
Today’s Renters Are Worse Off Than Their Parents - jseliger
http://blogs.wsj.com/economics/2016/06/29/todays-renters-really-are-worse-off-than-their-parents/
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CodeCube
I realize that this idea is dead in the water because it would require
landlords to "give up" a stream of income. However, if we ignore that for a
second and entertain a bit of wistful "what if" ...

What if we lived in world where real estate was not an illiquid investment,
with extremely high barriers to entry?

What if the monies taken in rent actually accrued equity by some schedule?

What if you could move at any point without losing your equity?

Crazy ideas, I know ... but via example:

1\. developer builds a house, has 100% equity.

2\. new tenant moves in and starts paying "rent", building up equity.

3\. Costs for repairs and maintenance have to be paid per your equity
percentage (so if I've accrued 20% equity, I have to pay 20% of the plumber's
bill while I'm living there).

4\. When the tenant inevitably moves, they take their 20% equity, and are paid
20% of the next tenant's rent payments, while still paying 20% of maintenance
costs ... this % of course decreases as the new tenant makes more payments.

This gives you the mobility to move from city to city to follow jobs, while
avoiding the money drain that is renting (ie. paying someone else's mortgage).
If a tenant stays in that property long enough, they will eventually reach
100% ownership of the property, they will have purchased your "shares" in the
house. So it remains an investment that you can get returns from, but those
returns do not last forever.

I know, it's a crazy idea; in fact, this is the first time I've ever told
anyone else about it ... but I think if it can be structured right, it could
change society forever since real estate is one of the areas that is
increasingly unavailable to the "have nots", thus contributing to ever-greater
inequality.

~~~
WalterBright
Part of being a free market is people can set up a business any way they like.
For example, there are neither legal nor regulatory barriers to setting up a
commune (communes were popular in the US around 1900). People can set up
workers' cooperatives. And your idea can be done if you can organize a bunch
of like-minded individuals to try it. You don't need to change society to do
it. Just do it.

~~~
StanislavPetrov
>Part of being a free market

We are talking about the United States, not a free market. In the United
States, the stated policy of the central bank (hint: free markets have no
central banks that control interest rates and pick winners and losers) for the
last 8 years is to inflate housing prices. The FED and the big banks still
have trillions of dollars of worthless derivatives on their books that they
have not "marked to market" because they are derived from mortgages on homes
that are underwater. The FED has taken over 5 trillion dollars onto its
balance sheet in the last 8 years in order to artificially inflate housing
prices (not including off-balance sheet loans, guarantees, and other tangible
efforts taken to prop up banks and home prices).

This is the opposite in a free market. In a free market, housing prices would
plummet with demand and credit availability, and would reach an equilibrium
with income. This is impossible in our centrally controlled economy that runs
on debt service in which even a small bump in interest rates or a small drop
in assets prices will cause the whole scheme to fall apart.

Edit: The Downvotes without replies are somewhat amusing. I can't decide if
its out of ignorance of the financial system on the part of those who read the
hacker news, or cognitive dissonance. I suspect a mix of both. I welcome
anyone who thinks any of the above is inaccurate to chime in.

~~~
sremani
That is quite a good way of putting things in perspective about Fed and free
money building up the asset bubble, which is only made worse by stricter
zoning laws and NIMBY.

As far as downvotes go, HN leans left, that is not news, any conservative or
libertarian views will collect the usual down votes. Strangely it happens in
bunches too.

~~~
dpc59
If you lean left you shouldn't be arguing for rent collecting oligopolies.

~~~
progressive_dad
I believe the standard "party line" on housing costs would be something akin
to Sweden. Purchasing a property for the explicit purpose of renting it is de-
facto barred. Its not illegal but must be approved by your local tenant/owner
association (like a condo board or home owner's association). This has the net
effect of raising rents, making it extremely difficult to rent in the first
place, while keeping home ownership within reach for nearly everyone due to
depressing any kind of housing bubble or gentrification through property
acquisition and flipping.

[https://www.justlanded.com/english/Sweden/Sweden-
Guide/Prope...](https://www.justlanded.com/english/Sweden/Sweden-
Guide/Property/Buying-property)

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aphextron
This is just a small part of a wider shift in the structure of our society. We
are moving toward a future where a small minority of highly educated, highly
skilled people will live in complete luxury and have their every need
fulfilled at the push of a button on their smart phone, while the vast
majority of less specialized average people will serve them through various
menial services until even those jobs are automated.

~~~
Camillo
Are we? As a highly educated, highly skilled person I live in destitution,
while some baby boomer jackass collects free money for buying an apartment
decades ago.

Rent - or, rather, the inflation of real estate value in cities - is entirely
about transferring money out of the productive part of society. If you make
your living with "education" or "skills", you're on the losing end of it.

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notadoc
Well yes, this is obvious. Nobody today is buying ranch houses in Palo Alto
for $160,000 anymore.

~~~
zip1234
Also, the size of new homes has risen from 1600 in 1973 to 2600 today. It's
not like all factors remain the same. You can drive through old neighborhoods
near me with 1000 sq ft houses that sell for $40k because nobody wants a house
that small. I'll bet a lot of the homes being built in Palo Alto right now are
not small.

~~~
0xcde4c3db
> You can drive through old neighborhoods near me with 1000 sq ft houses that
> sell for $40k because nobody wants a house that small.

How closely have you looked at those $40K houses? I've seen a handful of
sub-$100K smaller houses listed in my region, but they're wrecks; they'd need
a massive amount of work to get anywhere near the comfort and safety level of
a modern, well-maintained house. They're basically the house equivalent of
buying a $500 car.

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huherto
House affordability seems to me one of the major issues in the US. (Along with
high costs of college and Health)

It hurts families. But it also makes the economy less competitive. For
example. It is hard to bring any manufacturing when you have to pay higher
salaries that are barely high enough to pay rent.

Not only that. Because housing costs are high, people have less available
income. They spend less money in other services like entertainment, dining
out, etc.

So, it is a loose-loose. I don't even know if anyone wins. May be when you
sell your house at the end of your life you win. /s

~~~
mcgrath_sh
It depends on what area of the US you are in. In Western PA and the midwest,
housing can still be found in decent neighborhoods at a reasonable cost. HSH
did a study showing 27 metro areas and the cost to buy a house.
[http://www.hsh.com/finance/mortgage/salary-home-
buying-25-ci...](http://www.hsh.com/finance/mortgage/salary-home-
buying-25-cities.html)

For Pittsburgh, a $29k takehome is roughly $40-45k a year. That is in the
$20/hr range. I know at one point, my salary was $51k/year and I was brining
home $36-37k annually. I was working a standard office job that was not
particularly exciting, but all I needed was to have a bachelors degree. If you
have one adult working full time and another part time for an extra ~15k a
year, you can live relatively comfortably in Pittsburgh, and I am assuming
other medium sized cities in the Midwest.

The big costal cities (SF, NYC, LA, DC) do make it difficult to own housing,
but almost every country has cities where it is more expensive to live.

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ap3
Is this an apples to apples comparison, pretty sure we are not talking about
only rentals available on the 1960s.

Median house sqft has increased - how do the numbers look if we compare not
just median rent, but median rent per sqft?

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davidw
Support your local YIMBY group!

~~~
huherto
So yes. This may be a big part of the problem. One of those things that is
good for the individual but bad for the economy as a whole.

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eevilspock
Georgists and Geolibertarians would not be surprised with this state of
affairs.

