Hacker News Reader

Comment by mschuster91 | Hacker News Reader

There won't be a "doom loop", just a market correction to relatively normal levels. Free market at work - everyone speculating on real estate professionally knows the risk (or should have known after the 2008ff subprime crisis). Bailing out morons should not be a thing - if no one suffers this time, it's just an invitation for an even worse bubble. The problem is that instead of eating their loss like they fucking should, it seems like the uber rich are funding endless "return to office" campaigns in media, and once again try to let the 99% suffer from worse employment conditions and onerous commutes to the office instead.

The only people I actually feel sorry for are regular homeowners who bought way overpriced properties because they had no alternative.

View on HN

The worry about the doom loop is not that rich people lose money but that the current budget is tied to high tax receipts and when assessments go down tax revenue will plunge. Services will have to be cut to balance the budget.

> Services will have to be cut to balance the budget.

No. The US could also go and fix their tax code for once - start taxing the uber rich. Warren f..ing Buffet complained years ago he has to pay less tax than his secretary. A lot of the issues that cripple many Western countries relate to stupid tax breaks for the rich and mega corporations who have bought out politics.

Not everyone believes taking Bill Gates’ money and sending it to random drug addicts in SF is very good policy.

Bad example as his foundations probably does this through outreach programs

Foundations that are probably better run than local government.

Which is true but extremely problematic in itself. The poor and destitute should not depend on the graces of billionaires (or, worse, churches) for their basic needs, society should take care of them.

>The US could also go and fix their tax code for once - start taxing the uber rich.

SF is the most liberal city in the most liberal state. They don't have any issues taxing rich people (or any other person, that's for sure).

> The US could also go and fix their tax code for once - start taxing the uber rich.

We're talking about a municipality, not the US. Plus your whole point is fine in theory, but it's not going to happen any time in the near future. The question of whether SF is going to get stuck in a doom loop is a real one, and it should be examined through a lens of the social and political environment we're in, not a theoretical and unrealistic one.

The wealth in California is the equity that longtime residents hold in their homes. This is untouchable thanks to Prop 13.

If you want a Sweden-style social democracy, you need to significantly raise taxes on at least the upper quintile (in the US, that's just over $130k - coincidentally, that's around the cutoff for income subject to Social Security tax). But >$130k/year income is most common among the professional-managerial class, which has become a core Democrat constituency, so Democrats will for sure not raise taxes on them - Democrats have already promised not to raise taxes on households making less than $400k. So the US tax code isn't getting fixed anytime soon, unfortunately.

Sweden also has a 25% VAT.

Sweden style democracy only works because everyone is heavily taxed, from poor to rich.

Sweden has a higher wealth inequality than the US. Mind you this is different from income inequality.

Yes, like Rainier says, a VAT would be very helpful to have as well. The US can probably get away with a little less taxation in theory due to having so many PMC high-income earners, but that would depend on the US knowing how to run government services efficiently...

My larger point is that Americans are largely under the delusion that heavily taxing the 1% would be enough, which is just not the case.

> My larger point is that Americans are largely under the delusion that heavily taxing the 1% would be enough, which is just not the case.

728 people in the US own more assets than half the US population together [1].

Let that fact sink in, and then ask yourself why the fuck no one in the US has taken to the pitchforks yet. At least here in Europe, the lower classes are on serious strike runs the last months - the UK, France and Germany are just examples.

You know what, you could leave each of these 728 uber rich people a billion dollar each. Enough money that neither they nor their children and their children have to work a day in their lifes ever. Basically, aristocracy, "landed gentry" or however you want to call it, just legally recognized. The rest of the wealth gets distributed among the population. Easy, isn't it?

[1] https://www.snopes.com/news/2023/04/13/728-billionaires-hold...

Assets.

I'm not defending the massive inequity which clearly exists, but wealth tax that targets a theoretical (eg) land value will lead to silliness as this 0.00017% aggressively devalue their holdings to avoid this tax.

So what, then pull a NYC AG on them and investigate for fraudulent devaluing.

That might be necessary in the steady state but Sweden never redistributed as much wealth to the top 0.1% as the U.S. has in the last 40 odd years.

In theory the US could go very far taxing a much smaller base because it has allowed so much money to be redistributed to this tiny base.

But even ignoring that your comment is unnecessary. Even if a Sweden like social democracy is the goal (which it doesn’t need to be…there’s many stopping points in between), the US doesn’t need to do it overnight. Raising taxes on the richest and then increasing the tax rates on lower brackets gradually over the decades as needed is an absolutely fine way to head in that direction as well.

Define “rich.”

perhaps that is true in the abstract - but the budget for the City of San Franisco is +$1Billion US dollars Per Year. Add to that, they routinely cheat small business and tourists on money (traffic tickets, multi-year payment terms for services rendered). Thirdly, the largest population group of the City is ethnic Chinese, some of whom are quite good with money.

This.

> regular homeowners

for years there have been fewer and fewer of those "regular homeowners" and increase in offshore money speculation, purchase-to-AirBNB, and other non-obvious transactions. A recent examination of US Tax filings (posted on YNews IIR) show that +1 million adults in the USA have the financial ability to purchase a home, and have not done so.

> A recent examination of US Tax filings (posted on YNews IIR) show that +1 million adults in the USA have the financial ability to purchase a home, and have not done so.

That doesn't seem like a good measure. There are a lot of people with means who would rather rent a space downtown that own a SFH in the suburbs. Those people would/should not be considered "regular homeowners".

The apartment I used to rent for $3,600 is now renting for $3,300 on Craigslist. I don't think the massive collapse of office building rents will be reflected in residential real estate. People still want to live in SF, it's companies that have realized that an office is a waste of money. Or maybe just rent an office with a few conference rooms to host meetings with business partners, let the bulk of your workforce WFH.

> The only people I actually feel sorry for are regular homeowners who bought way overpriced properties because they had no alternative.

Many markets in other states are still going up. The condos in my building are selling for $100 - $150k more than they did in 2022. Lower inventory and volume, but the demand is red hot.

> There won't be a "doom loop", just a market correction to relatively normal levels. Free market at work - everyone speculating on real estate professionally knows the risk (or should have known after the 2008ff subprime crisis). Bailing out morons should not be a thing - if no one suffers this time, it's just an invitation for an even worse bubble.

The difference is the doom loop leads to things going below "normal" levels (and "normal" is not really a useful term here). Also, I don't think it's fair to say elevated office building prices in SF were the result of wild speculation - it was one of the most booming employment markets in the US with an incredible dearth of supply. High prices are just economic principles at work. Then something totally unexpected came and upended how we work, and that changed the market entirely - it was an external force, not people paying prices that weren't supported by the rents.

> Then something totally unexpected came and upended how we work, and that changed the market entirely - it was an external force, not people paying prices that weren't supported by the rents.

The thing is, if one is investing money, one should also take into account risk. Remote work has been a thing for years now, with ever faster adoption of broadband Internet. But it seems like a lot of people have either put way too much money into one single asset class or preferred to distribute money to shareholders instead of building some buffer for when tides start to turn. Either of these mistakes is completely avoidable and part of virtually any economics class, it's not rocket science - it's just plain old greed all around.

> The thing is, if one is investing money, one should also take into account risk.

This is true, but I think the idea that people should have priced in a black swan like a pandemic (and not only a pandemic, but a pandemic that changes the way we work) is not a reasonable one.

> Remote work has been a thing for years now, with ever faster adoption of broadband Internet.

This makes exactly the opposite point that you intend - despite the fact that people, especially those in tech, have had the infrastructure to work remotely for many years, SF's market still continued to go up in value and have incredibly high occupancy rates. If the condition existed for remote work for years and yet it had no appreciable impact on the use of office space, it wouldn't make any sense to assume that there will be a sudden change to cause everyone to work remotely and the market for office space to crash.

> This is true, but I think the idea that people should have priced in a black swan like a pandemic (and not only a pandemic, but a pandemic that changes the way we work) is not a reasonable one.

The world has become ever more chaotic the last years. Natural disasters, general political instability, even geopolitical instability has been on the table for a long LONG time now. Acting like a "black swan" event is unthinkable has been beyond foolish.

"The only people I actually feel sorry for are regular homeowners who bought way overpriced properties because they had no alternative. "

No alternative?

Highly doubtful.

More like they were just the "greater fool".

I can feel sorry for them in that because someday I may be in their shoes.

But they did have alternatives.

if remote work stays SF will be in a similar situation to Detroit, although they will be somewhat better off just due to the climate and location of SF making it a desirable place to live. But SF will still lose a ton of tax revenue if fewer tech workers are living in the area

Reply on news.ycombinator.com