Record rise in U.S. rents
bloomberg.com
bloomberg.com
Winston Churchill on the topic: http://www.andywightman.com/docs/churchill.pdf
> Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted!
> And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher in the parish!
> All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit
So fiscal stimulus should be paired with some kind of rent control/regulation, then?
1. Stimulus given faster than it can be absorbed into rents.
2. Progressive taxes on dwellings that are not primary residence.
3. Decrease the cost of new housing.
Of those, I think the last is the most realistic. It is the only one that does not lead to a housing shortage.
Google "deadweight loss price ceiling rent control" to see the detrimental economic effects of that policy. Once you understand that, check out the deadweight loss graph of a land value tax: https://en.wikipedia.org/wiki/Land_value_tax#Efficiency
The type of regulation we need is a tax on the pure unimproved value of land sites (excluding buildings, factories, farms etc.).
George:
> When all rent is taken by taxation for the needs of the community, then will the equality ordained by Nature be attained. No citizen will have an advantage over any other citizen save as is given by his industry, skill, and intelligence; and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, and capital its natural return.
> At what point is someone's wealth acquisition too much–$1b, $10b, $100b, $1t?
> Limitarianism is the view that no-one should enjoy more than an upper limit of some valuable goods or resources
> Plato's Socrates identifies the ‘endless acquisition of money’ (Plato, 1997b, 373d) as the main cause of civil unrest and war.
> In his last dialogue, the Laws, Plato gives a more or less complete limitarian account with a specification of both a lower and an upper threshold. According to this account, ‘extreme poverty and wealth must not be allowed to arise in any section of the citizen-body’ (Plato, 1997a, 744d).
> Plato provides a detailed description of the lower threshold which each citizen should meet: everyone should obtain one dwelling near the centre of the country and another one near the outskirts. The size of the pieces of land on which these dwellings are built will vary according to the fertility of the land and its distance to the city
[1] https://onlinelibrary.wiley.com/doi/pdf/10.1111/ejop.12535
Plato's ideas seem well intentioned but somewhat ignorant of higher order economic effects of such "1 child policy" like rules. Much better to have a tax policy that's well aligned with the incentives we want to promote, and let the market figure the rest out.
It seems like a clever govt trick.
Allow the outgo to be reduced by inflation but allow the income to adjust to accommodate inflation.
At the time, roughly 3% of the population were citizens. You had to be landed, wealthy and/or politically influental to qualify. Incidentally, only citizens had a vote. The other 97% were riff-raff, poor, slaves or otherwise unsuitable to be allowed to have a voice in the nation's decisions. Hence their opinion didn't matter.
Besides, in a free market it should not matter to prices whether I own two properties, or me and my brother (acting individually) own a property each, the market will set prices and neither of us can with one or two or 200 properties.
Of course there's a limit to this logic, which is when you own so much you have a monopoly, but there's no entity that I'm aware of that has a monopoly in residential real estate or anything close to it.
Singapore might come close.[0]
0: https://en.wikipedia.org/wiki/Public_housing_in_Singapore -- "The majority of the residential housing developments in Singapore are publicly governed and developed, and home to approximately 78.7% of the resident population."
I want to make sure I'm actually getting it, because I'm not sure I disagree in a sense. Housing/land has too much importance in the scheme of being a financial asset to the point it is detrimental to actually utilizing the world around us. Finance as social control mechanism has become, in my opinion, so fundamentally tangible as to be downright laughable.
So am I getting it, or am I still missing the point?
In addition, such a tax on ground rent should replace our familiar taxes on labor, capital, and economic productivity.
Even better, a tax on economic externalities, like pollution.
Aside, thank you for taking the time to write these comments, in this thread and others like it. This is fascinating and important stuff, and you have a way of putting it together in a way that's easy to digest.
Property valuations can be roughly split into land/location value and building/improvements value. By renting location I just mean the portion of the total rent that is attributed to location value, not improvements value.
If a train station is built next door, the demand would go up, which would cause taxes to go up. If nearby a bunch of housing was built, this would cause supply to raise and thus move the supply and demand curve which would cause the price to drop, and therefore taxes would lower.
What's the best thing to do with this tax money? Give it back equally to all as a dividend(similar to [0])! Thus the people who use less than the average amount of housing would actually receive money when this goes into effect.
We need to systematically identify all externalities, and tax according to the externality, and just give the money back to the population. This fixes the incentives. Figuring out where that money is going to go, fighting between political parties as to which company is going to benefit, the corrupting effect of centralization of decision making. Just give it back. Tax externalities and return as a dividend.
Mmmmkay. So you've established a materials acquisition set point for the area, or is this a derived value? Do you have a process for tracking this over time as markets aren't static? We've now got in addition to a land valuation assessment, we've got workmanship/material/ labor value assessment; let's handwave this for now, because I'm pretty sure this is old hat for tax assessors/actuaries, etc...
>Once you have that number, you just keep raising the tax on that building until the new market cost is equivalent, or $200k.
I get lost here.
At T=0, Market value for land+building was $1M, right? Cool. We do our magic valuation of the material/labor cost of the building, and determine the building represents a value of 200k. Cool. Let's implement our tax. Pre-tax (T=0), Market value-wise, you're waiting around for someone with a cool million burning a hole in their pocket. Post-tax(T=1) you're still waiting on somebody with a cool million to come along. The State wants market value and tax basis to converge. So you bought at 1M, they take 800k leaving 200k on your property sale? Seems like you may have shot yourself in the foot, because now only someone better off than you were would be in a position to buy the building at whatever you're selling at for break even or profit, but also to pay the tax liability on the land you now have of 800k based on the hypothetical statute? (This is the buy scenario, not necessarily what we're talking about, because it's a one time thing, but as I understand it, property taxes have something weird going on in Cali in the sense tax rates only change when the property changes hands in a transaction.) Market value, either way, has changed: the set buyers now encompasses only those people with your cool million plus the capability to weather the tax liability? This sounds like a property transfer to the rich.
Let's talk rent. You aren't selling, but you own the land since before the tax is implemented at T=0. Your change in LVT... means nothing, til the next buyer?
Let's say we hand wave that. Let's follow the 1% rule. Market Value is $1M, x.01 = 10k a month (ouch!) Current SF average yearly property tax liability is .55% (approximately 4.5k on $785000 value), or 5500 per million. Cool. T=1. Tax implemented.
Your accountant sits down. Land +building previously was $1M. Building was assessed at 200k. By statute, the rest is LVT. 800k. Property tax has just gone from .55% on land + building (1M) to 800k based on the statutory definition of LVT being (value at time of purchase - assessed structure value = 800k... per year? Over a period time?). Screw it, we need a number that makes sense for rent. Say we stick at 10k a month. Pre LVT, that's 4500 a month you're clearing. 54000 a year. But you're taxing the building on the difference of purchase price and actual material labor cost...
Like, I'm failing to see how your tax actually changes Market value. No one is selling a million dollar property for 200k except to avoid a greater expenditure over time in which case the State becomes the questionable actor here because they are essentially levying an excise on your sale price if too high because they want it lower? What if you charge less than 200k?
Forget the fact that we've got a mismatch between how the tax is collected (LVT implies excise over time, while assessment procedure seems to imply a one time).
This feels like a word problem with half the info missing. Either that or I'm missing some painfully obvious piece of context to the initiated.
It's obvious what would happen, the house price would drop. What would it stabilize at? Roughly the annual rent price for that type of house.
Moving back to my original example:
T=0, where taxes are .55% and market value is 1M, paying taxes of $5500.
T=1, we raise taxes to 1.55%, market auction comes in and offers $800k, where they would pay taxes of $12400.
T=2, we raise taxes to 5.55%, market auction comes in and offers $500k, where they would pay taxes of $27750.
T=3, we raise taxes to 15.55%, market auction comes in and offer $200k, where they would pay taxes of $31100.
STOP.
Balance as necessary.
Those numbers are not real numbers. The numbers will be different, and they will never be perfect. It's likely that you wouldn't have per-house figures, but city averages setting city-wide taxes.
Since so much of our current system's people networth are invested into something, this is not a change that can possibly happen over-night, and would likely take upwards of 50 years to phase in.
> Renting something that is the product of your labor or capital investment … should of course be compensated.
Land ("location") is a scarce economic good, with different locations being valuable for different purposes. Rendering it revenue-neutral would lead to misallocation. Land is also capital—a durable good used to produce other goods—so land ownership is a form of capital investment, and a tax on "ground rent" is a tax on capital.
All economic value is the result of human action. When the scope of "improvements" is properly understood to include all human activity relating to the land—not just obvious things like builidngs but everything done to deliberately or incidentally increase the value of the land—there is no "unimproved" value left to tax.
Rendering ownership of land revenue-neutral does not imply rendering all economic activity on said land revenue-neural. In fact it does the opposite, ensuring that the returns to labor and capital are allocated justly.
> When the scope of "improvements" is properly understood to include all human activity relating to the land—not just obvious things like builidngs but everything done to deliberately or incidentally increase the value of the land—there is no "unimproved" value left to tax.
Sure there is. All natural resources on that land, which existed before humans ever set foot on it, comprise the unimproved value of land. There is also the value of location arising from the community (infrastructure, proximity to labor, proximity to customers) which is not attributable to any improvements upon the land.
As people who can use the land more productively can pay a higher land tax they would outbid anyone who intends a less productive use of the land.
"Capital" in economics is a fairly broad category. One definition from Merriam-Webster would be "accumulated goods devoted to the production of other goods". Land is at least as qualified on that score as a manufacturing plant or a home (creating goods such as "shelter" and "storage") or machinery or hand tools or any other durable property used in the production of other goods.
> The owner of the land didn't create it, taxing the owner of the land doesn't discourage his production of additional land.
Being created by the owner (or by humans in general) is not a necessary qualification for status as "capital". Still, it is important here to distinguish between "land" in the colloquial sense and what economists would refer to as "land" (unowned resources). While land might not be created through human action, property is. You are not taxing the land, you're taxing the conversion of land into property—the act of identifying useful, unowned resources and claiming them for human use. And when you tax something you naturally get less of it; in this case there is less incentive for people to go out and discover new resources. A 100% LVT would nullify any economic motive to expend effort locating new sources of minerals or suitable farmland (etc.) since 100% of the value of whatever you discovered would be taken by the LVT.
That's assuming the LVT is limited to the hypothetical value of a bit of land in isolation. It gets worse when the scope of the LVT is increased to include the economic value of "location" with respect to other human developments—for example land inside a city being taxed more than physically equivalent land in a rural area. At that point you're not basing the amount of the tax on the land at all, but rather the capital investment and expenditure of human labor in the surrounding area. This form of "land value tax" is deceptively named; it should really be referred to as a tax on gross external benefits received. Which has some obvious flaws, for example that the property owner has little control over external benefits others may unilaterally choose to create, and also that one pays extra tax on any contribution one makes to one's own community which has the effect of raising property values. (In fact, under a LVT system unilaterally contributing to the community and making it a nicer place to live might well be considered harmful since it raises everyone's taxes…)
> what economists would refer to as "land" (unowned resources)
I have never come across this definition of land anywhere in economics. A more accurate description would be "unproduced resources". It is anything that exists in nature independent of human activity, and a distinct factor of production from capital and labor.
> You are not taxing the land, you're taxing the conversion of land into property
This is a total misunderstanding of land value tax. LVT taxes the monopolistic holding of land in order to collect rent. It does not tax any property developments or improvements (mines, cafes, farms, factories) on that land.
If a landowner expends labor to extract resources or improve the value of his land, those are improvements, which logically are untaxed. A LVT in lieu of other taxes would encourage the development of land into property, not discourage it.
> the act of identifying useful, unowned resources and claiming them for human use.
Again, it only taxes holding resources without using them -- it explicitly has zero taxation on productive economic activity such as mining, farming, or operating a business on land.
Furthermore, I contend that the act of identifying useful resources and claiming them only, is not a valuable activity, and can be taxed. It is the actual utilization of the resources to produce goods or services that adds value -- merely laying claim to land without productively utilizing it is the definition of a rentier economy.
> And when you tax something you naturally get less of it; in this case there is less incentive for people to go out and discover new resources. A 100% LVT would nullify any economic motive to expend effort locating new sources of minerals or suitable farmland (etc.) since 100% of the value of whatever you discovered would be taken by the LVT.
You're right in a very narrow sense, hypothetically there is less incentive for unproductive landowners to discover resources in their own land, lest they get taxed on something they have no intention of exploiting. In return for this disincentive, LVT aligns every other incentive for the common good. A 100% LVT and 0% sales, development, income, capital gains taxes would mean you get more of the latter: productive economic activity, because you're taxing it less.
The vast majority of land value in modern economies is well known, because it is not undiscovered mineral resource value, but the value of proximity to labor, goods and services. LA, SF, NY flats don't cost what they do because there's gold under the floorboards. The value of infrastructure, proximity to various labor, goods, and services markets is what makes up the vast majority of land value today. A LVT taxes those who hold land without adding improvements (the unearned increment), and incentivize entrepreneurship and labor (the new office building or high-rise will be entirely untaxed, nor will there be any sales or income tax on the valuable economic activity of its inhabitants).
> This form of "land value tax" is deceptively named; it should really be referred to as a tax on gross external benefits received.
I agree with you here entirely. Another name for gross external benefits received is "the unearned increment".
> Which has some obvious flaws, for example that the property owner has little control over external benefits others may unilaterally choose to create, and also that one pays extra tax on any contribution one makes to one's own community which has the effect of raising property values. (In fact, under a LVT system unilaterally contributing to the community and making it a nicer place to live might well be considered harmful since it raises everyone's taxes…)
These are not flaws. The property owner pays exactly as much in tax as is required to offset the external benefit received, therefore there is no harm done to them economically. There is no free lunch for them either (infrastructure, the cafe next door's productivity, the high quality state run school a block over). Making the area more attractive is not harmful as long as the tax does not exceed the unearned increase in land value received, which it shouldn't, by definition. Furthermore, not every improvement in a community leads to an exactly equivalent improvement in the land value, this would be mathematically impossible if you grant that services, goods, building have value apart from land.
This is the core of your misunderstanding. Yes, location is a scarce economic good. Rendering the ownership of it (rent collection) revenue neutral, while keeping the utilization of it (productive activity at a location) totally untaxed, is how to guarantee correct allocation. Those who can be most productive at a given location will come to utilize it.
Allowing the monopolistic ownership of location without utilization to be profitable is what leads to misallocation. Those rich enough to bid for a location will collect rent from those who productively utilize it.
https://upload.wikimedia.org/wikipedia/commons/a/aa/Everybod...
This creates good incentives, because the more you invest in structure on your land (ie more housing), the lower your effective tax rate is on the profits you generate from renting. $100 land rent, taxed at 95%, vs 100$ land rent + 500$ rent from housing 5 people is taxed at ~16% overall( 95 / (100 + 500)). Although ofcourse being able to house 5 people would require an investment into buildings, so it is not free money, and there is also competition from others who may be able to house 6 for the same building cost and thus maybe only charge 95$ per person.
Also here is a link of a book review that explains these ideas really well.
https://astralcodexten.substack.com/p/your-book-review-progr...
After reading up a bit more on the topic, I'm even more convinced of this. In fact, all this would really serve to do is encourage maximum development/urbanization by guaranteeing that those that urbanize become more efficient at extracting land rent than those that actually make that possible. Take the farmer of 100 acres to the multi story tenement operator of occupancy 50 on say 10.
The farmer at about a 2.1 acre to tenant ratio is relied upon to keep everyone fed, but with his 100 acres is paying much more in rent than the tenement operator, who is paying tax on 1/10th the "land" but extracting many times the "rent" in term of having developed upwards, where the farmer can't do so for having to rely on tillage to keep everyone alive.
Let us say the farmer is the primary hirer of labor in this microcosm. He's both bearing the tax burden, plus paying his laborers, while the tenement operator contents himself hiring a paltry few, and exploiting his rent extraction.
Also, under the Georgist idea of land are all the natural resources of such as wind, sunlight etc...
What if our tenement operator blocks or shades the farmer's tillage, rendering it unfit for growing? Or blocking the dominant wind approach? What if a river passes through one, or both parcels of land? Is one to get a discount for land shaded into inexploitability by another's construction? By airflow impeded through unit volume per unit time?
What if our tenants wash themselves and dump waste upstream of the farmer, which is then used to irrigate his crops, creating a public health hazard? How is that valuated? A punitive tax extracted from the tenement owner? He may not even take part in this behavior. His tenants? Not supposed to pass it on, remember.
I'm still reading up on it, but it just feels like the entire idea started to get thought through, then all conversation and analysis stopped, and someone declared this panacea and went home. I'm left hankering for a big dose of "show your work". But again, I've just started reading.
This is false. The rental market has supply that is effectively fixed. Therefore, landlords are already charging the maximum that renters are willing to pay. If they raised rent the renters would move or buy. Landlords that have efficiently used their land would have taxes go down, so people would move to their properties.
> In fact, all this would really serve to do is encourage maximum development/urbanization
This is one of the many points of land value tax. Valuable land should have expensive buildings on it. Building single family homes in an area that is in high demand is incredibly wasteful. Of course you should be able to do it, but it should be expensive.
> Take the farmer of 100 acres to the multi story tenement operator of occupancy 50 on say 10.
Farm land is much, much less valuable than tenement land. There's no way to say who would pay more taxes just based off this information. Either way, it makes sense for the tenement owner to make more money since he owns the building. The farmer owns no improvements to his land.
> Also, under the Georgist idea of land are all the natural resources of such as wind, sunlight
Yes.
> What if our tenement operator blocks or shades the farmer's tillage, rendering it unfit for growing? Or blocking the dominant wind approach? What if a river passes through one, or both parcels of land? Is one to get a discount for land shaded into inexploitability by another's construction? By airflow impeded through unit volume per unit time?
The farmers tax would decrease.
> What if our tenants wash themselves and dump waste upstream of the farmer, which is then used to irrigate his crops, creating a public health hazard? How is that valuated? A punitive tax extracted from the tenement owner? He may not even take part in this behavior. His tenants? Not supposed to pass it on, remember.
Dumping waste is illegal.
Here is a breakdown of all the great things LVT provides. https://astralcodexten.substack.com/p/your-book-review-progr...
One of the supposed detrimental effects of the policy is a lower rate of homebuilding which exacerbates the problem yet New York's fastest rate of homebuilding (the 1950s) still coincided with the highest level of rent control.
It's a topic of study (like the minimum wage, corporation tax, etc.) I'm also not really sure I trust most economists on since there's way too much $$$ (e.g. think tanks, koch money -> universities) invested in usefully wrong results.
It is possible that landlords inherently run amok until enough of them are literally killed, and then they dial it back until they forget.
> So fiscal stimulus should be paired with some kind of rent control/regulation, then?
I helped someone find an apartment in a rent control area - instead of higher rents you need to pay 4 months "brokerage fee" to make up for the lower rent. (If you don't want to pay, demand is so high someone else will.)
Rent control doesn't work, it makes things worse.
The correct solution is more supply. You can't fix high demand any other way.
No government, ever, has managed to repeal the law of supply & demand. Not in 4000 years of trying.
Even in communist countries, where housing is "free", it applies. It's just that the cost is in terms of something other than money, often a network of favors. The same goes on how military base housing is distributed.
Imagine wealth as a fluid. When it's in your account, it resides in a bulb. Connected to these bulbs are pipes connecting you to each person or business's bulb you transact with. Each transaction is facilitated by applying vacuum to transfer a small amount of fluid from bulb to bulb.
In this thing, you have entities that have many more or much larger bulbs than others, with more powerful vacuums that increase in size with the amount of capital they have at their disposal.
Every time you add a bunch of fluid to the system for everyone, you still have all the same networks for extraction in place, and no ability to prevent those connections from just extracting more.
Rent, in particular, is special. Realistically speaking, the pipe that extracts rent to your landlord is not just a transaction facilitator, but is an important mechanism for ensuring that your landlord's wealth relative to the rest of the system is maintained. So in a way, the amount getting extracted will always scale once your landlord is made aware of a global infusion of working fluid to everyone, otherwise, the "value" of their real estate is "diminished" in light of the global infusion.
Real estate as financial instrument is weird like that. Unfortunately, attempts to control that reactive rent adjustment are fraught with side-effects, because when your entire basis for free market economics is that greed and wealth accumulation (considered axiomatic human vices) can be put to productive use by leaving things alone, as evidenced by any attempt to do otherwise having undesirable outcomes, see the history of centrally managed economies.
At least that's as far as I've cared to read up on the matter. After a while trying to get to the bottom of it though, you realize once economics abstracts away any complexities around money moving => physical things happening, it might as well be pontificating on the weather for the questionability of measures involved.
This is a sign of me hitting the absolute depth of my understanding and needing to do more digging to potentially get further but not being capable of devoting the time at the moment.
Do you have some kind of economic intervention in mind that could produce the desired results of stimulus while dealing with some of these side effects. Besides tax cuts, that is. Those are boring and have their own well-understood issues.
If the idea is to do nothing, that something that works better in fiction than in the real world (because the real world has real problems that are harder to hand-wave away).
Almost 1% of renters get evicted per year in normal times. Almost 0.5% of homes get foreclosed in normal times.
^ This makes up a decent percentage of overall new leases / purchases. It's not like 100% of renters move every year.
We have a lot of markets with restricted housing measures that should make it obvious that reducing supply even a little, can cause prices to go up a lot.
You give people the largest transfer of money in history - increasing personal income by the largest margin in decades, lower interest rates dramatically, AND reduce supply - at the same time everyone is going bat-shit insane trying to "WFH" with kids and there's no where else for them to spend money...
I will be surprised if there is not some really bad unintended consequences from this. But I'm far from surprised that prices are going up in the middle of a "recession". There's 30% more M2, personal income is up 10%, and payments are ~15% cheaper due to interest rates. Why should anyone be surprised that rents are up?
Las Vegas had the highest increase in rents. It had the highest unemployment rate. People on unemployment were making > median wage. Why should anyone be surprised rents went up?
With rental housing, there are 2 major supply shocks:
1. Much new housing was put on hold during the pandemic.
2. Critically, the eviction ban over the past 18 months has absolutely killed many small time landlords. Any prospective small-time landlord would certainly think twice about getting into the business now, and many existing small-time landlords are doing everything they can get out. It doesn't help that landlords are basically demonized by a large section of the political class. The end result is this: https://www.reuters.com/business/finance/selling-out-america...
So, at the end of it, it comes down to basic supply-and-demand, and the supply side got crushed.
Also, there is evidence that small time landlords are much less aggressive when it comes to evictions (see https://www.atlantafed.org/-/media/documents/community-devel... from the Atlanta Fed). This means that small-time landlords provide a greater percentage of the supply for "marginal renters", i.e. renters who are more likely to miss payments. When that supply goes away it means there will be more competition among these marginal renters to find a place to live.
This also ignores the trend of businesses engaging in the activity.. buying homes in mass for rental properties instead of the typical apartment/townhouse apartment developments.
The end result does not have to be what you mention. We can enact policy to ensure that housing is available to the masses. I don't personally spill many tears over the landlords who lost money. For years, every time people have asked "why can the landlords extract rent", they respond with "the landlords take on the risk". Okay. So this is the risk coming back around. There was never a guarantee that landlords would always make money, nor should there have been.
And when it come to "the landlords take on the risk", well, in the past, this was always true. There's the risk of bad tenants, the risk of unplanned environmental damage (just ask anyone in Texas who had to go through major floods or ice storms with no power), etc. But the extended eviction ban basically was changing the rules in the middle of the game, to what amounted to government appropriation of property without just compensation, and that is exactly the type of risk any decent functioning government is supposed to prevent.
This is in no small part due to the fact that social safety nets are weak and collapsing prices mean terrible outcomes for retirees.
But it also, to me, demonstrates the unethical state of investment and wealth in this country, where the rich get richer without providing any risk-bearing service to the rest of the country.
https://smcorridornews.com/steady-as-she-goes-texas-apartmen...
San Francisco: https://twitter.com/AlecStapp/status/1331832907003015168
Blackstone: "We believe we will continue to experience below-average levels of new housing supply in our markets which will support future rental rate growth and home price appreciation." https://twitter.com/AlexFischCC/status/1402770234730160132
Does putting more money into people's pockets make rents increase? All else equal, this does occur in the short-term. In the long-term, housing developers want to build more housing to get a cut, which increases the supply of housing and slows rent growth. This hasn't been happening because of segregation-era zoning laws which outlaws denser housing in areas where they are needed.
The fact that there is a belief "the invisible hand" will lower it back down, is separate from the increase due to the general welfare (stimulus). Availability/a market supply increase, is another factor for pricing, not part of the same change. Less so, since it simultaneously exists only in the mythical future.
> All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit
Seems like an accurate look to me.
Once in a great while, you might get a reduction, but it's really rare
Property taxes do go up, but they haven’t gone up too much. Again, in my last house they went from $2500 to $3750 over 17 years.
REI074: Data-Driven Real Estate Investing W/ Neal Bawa https://www.youtube.com/watch?v=tzeTx1KE600
A major takeaway from this podcast is that 4-plexes are the best economic investment because they are liquid, ie. 5-plexes incur more scrutiny from the bank, the downside of multiplex is you may need a property manager, so after scraping zillow and doing some machine learning to deduce the most profitable market, Mr. Bawa builds seas of 4-plexes with all administered by a single property management office.
Meaning if rents stay down after decoupling from an increase in housing stock value, the house prices could adjust down in the event there is over-supply and the market at the margins decides to rent rather than buy because it’s cheaper.
I'm assuming that has a lot to do with leases and rental contracts? If you have a 2 year lease I can't raise your rent until it expires even if the property increases in value 10x during that time.
4 plexes are commercial properties. Just because they're for residential purposes doesn't not change that it is zoned as a commercial property.
You arrive in a room with no inspectors. To the North is, "Of course we'd still have inspectors." To the East is, "Privatize all the inspectors." To the West is, "Let's build a disruptive app to facilitate illegal barn raising."
To the South is, "Let me revise my initial statement..."
Because every unit increase in a circle's radius r, causes the area to go up by r*r. These ever increasing concentric circles, cause infrastructure demands and spending to keep going up by factors of square.
Every unit increase in a Pizza's radius demands more and more cheese. To a point you will realize you get more Pizza when you order a very large Pizza than ordering 2 small Pizza's.
At some point you get two cities for Cheap than expanding an existing one.
You just can't keep building additional housing this way. In Bay Area where people stay as far as San Ramon and travel to work, you realise the taxes are just crazy high.
Not to mention property insurance rates have jacked up mysteriously in the past year.
Not that mysterious. The cost of home repairs has increased substantially in the last year, due to supply chain disruptions. Lumber is a big one.
My hot water heater failed last week. It cost more than double to replace it from what I had paid to install the previous one.
I don't think rising costs to the landlord always results in rent increases. Rents are constrained to an extent by the average salary of the area.
If you incur more costs, but the average salary of your area doesn't rise, and you increase rent prices, you run the risk of void tenancies.
Because if they did, another landlord would undercut them. But with all the landlords facing rising costs, another landlord cannot afford to undercut. Hence the rents all rise.
This is how supply&demand curves work.
Over the last few years, Seattle has added many various laws that are costly to landlords to comply with. This corresponds with a decline in affordable housing. I'm pretty sure the Seattle Council is well aware of this connection. But as the number of renters far exceeds the number of landlords, they know where the votes are, and they sell the fiction to the renters that the landlords will pay.
Supply and demand don't "work" the same when there is a monopoly of a necessary good.
Consider the scenario where there is no more water in the world. All that is left is in a well in your back yard. You can charge whatever you want for the water, because people need it. The limit is what they can spend, because the demand is essentially infinite.
Now, if you had to purchase a more expensive pump to extract water from your well, would you charge more for your water? No, because you can already charge as much as you want.
I haven't seen the data for other countries, but in New Zealand, you can look at trends of rent vs house price and they are not correlated anywhere near the way rent and income is correlated.
Supply and demand do still exist and affect rent, but when supply is low for housing, landlord cost increases have no effect on rent.
My landlord did this. In July, I learned that he had decided he wanted to sell my townhouse, and wanted me out. I was fortunate enough to find a place to buy that reduced my commute to my son's school, but it was pretty nerve wracking.
That's why in France it's illegal to do that. If you have a lease, and the landlord wants to sell, they have to propose to you first, and then last ( at the same price as with the potential buyer); the new landlord can't evict you ( your lease is sold alongside the "land"). And if they want to not renew your lease, you have to be notified well in advance.
- Help absorb record-high PE ratios in the market
- Allow people with heavy investments in equities to continue to prosper
Will also:
- Let the government pay off massive debts with smaller dollars (later)
- Badly hurt the poor and especially those on fixed incomes
Personally, I don't like inflationary times.
Nevertheless, 8.5 million is a small cohort relative to 300+ million, and if they're the "most productive" then they're not representative of the median-productivity experience that matters on a national scale.
For what it's worth, I think this concentration of high-profit business in the Bay Area may be (finally) coming to an end with the ascendance of remote work, which may be a factor in the locally declining rents.
Similarly, I would guess 2020 saw less construction then an average year. Wouldn't that alone cause a short term spike?