Is this a direct result of our fiscal policy? Have we destabilize the economy in order to create the richest muilti-billionaires?
Five years ago, we moved into a 3,000 square foot house in the Annapolis suburbs. We are right on the water so it cost a princely $485,000. But it was easy to get a house in the neighborhood for $300,000 or so, or just 4 times the county’s median income. As a result, the neighborhood has lots of young families (many without college degrees!), retirees, etc. Today, the house next door is under contract for double the price, and is smaller than ours. As far as I can tell, there’s no billionaires or even centi-millionaires anywhere near us. Just upper middle class people whose 401ks have done really well thanks to the Fed printing money like crazy, not to mention upper middle class welfare like more than a year of deferred student loan payments. (Lower income folks with student loans were already eligible for income based repayment.)
Reaganism has won so completely in America that even AOC doesn’t want to tax upper middle class people. But these are the people directly competing with the middle class for fixed resources. They’re the people driving residents out of gentrifying neighborhoods, driving up the price of coffee, etc. There’s not enough 0.01%-ers out there to move the needle on these assets and services.
That seems to be a typical view on income and wealth in this country: people's opinions are wealth are out or proportion with reality by factors of like 100. For reference, upper middle class technically starts at around $120k/yr, so $10MM could pay 80 years of an upper middle class income. So there's no conceivable way an actual upper middle class family could actually save enough to be consider what the public thinks of as upper middle class.
In my experience the kind of people this heuristic selects for is around the same monetary threshold you’ve noted in the low 6 figures.
[1]: https://sfgov.org/scorecards/safety-net/poverty-san-francisc...
Median income is $56K for Australians in general, and about $90-$110K for areas of Sydney that have water views.
Recently the federal deputy treasurer made a speech that younger residents of the city should consider moving to the country to afford a home. The not so minor issue with this statement was that you have to go very far down the list of towns by size in the state to get to a place where he himself could afford a home on his government salary of well over $200K a year!
Why are the rich getting tremendously rich? Because the Federal Reserve has printed money at an astonishing rate, which inflates asset prices. Who owns the most assets? The rich do.
People are so focused on taxation (because it's something the average poor or middle class understands) when the real issue is the Fed (something most Americans aren't even aware of).
Still, the point still stand: federal income taxes are quite progressive, and would surprise most people who wave their angry fist asking for the rich to be taxed more. The problem is mostly at the state and local level.
The top 50% pays 97% of federal income tax.
If you include most types of taxes, including social security, you end up with something a little less polarized: the top 1% have an effective tax rate of a little under 34%, while the poors are around 20%. One could easily argue it's not progressive enough, but it's still not the usual narrative of "I pay more taxes than millionaires".
A a handful of ultra rich abuse loopholes to death to pay very little, and these people are averaged in the statistics (so the average rich person actually pays more than the stats show, if only a little). It's a minority though.
Don't you get the value of the money back for all taxation, according to any theory that approves of taxation?
Social security would be a little closer to a sewer and water bill from the city (which you have to pay if you're a owner, but you get a sewer in exchange. Whether you like it or not). It's still not a great analogy because Social security is more deferred. It's really its own thing. Still, it doesn't work quite like a tax either.
I personally wouldn't mind if it did though. It's one of those things where we'll pay for it one way or another. If there's an entire generation of people who can't properly retire and pay medical bill, we will pay for them through taxes anyway. May as well do it preemptively and efficiently.
Roughly speaking, anyone paying more in taxes than the per capita spending is probably not receiving the full value of their taxes. We see this where most welfare (Pell Grants, SNAP benefits, Obamacare, etc) and tax credit schemes (CTC, electric car credit, etc) phase out as people pay more taxes.
This is exacerbated by capital gains and dividends being taxed at a lower rate; if the gains due to asset inflation were being taxed at 37% instead of 15%, then at least all this money printing would help balance the budget a bit...
The top 10% of Americans own about 85% of the wealth in America, and the entire bottom 90% only own around 15% of it.
This was just last year. The norm is far lower, but was inflated by stimulus checks.
https://ourworldindata.org/grapher/urban-and-rural-populatio...
and normal homeowners stopping densification out of fear of reducing the value of their own home or just not wanting the riff-raff living near them. These people are really the ones doing a directly harmful thing for pure selfish greed. They're not super-rich, they're just people's parents. But they're trying to make money by excluding others instead of doing anything useful.
My take is that we need to treat housing as an actual human need, and there should be penalties for buying houses to rent or for investment purposes outside of ones primary residence. That sort of exists in the mortgage interest tax deduction but with rates near 0 that’s become far far less effective.
There are lots of people who don't want to own a home (e.g. who value the mobility/flexibility of renting), and people who are unable to afford the fully loaded homeownership costs. In these rent-vs-mortgage discussions people often overlook the non-mortgage homeownership costs which can be very significant and hard to predict. I say this as a person who found myself needing an unexpected $25k+ roof replacement in my first year of homeownership.
I suspect living standards for the bottom quintile would actually fall if they had to maintain their own homes. E.g. how are the people who can't put together $400 in an emergency, the minimum wage employees living hand to mouth, etc going to be able to afford to replace an unexpected leaking roof (a $10k+ problem) or a broken water heater (a $5k problem) or refrigerator (a $500+ problem)? A lot of basic amenities are legally mandated for landlords to provide that I think low-income tenants would not be able to maintain on their own. A landlord with a larger net worth is better able to absorb these cashflow problems and keep the property in a healthy state.
> The amount of private equity in housing
I think this issue is, at least at the moment, overstated. Could be a problem in the future though.
In China, where housing costs are skyrocketing as well, there are protests when enough housing is built to start to make it affordable again.
Putting the majority of a person's life savings into their house is, in the end, a pretty bad idea.
FYI, mortgage interest on an investment property is also tax deductible. In fact, there's no limit on it like there is on your own personal-use home. It's basically treated like a business expense (which, arguably, it is).
These homes are not owned by billionaires either. It’s an asset class that’s very broadly distributed by its definition; most people own their homes.
I think it’s mostly driven by macroeconomics. Near zero interest, population growth (organic or through immigration) and historical real estate appreciation all fuel this trend.
So yes Toronto might have been influenced by rich Chinese buying properties, but does that extend to Canada as a whole?
If anything, more real estate investment would create more housing stock. Someone’s not building enough.
Lastly, we've got NIMBY - this is the source of nearly all our housing woes because if you could buy up all those single homes in SF and convert them to condo towers we'd solve the housing crisis overnight - but that would "ruin the neighborhood" and, more importantly, depreciate the value of all those inflated house prices - and that's why all the neighborhood councils will continuously vote to perpetuate the shortage of housing.
People do want to build more housing - but people who own the land are stubborn assholes. When it happens that an investor manages to secure a full block of single family homes in a downtown core they'll almost always try and convert it to condos - but then they've got to fight against the NIMBYism and they'll usually lose because as every 80's movie ever taught us: "The evil developer is trying to tear down the community center - we've got to stick up for the neighborhood and win that tournament!"
Also, a lot of the opportunity for large scale projects is gone; building a large tract of homes in the Bay Area means building super-exurban in places like Tracy. Projects like the Vallco mall replacement in Cupertino take a decade+, and what ends up getting permitted will not usually look anything like the initial plans, or what's technically allowed by law. (This is changing slightly in California in that by adding enough below-market-rate deed restricted units, you can build according to code and zoning without greedy neighbors vetoing the project. )