A record number of Americans can't afford rent
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This is not to say that people shouldn't own their homes. I think in an ideal world, most people would own, or even all people would own and the market would just be liquid in terms of selling and buying. I think ownership has a lot of downstream benefits to communities, but by enacting so many policies to safeguard owning as an investment we've basically killed homeownership in the future.
Edit: 30 year fixed rate mortgages are just an example, there's tons of other issues. We've basically given homeowners the keys to power to fight back against any and all building developments. Zoning too is part of the issue, and is frequently used to fight back against building. If you want change, vote for a land value tax which is a good start to aligning incentives properly
Absolutely! Build more housing, at any price level[0], and rents will stop growing and maybe even come down.
[0]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4629628
It hasn't been disproven. There being more vacant homes than homeless people just means that the market isn't clearing, because the minimum price acceptable to the landlord is higher than the maximum price acceptable to the homeless. This could be from any number of reasons, none of which "disprove" the fact that the laws of supply and demand do in fact apply to housing.
As an analogy, there are always jobless people even when there are vacant positions to fill. Why? Because of a mismatch between the price of labor, which is artificially inflated by minimum wage laws and another hundred laws and regulations that make it costlier to employ someone, and the economic value generated by that labor.
Who cares if there are vacant homes in downtown Detroit for sale or rent? If you moved there you wouldn't be able to get a job
And as with many other ways to make a living at the expense of society - such as fraud, theft, and abuse - it should be illegal.
- there is a housing shortage
- as a society, we should make sure that resources are available for the ones who need it most
- people who earn more money, deliver more value to society (not necessarily true of course, but well, capitalism)
- as a society, houses should be available for the highest earners first
Therefore, everyone should increase prices as much as possible. Until you cannot sell or rent to anyone, then you lower slightly until you can.
Canada is in worse shape, and doesn't have 30 year fixed mortgages (most are 5 years), and you can't write off mortgage interest expenses. In other words, our homeowner incentives are worse, and yet the house crisis is also worse.
That's leaves what you mention off-the-hop: we aren't building enough. But why? Is it a supply or demand problem? My country is starting to believe it's the latter.
That's right. The states that have the least land-use freedom[0] are some of the worst in terms of housing availability.
I live in the Bay Area and know multiple households making well over $250k who rent largely due to the fact that those who bought 10-20 years ago are paying about 1/3 of the property tax of a new buyer today (even setting aside interest rates).
Simply “build” is not the answer. “Building smart” would be a better answer. Build “vertically” instead of “horizontally”. Build 10+ stories residential buildings. And build shopping malls vertically too. Build walkable cities so that people don’t have to rely on cars. Etc.
If you have residences that are an hour away from groceries, even with no empty lots nearby, I think people would find it obviously profitable to buy a residence and convert it into a grocery shop. Capitalism alone takes care of the need to be this smart.
If nowhere builds enough, maybe it's not a practical solution?
Also interesting to observe that the places that build by far the most, that is, the places which are most densely inhabited, are also the most expensive (NYC, SF).
I know the counterargument that even NYC simply hasn't built enough. Need to build more, a lot more. But I have to ask, if the #1 densest place in the US isn't dense enough to be cheap (instead of the most expensive), maybe density just can't make it cheap in practice?
Maybe it takes a place like (Isaac Asimov's) Trantor, with buildings miles and miles dense to achieve cheap housing in a dense place? Will there ever be such a place on Earth? (Do we want to live in such a place on Earth?)
Of course, this could also result in just rents going up, so maybe also put a cap on that?
There are areas where a lot of housing is being built but most of it is is siphoned off the local-resident market by investors who convert them into AirBnB rentals. So now all this housing stock exists, but only to serve tourists, and the locals can neither rent nor buy a place to live.
Local political leaders tried to pressure the investment firm to lower the rents, but they responded with "fair-market rent, blah blah blah", and nothing changed. The shameful thing is that the web page of the large investment firm (sorry, don't have a link) basically spells out their strategy: "Purchase rental units in small, low-ish income communities. Raise the rent. Profit. Rinse and repeat." The web page boasted about huge returns; it didn't talk about "fair-market rent, blah blah blah".
When developers are well financed there's no counterbalance to this strategy, they can keep these units off the market until the price point is right and drip feed some more, without a cash flow crunch they are not losing money.
I've seen this strategy being used in some São Paulo's neighbourhoods, new developments would sell maybe a tranche of 10% of apartments, after 6-12 months a new tranche of some 20%, then another 6 months and 30-50% would appear, crashing the price of the previous owners. Rinse and repeat.
If that was the case, the point would be an increased supply pushing the price down.
What about them? They make it more feasible to own a home. The rest of your comment appears to favor people being able to own homes, but this comment opposes one of the few things that help make it happen.
> We've basically given homeowners the keys to power to fight back against any and all building developments.
How is that? As a home owner, I didn't get the memo. The local government approves or rejects all kinds of building sites without ever polling or asking anyone outside their agency. Homeowners of the area don't have any input.
I submit that artificial currency inflation is not a good thing as economists claim.
I do agree, there is really something weird about owning 'extra' houses that you may only use a few weeks a year.
Reductio ad absurdum... if rich Chinese businesspeople buy every home in Vancouver (strictly to park money, not live or rent), nobody who works in Vancouver can live there and everybody has to commute from the suburbs.
Edit - at an indivual level, you're right, who cares. At a policy level, ensuring reasonable housing for the general public is a good thing.
Manhattan only exists due to Manhattan schist, exceptional bedrock due to old volcanic flow.
Many locations have poor subsoil for tall buildings, even with the best foundations there are other limits to building height.
There's a lot of potential space, sure, but not infinite space - it's finite on planet and bottlenecked by transport and terraforming off planet.
Nowadays though, it's common to own that second dwelling in a city or other built up area.
Just last week I was talking with a family member (mid-60s, about to retire). They are planning on buying a small apartment in the city their son and grandchildren live in. They are not selling their existing house in another city to do this. They plan to use it only while visiting and have explicitly stated that they see it as an investment. They are by no means 'rich'. 30 years ago this would have been unheard of for people in their position.
Another pertinent question would be the overall supply of housing: one obvious factor that could help explain the graph I just described is that the overall supply of US housing has gone down, meaning that fewer owners are in a position to rent out property at all. Hence the supply of rental properties is significantly decreased, which will drive up the price.
[1] https://www.statista.com/statistics/187576/housing-units-occ...
Edit: I'm also not sure that their definition of owner occupied excludes second homes. From the linked page:
> Owner occupied housing is where the person who owns a property – either outright or through a mortgage – also resides in the property. Excluded are therefore rental properties, employer-provided housing and social housing.
Hm, yes, you're right, I was misreading the y axis.
> I'm also not sure that their definition of owner occupied excludes second homes.
"Resides" generally means principal residence, which excludes second homes. However, it would be nice if the site would clarify that.
As you own more of a scarce asset, margins on rents are driven toward zero.
An aside, I often see worry of corporate ownership of property. While of course this is an issue, the bulk (72%) 1. of the problem lies with simply affluent people who own (fewer than ten) investment properties. I do think however, a fair penalty is to just tax based on the degree of rentiership from property investing, therefore a marginal tax on number of properties owned seems reasonable.
1 https://www.pewresearch.org/short-reads/2021/08/02/as-nation...
Unfettered use of housing stock as an investment is inefficient and frankly undemocratic as the delta between ownership and renting entrenches inherited wealth. Ideally, although up for debate, would be to use marginal tax to fund creation of low income housing units as Santa Fe NM has recently implemented as a luxury tax on new home purchases.
Just as an example:
Assume a baseline property tax level of say, 6%.
Primary residence - 2% discount to 4% Non-primary residence, in same region (county/city) as primary = 6% Non-primary residence, not in same region as primary = increase 2% to 8%
Non-primary residence owned by a corporate entity rather than a citizen = increase 4% to 10%.
You do that, it should make doing things like this much harder.
https://www.cnbc.com/2023/02/21/how-wall-street-bought-singl...
So your idea is fine, but the numbers are way off.
My proposal would be more like:
Primary residence: 1%
Rental property with 1y+ lease: 1.5%
First secondary residence, owner-occupied seasonally: 2%
Third residence, vacant, or full-time short-term rental: 5%Isn't that going to push up the price of lower end apartment rentals? Why would we try to squeeze more money from poor people to the benefit of richer home owners?
1. Homes that are vacant for more than 6 months out of the year 2. Homes that are short-term rentals for more than 6 months out of the year
Incentivize owners to either get long-term tenants in, or sell.
AirBnB is making things much worse. Landlords have discovered that turning a house into a short-term rental property is more lucrative than having a long-term tenant. That's horrible for the long-term rental market when everyone does that.
We don't need to make it illegal. Just tax the shit out of it and disincentivize it.
I don't know any actual stats, only that in searching for an apartment they came up a lot in searches and I assumed it was partly to make more money (a 3br apartment with 3 people paying $3k each is $9k vs renting the whole apartment for $6k-7k)
But, also, rent in general is too damn high and it's lowers the price "for some definition of lower".
Remote is definitely better than the status quo of subsidized suburbs housing car commuters though.
Notice I didn't say that we should only look from the environmnental standpoint.
Suburbs are subsidized? What do you mean?
Look at the graph in this example @2:59: https://youtu.be/7Nw6qyyrTeI?si=BVi7PNEizNnQ7FKh&t=179
They are almost perfectly incentivized to attract working young people and families to help increase their tax base (property tax, income tax, sales tax) and housing would help them do that. Given most large cities are facing huge financial deficits, wouldn't this make sense?
(Yes, I'm aware of regulatory capture and the inefficiency of local government, but shouldn't there be SOME common sense?)
Every time a new development gets started in our neighborhood, Facebook neighbor groups explode. The older generations hate how it's ruining the character of the neighborhood. The younger generations ask where the fuck they're supposed to live when prices are so high.
Thankfully, in the last few years it feels like the YIMBY voices are getting a lot louder.
I have difficulty understanding this often repeated assertion.
I've been voting for over 30 years. I've never (to my best recollection) had a ballot question about increasing housing supply in my town. The town government is constantly approving (and sometimes rejecting) housing developments, but they have never asked me.
For areas like the Bay area where the cost of living is high (making city employees expensive), zoning for residential instead of commercial means that they're limiting their future tax base while having to provide services to these houses, so cities avoid building housing as much as possible.
The reason urban areas, especially coastal cities, don't permit more housing has more to do with NIMBYism and, more recently, leftist politics that sees all private and even much public development as evil--because so-called gentrification, because money changes hands, etc.
[1] Note that the way schools are organized and funded in California means there's less local disincentive stemming from the need to fund schools than might exist elsewhere. I'm not familiar with the numbers, but if you're a municipality looking to keep tax money flowing through your area as opposed to being redistributed elsewhere, I wouldn't be surprised if public schools are a net win.
1) The 'special interest' effect — where narrow groups of highly-motivated individuals become more politically organized and effective than the rest, whose interests are at odds with the minority group but whose members are, on an individual basis, not affected enough to take political action. This is especially true when the special interest group is highly-resourced.
2) The USA system of deciding what gets constructed where is slow, bureaucratic, and tends to have lots of nucleation sites for local special interest groups to assert their political power.
2) NIMBYs are, by definition, landed gentry, and therefore more highly-resourced than young renters.
If you want the rent to go down, you should make it profitable for investors to build lots of supply of housing, rental or ownership. Lots of non-owner-occupied houses is a good thing if you rent.
How about people invest in businesses and not things we need to exist.
Instead of pitting renters against homeowners, think of policies that reduce costs for both renters and homeowners by adding supply. E.g., relax zoning to raise height limits and allow apartments, allow more worker visas and encourage people to work in the trades, subsidize construction loans.
Every single landlord is stopping somone from owning a home. If people need to rent we can offer apartments.
This isn't rocket science.
But to explain the increasing share of rental housing, the book Kevin Erdmann, Building from the Ground Up explains that the problem is not investors overinvesting in houses, but residents who are locked out of the mortgage market due to post-Great Financial Crisis regulations that killed the homebuilding industry across the country. If residents had the same access to credit that they did before the GFC, then they would be able to outcompete investors. There’s no point in suppressing rental investment just because we mistakenly suppressed mortgages.
But whether you are looking to buy or looking to rent, more supply helps, so that is the underlying problem to address.
I think this chart explains much of the disfunction in multiple arenas of American life. https://fred.stlouisfed.org/series/W270RE1A156NBEA
https://www.axios.com/2023/12/16/housing-market-why-homes-ex...
I tried to read the "article" underneath the graph but it just seems to be a disjointed collection of assertions strung together with inappropriate connectives and insane formatting.
Moodys has a more technical analysis if you have patience to read it all using both census and realtor data:
https://cre.moodysanalytics.com/insights/cre-news/one-good-y...
So if your property tax on the first house (chronologically) is $1, and the property tax on the second is $5, you pay 1 + 5x2 = $11.
I'm talking about anyone (including individual corporations) owning more than one property in which they do reside.
IE, the problem isn't the tax break, it's the constraint on housing supply.
You also failed to say, “nothing needs to be fixed at MY property! Why did my rent go up!?”
Because it takes several years to save up to replace an HVAC system or a rotten deck or plumbing failure and I have to charge based on the projected cost.
Maintenance costs and taxes are the only ones that could be a factor out of your original 5 - your point is drowned out by the poor supporting facts.
And taxes aren’t even going up, just the valuation of the properties - which drives higher rent anyways.
And since you’re a landlord, you should have a maintenance plan that would reimburse you for things like HVAC.
Suppose you are a homeowner. You definitely know then that utilities, insurance, possibly the mortgage, definitely maintenance costs have gone up. You pay those as your "rent" because you are the owner. So the rent went up, even though you are the landlord.
The rest are a small fraction of the total cost of ownership (vs financing the initial purchase).
Rents appear to be going up faster than the total cost of ownership (the financing costs are fixed, or nearly so).
Electricity - not paid by landlord.
Labor - not sure what you mean.
Maintenance - fixed rates for home warranty for big things, minor costs for maintenance otherwise which are factored into rent monthly regardless of whether they are used. So that could account for single-digit percent rise in rates.
Anything else?
This false premise that "living alone" is some sort of social achievement needs to end.
Mean is a bit of a misleading number here since the distribution really is discrete - and there are a lot more 1 and 2 person homes today than before, which is contributing to the lower average.
Could this really just be showing that less people are marrying and having kids?
A further question would what is called a “household” (and how that has changed over time). Is a 4 room house with 4 renters room renter, 4 households or just one by the owner?
How does people owning multiple houses affect this number?
US census has a publication on how single-person households are skyrocketing.
No, it's not. Let's stop patronizing poor people.
I agree. I find the idea of living around other people absolutely detestable, but I do often wonder how much of this is cultural.
small unit (<10) landlord here. fwiw: I explicitly forbid any sort of sublet/short term/airbnb type thing in my leases. think that is the rule vs exception around here. too much abuse potential and problems. so dont just blanket blame tenants. and each unit only can have so many, two plus a kid or two maybe.
will say that "cannot afford" does not really come up for me anymore. I will not rent <650 credit score, good savings, income ratio, recommendations, work etc. tenant protections are so strong and courts so backed up now its just wildly expensive to get rid of people. so after two bad experiences of taking a chance now I don't take chances on people would rather have a unit be empty for months then pay 1-2 years or more for a bad tenant. but you are wrong to blame tenants current situation is hard on all sides. painful to impossible to replace/expand old buildings, hard to make things cheaper, good tenants get screwed by bad ones just as good land lords do, bad landlords abuse things, everything is way more inefficient then it should be. everyone just does their best with the various perverse incentives.
This speaks to a fear of mine, which is that laws meant to protect tenants end up backfiring against tenants because they reduce the pool of landlords willing to rent to them. E.g. from the article:
> At the state level, Colorado lawmakers have proposed a bill to limit the reasons for which a landlord can evict a tenant.
(fwiw I am not blaming you -- you're not running a charity. Just pointing out the tension between what lawmakers are attempting and the cold reality of the situation.)
yes. really wish "game theory" was something more commonly (ever) in politicians dictionaries. Like not opposed to decent tenant protections at all! but worst words to hear are 4 years after some law "oh we didnt mean for THAT to happen!" like it was friggin obvious it would. think through incentives please!!! there are lots of very reasonable policy goals one could choose, course got my own opinions, but in a democracy can accept if after reasoned debate some other goal is picked. but what sucks is then doing policies that dont help at all vs making things more efficient all around.
- a really good fast dedicated "small claims" style judicial system for example. like for ip or corp law in delaware or whatever, if people can resolve matters quickly with quality and without lawyers big expense/risk reduction.
- or we got all this crazy 3d scan lidar stuff now right? been very impressed by what even old phones can do, got used iphone cuz cant afford new one and made basic floor plans and point cloud of my house, not perfect but neat. and apparently the real deal are amazing. $30k is too much for one but not actually that expensive at gov level. so imagine states have official neutral service, couple of inspectors each with a fast scan unit, paid for by very low rental tax. as completely normal standard required and no extra cost part of renting a unit and leaving a unit, they come by and just do a scan of the whole thing. everyone signs, takes like 5 minutes. now there is official before/after down to centimeter 3d of entire apartments held by the state. or be paid to come again as part of any dispute. no more debate about "that was already there" on either side, for anyone ever again. single inspector could do dozens or even hundreds per day in an area. would not solve everything but stuff like that would add up in terms of getting facts straight, at low cost.
- gov backed insurance for aid programs like section 8 so landlords get made whole for property damage and expenses from the poor, not just rent?
dunno. not a genius on this but would like more innovative approaches tried. but if its risky to rent then risky people wont get rented to, more deposit will be requested, or more consolidation. but incentives always will play out in the market.
>Just pointing out the tension between what lawmakers are attempting and the cold reality of the situation.)
right and define what is "tenant protection" too, like WHICH TENANTS POLITICIANS/ACTIVISTS!?!? because the tenant protections we have now meant it took me 6 months to evict someone yelling racial slurs at other good tenants! it's not always about money. that tenant was well protected from me, but what about the other tenants? racial slurs, domestic screaming fights but not violence are protected speech not like they can sue or have the police arrest them for it. eviction should be the answer lease says you won't ruin other people's enjoyment of their own property but proving stuff is hard. and law compounds. at least we don't live in two party consent state here but if you do and now it is illegal to record them saying slurs now what if no-cause isn't a thing?
anyway sorry for the rant. just wish things were better, wish bad landlords got stomped, wish bad tenants could abuse things less too tho.