cost $6.5bn. [3]
Consider that money for all of this is artificially restricted by Prop 13, and by California being a net-giver state, paying about $40bn per year more to the fed than we receive back, effectively being a piggy bank for poorer states.
> Plus there are a lot of people that like the character of their neighbourhood and don’t want to live in an apartment building.
Many commenters with a lot of hatred for San Francisco’s unique brand of dirext democracy are sadly OK with overruling the expressed will of the people not to turn our home into New York just so some tech billionaires can sell more banner ads.
1. https://en.wikipedia.org/wiki/Central_Subway
2. https://en.wikipedia.org/wiki/Transbay_Transit_Center
3. https://en.wikipedia.org/wiki/Eastern_span_replacement_of_th...
> Many commenters with a lot of hatred for San Francisco’s unique brand of dirext democracy are sadly OK with overruling the expressed will of the people not to turn our home into New York just so some tech billionaires can sell more banner ads.
Who's our? Generally voters tend to be older, wealthier and landowners. The large pile of younger, less wealthy, more transient renters isn't represented well. I don't think the outcome means the system works.
Citation?
> Who's our? Generally voters tend to be older, wealthier and landowners. The large pile of younger, less wealthy, more transient renters isn't represented well. I don't think the outcome means the system works.
That’s how democracy works. If you don’t vote, you don’t have a voice.
All costs below are in $USD nominal per mile of fully-underground subway system.
NYC subway extension, east side: $3.7B per mile.
SF Central subway: $928M per mile.
Tokyo: $400M
Beijing: $240M
Berlin: $327M
Naples: $194M
Milan: $175M
This is backed up by a Citylab analysis:
Alon Levy at Citylab shows approximate range of underground rail construction costs in continental Europe and Japan is between $100 million per mile and $1 billion. Most subway lines cluster in the range of $200 million to $500 million per mile.
The US has a range of subway construction costs of $600 million to $2.6 billion per mile. The US median price cluster is $800 million to $1 billion per mile.
> That’s how democracy works. If you don’t vote, you don’t have a voice.
Indeed.
[1] https://www.marketplace.org/2019/04/11/subways-us-expensive-...
[2] https://www.nextbigfuture.com/2018/01/subways-and-light-rail...
[3] https://www.bloomberg.com/news/articles/2018-01-26/the-u-s-g...
[4] https://pedestrianobservations.com/2011/08/22/construction-c...
[5] https://public.tableau.com/profile/romic2976#!/vizhome/EnoTr...
In an optimistic world, sure.
It can also be that you build a bunch of building. Then, there's an economic downturn, and SF is fucked and left with abandoned buildings.
There are cities that fell into this trap.
I'm not saying it will happen, but it can happen.
Growing slowly is a good way not to push yourself into that corner.
How slow? I dunno. I hope there's an expert that can evaluate it.
Maybe SF could credibly commit to adding more density in the near future, but not immediately? That way speculators open brunch places before the customers arise, and there isn't a brunch shortage?
Homeless is a tough one. I'd say that reduced housing prices would help, but I think that will just reduce the rate of new homeless. I personally thing that we need to aggressively force them to seek help or get out of the most expensive city in the world. Saving up enough to find a place in SF in near impossible, and hacks like homeless shelters are often full of crime and reduce the housing supply for low income families.
We already fucked up the housing market with prop 13 throwing off the supply, we need to build a huge supply to counter that (unfortunately repealing prop 13 remains the 3rd rail in CA politics).
Those other 3 cities have significantly more capacity both to build up and out. Blame the electorate all you want but geography is geography.
Rich people will just have people they need to keep things running live on their own now-very-large properties; and arrangements where your workplace also provides your housing might start to gain traction.
All of these ideas to make workers more dependent on their benevolent overlords is basically creating a subservient population.
If company X is offering you a job, and you really need a job, and it's not enough to pay market rent, but X has company dorms available and it will be paid via a line item off of your paycheck, you might take it.
Anyone who needs this type of arrangement is likely going to get a refund at the end of the year anyway and doesn't care about the tax implications.
Amazon could start doing something like this to have labor for its warehouses if the housing market keeps pricing everyone out, for example. Maybe also office maintenance, food prep/delivery, etc. Didn't Foxconn house its workers at one point?
These could be the housing projects of the future if done at a big enough corporate scale. Would they decay into crime-ridden slums or would corporate housing police keep things in order, but in a dystopian manner?
1) I kind of despise the housing market, but you do at least earn equity instead of throwing money away to a landlord.
2) If the company owns the place, your rent goes right back to your employer, making them an even stronger entity.
3) If you are at risk of losing your house by pissing off your boss, it means you'll usually adapt your behavior in a variety of ways dramatic and subtle to fit in.
4) Switching employers means you definitely need to move instead of just probably.
5) It's just a weird vibe when you live in a hive that isn't yours and is owned by the same entity that controls everything else in your life even if they were benevolent. They're daddy and you're baby, except they have little interest in you beyond pure self-interest.
Comparing that scenario to serfdom is amusing. If the property is sold, you could say that the people "come with", though they needn't get permission from their Lord to travel or move (barring any legal contracts like leases).
San Francisco publishes its Housing Development Pipeline here https://sfplanning.org/project/pipeline-report#current-dashb...
They may not be adding capacity at a sufficient rate, but they have tens of thousands of units in the pipeline in every quarter.
[1] https://economics21.org/bay-area-the-land-of-many-jobs-and-t...
[2] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage
I don’t understand why so many HN commenters seem to think it could magically become a dense metropolis like Manhattan or Chicago.
Even in the Gold Rush in the 1800s SF was unscalable the rent was unaffordable. It was always a high crime city. Just read about the history of the barbary coast.
Everybody who comes here purely for money wants this city to be something it just isn’t.
It’s 2021 and Covid-19 has shown that remote work is viable.
Back in the day large tech companies like Sun, Peoplesoft and Cisco built offices all over the bay so that people had the option to work at facilities close to their home.
SF wasn’t even a significant tech destination before 2007.
My wife and I are actually moving to Barcelona when Covid is over, under the Non-Lucrative residency permit. If you think San Franciscans have a Nimby attitude and hate outsiders then you should go visit Barcelona.
“Unremarkabe single family housing”. So what, you want to take peoples’ housing via eminent domain and build more of the hideously dugly condo boxes they’ve stuffed all over SOMA and the Missiom?
I happen to love my unremarkable home in the Sunset in which my family has lived for 55 years.
It’s quite rude to refer to housing for people as “droid housing.” What makes you any better than them?
“Droid housing” is san francisco slang for the soulless eyesore boxes containing cramped, slapshodnfaux “lofts”, usually painted a bluish slate grey or salmon pink on the outside, entirely devoid of character or quality.
Thankfully San Francisco’s direct democracy works well to keep this city small. There are many soulless sprawling cities which are seismically stable, devoid of character, flat and inhabited by people who don’t care enough to resist.
You seriously think San Francisco would be livable at 51,000 pe m^2? It would literally cost $500bn in infrastructure investment to make that possible just inside the city.
101 and 280 would need to be 15 lames wide each, bulldozing 1/8 of the peninsula. We would need a half a dozen new transbay bridges and tunnels.
SFO would probably need another couple of runways and terminals.
You’re talking trillions of dollars in investment because tech companies prefer open office spaces to Zoom.
Why would we need more freeways if amenities are local? In fact, we could probably demolish freeways if more people who worked in San Francisco could afford to live here.
People don’t disappear if you don’t have housing for them. Why is building infrastructure in Phoenix preferable to growing it here? There are returns to scale with all of this. OAK is underutilized as an airport as well.
Have you considered that San Francisco is a pleasant place to live, and people want to live here independently of their employment situation? Prices were high before technology employment.
I agree with your point, but you will often find the plight of the poor is.. low on the priority list. It should be higher based on the average presence of guillotines on various message boards I frequent, but I assume the well-off have some sort of survival plan.
In the U.S.A if you took EVERYTHING from all of the billionaires, there are ~700 of them you would net under $5T in total [1]. The existing debt of the USA today stands at a hair under $28T [2]. The estimated budget deficit for the next 10 years is $1.2T a year [1]! You do realize you can lop off all the heads you want, take all the money you want, and you will not have solved anything! You would still be a debt slave :( Raising taxes by itself will not solve anything you ALSO need to decrease spending, but no one wants to hear about fiscal responsibility.
The heads that need to go are those of corrupt politicians.
[1] https://inequality.org/great-divide/updates-billionaire-pand... [2] https://www.pgpf.org/national-debt-clock
edit: Come to think of it. You cannot ignore it precisely, because it is not rational. Rational people you can bargain with.
Demographics-wise, I assume people younger than me, but I may be oversimplifying it. In practical sense, the more you earn, the less likely you are to support tax increase on yourself so maybe it is more tied to socio-economic status. Sadly, I have no data to back this up.
The goal of threatening to kill someone isn't to murder them for the sake of murder, it's to negotiate with them from the fairly sensible starting point of "give me what you want or I'll kill you". If what they want is "fair wages and a decent life," that seems reasonable enough.
The solution is to remove control from local groups. That also would address a huge part of the many committees you need approval from to build something which is another massive driver of costs and deterrent to build especially cheaper units.
I think the other thing that's not talked about enough is that building more housing has benefits for incumbents. If more housing is built in my neighborhood, my neighborhood will support more local businesses and other amenities which I can enjoy. It also means there are more social connections available. Additionally, population growth drives economic growth, which ensures that their locality remains vibrant. The ideology where we view more humans as strictly a cost, and never a benefit drives a lot of problems in our society IMO.
- Great Britain, to the colonies
You'd better have a really, really darn good reason for throwing out democracy. Otherwise this is basically calling for taking away what someone else has just because we want it.
I've lived in SF for over 15 years -- this is obviously false. You could argue "not enough" units, but if you haven't seen new construction of multiple large buildings in multiple neighborhoods (Hayes Valley, Mission, SOMA, Market st., Potrero Hill, Mission Bay), then you haven't been in SF.
Literally walking around on the street, you can see thousands of new units. There was a pretty big uptick sometime around 2014 or 2016 as well. That said, prices are still the about highest in in the nation from what I can see.
The past 20 years is the lowest population growth the metro area has ever experienced. What it has experienced is growth in the wealth of the wealthiest part of that population, along with increased demand for office space, which competes for housing as a possible use of land.
The actual fast growing metro areas of the past several decades, i.e. San Antonio, DFW, Phoenix, Las Vegas, have also seen tremendous booms in housing construction.
The homelessness problem in San Francisco is not new, either. You can read about the history here: https://www.kqed.org/news/11765010/timeline-the-frustrating-...
It stands out to me in particular that the number of homeless people is about the same as it was in the 80s, but the public complaints being received have skyrocketed. What seems to have actually increased is the number of people either living or working in the city who aren't used to seeing homeless everywhere, presumably people from elsewhere displacing native San Franciscans. But both the absolute number of people in the city and the absolute number of homeless people in the city are not growing at any abnormal rate.
>Even with the leverage that comes from getting all the value increases for only a fraction of the initial cost, it is a pretty rare market where the average homeowner will be better off by raising home values.
>Frankly the only time this sort of argument makes any sense is if people are planning on moving to far less expensive areas (e.g. retiring to the country) or if they plan to never purchase a home again.
https://marginalrevolution.com/marginalrevolution/2021/03/ho...
Moreover, that assumes that the restrictions you put in place will impact everywhere that people want to move. It seems to me like it's more of a commons problem - people want to add restrictive zoning where they currently live because it benefits their net worth but they are harmed when others do it in places they might want to move.
In your same example:
I have $10k, and buy that $100k house with a $90k mortgage. For simplicity let's forget mortgage repayments
After 10 years I sell for $163000, leaving me $73k for my next down payment
I can now "afford" a $700000 house assuming banks are willing to lend 90% LTV
> It's not for no reason that it's prohibited in Islam, Christianity, and Judaism.
And it isn't (in most Christianity, and I think at least some Judaism). That's all.
Suppose it doesn't. It's been years since we able to count on decades of unbroken, steady home value inflation.
It’s weird how so many things seem to be geared to help people who don’t need the most help (although I appreciate it). Locking in a mortgage and not having to move is one of the best things to square up a financial situation.
Especially hard on friends who rented for 20 years who have been saving to buy but hurt by increasing rents over and over.
If you are doing rent to buy but living in frothy areas where rents are always rising and apartments rent for 4k then obviously it's not going to be a winning strategy for you.
IKR? What is it with leaving reality out of these equations?
The world-record sprawl (and commute times) of Houston are how the housing prices have historically been kept in check.
As someone who is actively working to find a home in this market, I can say for certain that these measures are no longer sufficient. Houston has a few unique hedges to the scalability problem, but it won't hold up to larger forces such as mass migration from other states.
Prices in the Houston market are still not within a range that would concern a Google employee, but for everyone who lives in the state and is receiving Texas-style wages, these prices might as well be as unattainable as housing in Manhattan or Silicon Valley.
Yes if you wait for others to gentrify a neighborhood you'll pay the price. The third option is to take a risk and be an early adopter in an inner city neighborhood. Midtown used to be shotgun shacks that dated back to late 1800s. Now it's a sea of condominiums. East of Downtown (aka EaDo) was post-wwii starter homes and industrial, it too is now townhomes and condos. Third Ward (my neighborhood) was a mix of rental property and retirees and now has high and medium density housing mixed with condos and townhomes which are slowly pressing East towards TSU and U of H. The same happened to Moody Park area and Acres Homes is next.
I'm not quite sure what you mean: Houston's city limits span 667 square miles! That's not a very small portion in the urban center. It's true that there are a few pocket cities embedded in the city that may have different zoning laws: Piney Point, Bellaire and West University, but Houston relentlessly grew through annexation until it was slowed by lawsuits. It still continues to grow though annexations... see [1]
https://www.houstontx.gov/planning/Annexation/docs_pdfs/Hous...
I also disagree about home prices being unattainable; I think implicit in your statement are assumptions about schools, neighborhood walkability and the like. There are plenty of places that aren't yet ideal but are far cheaper. In my zip code there are plenty of listings for houses and lots in the $100k range but at the top of the market there's a mansion for $2.1 million. Best of luck in your search for something with your criteria.
I would be interested in knowing this zip code.
1. While it's important to have private investment in property because this literally creates the housing units people rent, there's simply too much speculation here. I like the Swiss model that is way more restrictive of who can invest (as in, someone can't come in and buy up all the land in Switzerland) and punishing to short term speculation;
2. Foreign "investment". Investment here is a euphemism. "Money laundering" is probably closer to the truth. Example: every US tax resident is required to declare all foreign assets (including being a signatory in a foreign company or trust) but... real estate is specifically excluded. Why? It's well known that in places like London, property is used to hide and park money by, for example, Russian oligarchs;
3. Property owners who are non-residents where they own property should be taxed at a much higher rate. Places are simply way better off if the people who live there own the property there;
4. Incumbents vote themselves massive tax breaks. This applies to both property owners and renters. Case in point: Prop 13 in California (eg Disney still pays 1970s tax rates on Disney Land, for example). Oh and rent control;
5. NIMBYism. People on HN like to paint this as the boogeyman. I think this is somewhat overblown;
6. Subsidies for car ownership. Building out requires more infrastructure (eg roads, schools, utilities). Suburbs are subsidized by the taxpayer;
7. Attacks on public transportation. For example, Santa Monica trying to fight the LA rail extension into Santa Monica (because, you know, that'll bring undesirables into the area). Sometimes this is done for pseudo-political but self-serving reasons ("it'll raise taxes!"). This exacerbates other problems;
8. General opposition to allow and opposition to living in higher density housing.
That all being said, I see the pandemic as helping to reverse the trend towards the move to a few urban centers. This is a boon for medium-sized regional centers and ultimately a good thing for a couple of reasons: it increases choices and cities beyond a certain size just... stop working. More cities under 2M people would be better than more cities of 20M people.
We are basically a fence for the plunder of the developing world.
As foreigners drive up asset prices it becomes more expensive to acquire equity in your society as the rich get richer.
Additionally, my understanding is that median income in Switzerland is like ~70% of what it is in Los Angeles.
Is this not correct? This seems far from ideal.
I'm surprised it hasn't become commonplace to buy California properties through an LLC. That way one could sell the SPV while maintaining the tax benefits.
Then don’t change control. For sake of argument, consider putting an entire town’s real estate into an LLC. Ownership is allotted with membership units which correspond to plots. You could have all the same local laws apply to the units instead of to the properties. The managing member could be a town-owned LLC or something; control would never change.
The current situation in CA is tenable because the newcomers who are shouldering the disproportionate burden of taxes are high income, and can and are willing to afford it while the older homeowners continue to wield political power.
Companies(up till the pandemic) seemed to cluster in all the same spots due to network effect, SF bay area, NY, Chi, Boston, Austin etc, with little to no jobs (that pay well) in midsize or small cities.
People now are extremely knowledgeable about great towns and what areas are good, thank instagram/facebook, zillow/redfin, and a multitude of blogs and sites that report on this, there is really no longer the idea of a "secret town" that is perfect, if one is found, people flock to it and drive up housing prices.
States/Cities stifling development in favor of incumbent owners. This is a real problem in California, and even when I lived near Boulder it was shocking to see how much they tried to have people stop building in that town.
The pandemic, remote work the and return of urban unrest have slowed or possibly reversed this trend as you've pointed out.
The place I live aggressively builds dense highrise apartments. People are flocking here and it's still awesome. My rent didn't go up this year and if I were willing to move across the street I could have saved money.
Household income by itself is weird, because an increase in personal income can lead to a decrease in household income as better employment allows members to move out on their own.
The study focuses on the "50 largest cities" in the US which generally have regressive housing policies. Often, those cities are where the economy is doing well and high-paying jobs are available - but the city councils refuse to permit new construction. This limits supply in the face of increasing demand. Rent in particular too as folks living in big cities skew transient.
I tried to find a source for their "median income" figure, because it would make sense that if you compare the increase in rent in big cities to median income nationwide it would be more sensational, as these cities are where the income would have grown the most.
This is where I pull out my usual recommendation of Japanese-style nationwide zoning rules. [2]
[1] https://www.statista.com/statistics/183648/average-size-of-h...
[2] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
1. There are definitely reasons for many of the types of zoning rules in the US beyond what the author recognizes in that article. Zoning isn't just about measuring nuisance level.
2. The US definitely does have mixed use zoning.
3. The foundation of property law in the US is fundamentally incompatible with a standardized system. The US government already did the extent of what they could practically do when they suggested a standardized system in 1920s.
These stories ignore the sky-rocketing rents facing most of the nation - foster an unrealistic picture of the rental market.
For example, if a town has 1000 families split among 1000 equal parcels of land, each landowner would contribute enough taxes to the city budget to provide services for 1 family. If I then take 100 parcels of land away and put 600 apartments on them, now I have 1500 families among 1000 parcels of land. The city will now require each landowner to cover the budget costs of 1.5 families
However, even ignoring all of the questionable assumptions that go into such an unrealistic scenario, the tax justifies itself since that neighborhood was clearly massively underdeveloped compared to its land value (i.e. housing demand).
>Any natural resource which is inherently limited in supply can generate economic rent, but the classical and most significant example of land monopoly involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair and equitable. The main Georgist policy recommendation is a tax assessed on land value
What's wrong with this picture? Developers love building luxury condos. 3-bedroom apartments? Not sexy. Low income housing? Not sexy. Unoccupied luxury condos? No problem, refusing to sell keeps those valuations up, which you write off as a loss -- easy $0 tax bill!
And then the really juicy shit. We're expanding mass transit! Great, right? Stations are great place to put the high density, walkable neighborhoods! But who chose the locations of the stops? Developer-controlled city councils. It reeks of self-dealing, especially when it appears that the developers bought up the land before the station locations were announced...
So. Be careful what you wish for. It's not just "new developments" that we need, it's high density, affordable housing.
In 2000, the average American household earned $42 thousand after taxes. Of that 17% was spent on shelter and 5% on rent. 34% of households were renters.
Therefore relative to average incomes, the cost paid by the average American renter has only increased by about 17% on a national level since 2000. Since the Consumer Expenditure survey includes the entire country, it seems highly likely that the study in the link is cherry-picking specific metros to get headline results.
> Across the largest 50 cities
If income-pegged rents increased in that group by 175%, but only 17% nationally, then that would imply that rents outside the largest metros decreased by 60%. That seems highly implausible.
Either this study has to be wrong (or highly misrepresented) or the BLS Consumer Expenditure survey is wrong. Consider that the BLS survey is a huge sample size, with carefully controlled data, developed over decades, I'm trusting it.
ref - my comment: https://news.ycombinator.com/item?id=26594672
Housing supplies increase when developers build new housing. Landlords would seem to be a fairly small component in that equation.
The supply didn't increase. Demand reduced, because you moved away.
By your logic, if I stop eating hamburgers I've increased the supply of hamburgers.
Even in the 'normal' development sector, landlords buy a significant proportion of the apartments available from new build developments. I would estimate that 30-40% of the apartments in my building were bought by landlords ahead of the development starting. This adds liquidity to the market and allows developers to build knowing they are taking less risk on selling them when the building is (more) complete.
That is very similar to this quote of Smith:
> The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give. (Adam Smith, op. cit., p. 131)
> Rent, considered as the price paid for the use of land, is naturally the highest which the tenant can afford to pay in the actual circumstances of the land. (Adam Smith, op. cit., Vol. I, p. 130)
One landlord in Chicago never kept the heat on, or rather claimed that our unit was at the end of the heating line and it just didn’t get very hot, they couldn’t do anything about it. That was a cold winter. Another in Brooklyn would never fix anything, at all, and if they did it was because the ceiling in the bathroom had a pipe flooding us or some other emergency they couldn’t ignore.
There’s probably a middle path between owning dozens of units and only owning the building you live in.
The problem isn't individuals owning a few units. It's big players owning thousands if not hundred thousands flats. Publicly traded companies, with investors waiting for returns/profits, very often foreign investors even...
I really don't like where this is going and frankly I have a hard time understanding how we came this low.
https://translate.google.com/translate?sl=auto&tl=en&u=https...
imo the american obsession with homeownership is the root of many of our problems. I also notice a common theme in these comments. most of the complaints about landlords seem to come from people who rent older units in highly desirable cities. my renting experience in a cheaper city with lots of new buildings has been quite different.
There are very few countries in the world that allow just about anyone from anywhere to buy a piece of land within its borders and own it forever.
i'll repeat a simpler solution i posted about elsewhere [0], which is to escalate property tax rates based on number of units and/or square footage, which would be a type of pigovian tax similar to a land value tax (which could in fact augment the escalating tax idea). a happy medium in my mind would be to allow a landlord to own a few (occupied) units without much escalation, but once ownership gets much beyond ~100 units, it escalates fairly quickly, so that only the most lucrative buildings (likely tall, perhaps mixed-use, buildings in highly desirable areas) are worth owning outright.
Imagine instead we restricted the number of rental units you could own to 0 instead of 2. It would mean that you couldn't rent at unit at any price, driving the price to essentially infinite.
The report, in the paragraph preceding the 175% quote contains this, "Annual median rents were on average $324 higher for every $1,000 increase in household median incomes across the 50 cities in 2020."
[0] https://www.mba.org/Documents/Research/RIHA/22300_Research_R...
This is in line with the general rule of 30% of income should go to housing, and this is after they limited the selection to just the top 50 cities.
Kind of important to note.
So what are the desirability ratings of those cities vs. alternate places to live over the same 20 years?
Is it that people want night life, a Whole Foods, 20 Starbucks, etc. all really close to wherever they live? Or is there some other driving factor, like living outside the city and buying a home and having a reliable car is something many wealthy citizens enjoy, but if you need to be close to services, even if your income hasn't gone up, you have to rent in a city?
And how much is rent outside of those cities?
If housing is so inflated in value right now, wouldn't investors be pouring tons of capital into construction?
If the cost to build is fixed but the sell price is continually increasing, then isn't that the greatest profit making opportunity you could ask for?
So then why isn't the supply side of the market catching up with the increases?
In my area the issue was land to build on. The main undeveloped areas are either national forest or farmland the majority of which is owned by just a couple families who are not in a hurry to sell it off.
For another zoning restrictions are severe in the US, with most residential land zoned for single family housing with large lot sizes.
With high upfront costs, limited land, and political issues, developers would rather build high end housing, which has led to over supply in the high end market, and under supply in the low end market
To house more people, you need to build denser housing on the fixed supply of land. Most places have zoning laws that limit density. But beyond that, it's actually less expensive to build higher cost homes - a lot of small apartments require a lot of walls (more material) redundant plumbing and electrical (more labor) and you need to handle the sale or rental to more parties (more overhead). If they do build apartments, it's going to be samll 1 and 2 bedroom apartments because those are lower risk - you'll always find some young people who need a place and can get a parent to cosign a lease and who will let their landlords treat them like crap. 3 or 4 bedroom apartments appropriate for families are harder to move, so even though those tenants might be able to pay proportionally higher, the opportunity cost of vacancies makes them a non-starter.
Construction materials companies (e.g. lumber producers) would rather just raise prices than scale up production dramatically since there's a real risk of demand drying up when interest rates go up sometime after 2024. Same reason why crazy COVID demand for masks has not lead to huge increases in domestic mask manufacturing from small players.
A lot of good can be done if we reset California zoning ordinances to what used to be allowed, just as a start.
One of my friends was paying 3600USD per month in a brand new luxury building for a one Ben in the heart of Manhattan. After covid he’s paying $2600 per month in the same building same apartment. The apartment also paid the moving costs for new tenants to move in.
Wow, it’s almost as if people aren’t paying for landlords and their buildings. Almost as if people are paying for access to communal amenities like jobs, public transit, education, restaurants, other cultural centers.
Almost as if landlords don’t deserve a massive cut of something they had no hand in producing...
Also no notes on whether it's been corrected for anything, e.g. better housing, bigger housing, changes in subsidies, smaller households sizes, different demographic makeup, increased disposable income etc, no information on zoning restrictions etc.
Not very interesting to be honest as a way to explain the magnitude of the change, the confounders, and the drivers of the changes. We don't need another little-substance 'rent is too damn high' article if we want to have a serious discussion around problems and solutions.
How much of that is attributable to reaching/straining/exceeding regional carrying capacity? More people competing to live in the same area raises prices.
Does '100% faster' mean its the same speed or twice the speed? Is '175% faster' 1.75X, 2.75X, 175X, or something else entirely?
A solution is to manufacture a home that could be built by bolting together mass-produced interchangeable parts. I have seen prefabricated housing, and that is a start. But, something more granular would be more efficient and less expensive.
That said, prefabs would help greatly. It's too bad that prefabs would have to travel over the open roads, which limits the size. If houses could be lifted via helicopter to the destination, we would likely see costs fall greatly, through the power of the assembly line that Henry Ford invented oh thousands of years ago now.
Solution: Require neighborhoods of single family homes to be replaced with high density high rises when a certain density is reached.
Solution: Force owners of undeveloped lots to sell to developers.
I actually don’t agree with any of those. Just like you shouldn’t have the right to take my property to create additional housing, you also don’t have the right to tell a community to change its character or compensation. That’s really what the government is. It’s the community. And if the community doesn’t want new development, that should absolutely be allowed.
But my personal distaste should have absolutely no bearing on the norms a foreign (to me) community chooses for itself.
We need a way of sunsetting rules that no longer make sense when technology makes radical change possible. We also need to remember that competitive companies don't succeed long-term (i.e., in timespans of decades) by producing things that intentionally kill their customers. (Ford hasn't done too well in the decades after the Pinto!)
The idea that we don't need fire codes because company owners or employees care what happens decades down the line is misguided.
Sometimes you do though. There are real cases where the acid rain produced by City A falls entirely on City B. Surely in that case City B should be able to tell City A to change its character? Local government alone will never solve a problem like this.
The people who pay the price for SF's character are not people who live in SF, but people who commute a long way from outside the city limits, or who don't live in the Bay Area at all but would if they could. The SF government should care less about them than about current SF citizens, but their interests aren't zero. Which is why you need a higher level polity like the CA government to overrule the local government .
That's fair enough. But the federal government provides a ton of incentives to promote home ownership. If a local community doesn't want to meet its endogenous demand for housing, it's essentially offloading the problem to other parts of the country.
A local government that artificially restricts housing should automatically lose all of these federal incentives. Because when supply is inelastic, it doesn't actually increase home ownership, just makes the existing landowning class wealthier. If a community refuses to build housing that's fine. But homes in that community will never be eligible for Fannie or Freddie mortgages. Homeowners will not get a mortgage interest tax deduction. In fact they should have to pay income tax on the value of imputed rent. No more capital gains exemption on their primary residence.
I expect some communities will still choose to keep their policies in place. But I think the vast majority of states and municipalities would change their tune pretty quick.
it encourages your solutions without "forcing" anything.
It's definitely a double-edged sword with no right answer, though. You can encourage the efficient use of land with high land taxes to bring in development of badly needed housing, but you will be altering the ability of previous residents to stay in their homes.
Likewise, it's not unreasonable to see local governments reflect the will of their constituents saying "We recognize that these actions mean that new people and businesses will not be able to move in here, and we're all fine with that."
It seems like this is directly a tradeoff between the rights of current residents vs. considerations for prospective residents. Neither one of those groups is intrinsically more valuable than the other. While land tax is really great at making places more livable for new residents at the expense of current occupants, restrictive zoning and current-valuation taxes are great at preserving the neighborhoods that people already live in, at the expense of new people being able to join those neighborhoods.
in any area where the residents are the landowners, they're being paid a fair price for their land and so the development is not "at the expense" of anybody.
Here are the facts:
* Median (household) gross rent in 2000 was $602 (1) or $7224 per annum
* Median (household) gross rent in 2019 was $1097 (2) or $13164 per annum
That is an increase of 182% for rents over the period.
* Median household income in 2000 was $42,148 (3)
* Median household income in 2019 was $68,703 (4)
That is an increase of 163% for incomes over the period.
So while its true that rents have increased faster than incomes, saying that rents increased 175% faster than incomes is false. Rents increased roughly 20% faster than incomes over the same period.
More importantly, affordability (e.g. median income/median rent) decreased from 5.8 to 5.2, which is a decrease of 10%.
(1) https://www2.census.gov/programs-surveys/decennial/tables/ti...
(2) https://www.deptofnumbers.com/rent/us/#:~:text=Average%20gro...
(3) https://www.census.gov/library/publications/2001/demo/p60-21...
(4) https://www.census.gov/library/stories/2020/09/was-household....
I've noticed a lot of these poverty-porn pieces that wildly exaggerate how terrible things are, and at this point I'm not at all surprised to see this type of misinformation in Academia, which has long ago crossed into crusading territory. If you want to know what the various tricks are that advocates use to inflate these figures, here is a brief listing:
* confusing asking rents with rents paid. Particularly in cities with rent control, there is a huge gap, which is why you need to use census data on rents actually paid. I suspect this is the trick used in the current study. In addition to rent control factors, note that there is always a difference between price paid and asking price when you look at boards like Zillow or craigslist because cheap goods are taken off the board quickly while more expensive goods linger.
* Household versus personal income. E.g. look at personal wages and compare that to household rents.
* Playing games with boundaries. E.g. is a city the legal limit or is it the MSA? You should always use MSA (that is why they are statistical areas) to get closer to an apple to apple comparison. The 50 largest MSAs would be 180 million people and would not have median affordability ratios much different than the nation as a whole. But looking at craigslist adds for downtown areas would yield a different story.
* Making inappropriate comparisons. E.g. comparing a large MSA to a small town.
* Games with real and nominal incomes. E.g. I've seen people compare real to nominal incomes, or talk about "real" rates without adjusting for inflation.
* mixing average with median. Median should be used in distributions with fat tails or if you are interested in middle class questions. I've seen this abused a lot.
* Doing things like taking percentages of percentages when the base is small. E.g. the number of blind people electrocuted in their swimming pools is up by %1000!
* Strategically chosen start and end-dates. It's important to use peak-to-peak business cycle comparisons rather than trough to peak. Especially as we know that things like rents and home prices are more volatile than incomes (which are famous for being more downward sticky). Always ask yourself what the economy was doing at the start and end points.
* Ambiguously wording statements to get a big number. E.g. the rate of increase of X is %175 faster than Y! What does that mean? That the compounded growth rate of X is 1.75 that of the growth rate of Y? Or that the total increase of X is 1.75 times the total increase of Y? This type of strategic ambiguity is used to make false claims that are hard to pin down.
Rental properties pay property tax whether or not the business is profitable, and if the business is profitable, then the profits are also taxed.
As it is large numbers of properties are bought and banked into short term rentals, BNB etc. City rules are easy to evade via careful client vetting. These people want to defeate the laws of supply demand via such artificial shortages.
Is that an increase of 0%, 33%, 300%, or something else?
Suppose the original homes then increase to $5000, while the newer homes drop down to $500. Is that an increase or decrease?
We can have a situation in which rent for every home doubles in price, yet the median rent goes down.
Do we care about the rent being demanded, including for vacant homes, or just the rent being paid?
There are lots of ways to make a "correct" conclusion that is highly misleading.
Apparently the study looks only at the 50 largest cities. That would ignore any rent decrease in small cities. One would expect exactly that if people are moving toward the largest cities.
In your second scenario, the average rent has not changed.
If this supply change happened over a century, a 33% increase would probably be very reasonable, and means the price went down in real terms.
It's not sustainable when landlords are only incentivized to take as much as humanely possible from their tenants. The median worker already coughs up 45% of their wages to their landlord in Los Angeles. Eventually there won't be any more to squeeze; the working poor are already living on top of eachother in crampt apartments. Skilled laborers go begging for work in home depot parking lots while infrastructure falls apart and needed homes fail to get built, what a country.
The worst thing to do if there's a shortage of bread and thereby a shortage of bread bakers, is to put a cap on bread prices and reduce the bakers' incentives.
If there's issues of inequity (e.g. the poor being unable to afford bread) then you can tax the general economy progressively (taxing the rich the most), and then redistribute money to the poor, subsidising their purchase of bread. This equalises consumption, but it does not artificially lower prices with a cap, thereby keeping incentives to bake bread high, which is the primary way to addressing the scarcity.
Rent subsidies and income redistribution, sure, but rent caps aren't necessarily great instrument.