
Rents are plunging in the most expensive U.S. markets - apsec112
http://www.businessinsider.com/us-rental-market-analysis-2016-11
======
xor1
Los Angeles though... :(

One of my friends just moved here and is sharing a 5-bedroom home with _25_
other people. I thought he was bullshitting me, and I still couldn't believe
it when I went over. He's paying $600 a month to share a bedroom with four
other guys. He told me it was the best thing he could find on 1-day notice. He
pays for rent online, and he has no idea who the actual owner is, nor who is
actually receiving the money.

I thought that kind of living arrangement only happened with undocumented
workers (barring SF and NYC, which I've always considered to be ridiculous),
who can't easily exercise tenant rights.

Now I really wonder how many of the apartments and homes around me are just
completely packed with people who are splitting rooms.

~~~
oneplane
Woah, I knew about things being bad in the USA, but I didn't know living
conditions are going towards third-world standards :/ Where I live (The
Netherlands) there are laws that even protect foreign workers (i.e. from
Poland) from all being stuffed in a single room.

At this point it's starting to look like even jail cells have more room and
privacy.

~~~
johngalt
The problem isn't: "We are an exploited underclass unable to live in
reasonable conditions." The problem is more along the lines of a gold rush
type movement of people. Where large cities are attracting a large influx of
people increasing demand on housing faster than it can be corrected.

Plenty of inexpensive housing in Ohio. Not so much along the California coast.

~~~
pascalxus
That, plus a complete refusal on the part of government and voters to build
any more housing.

not to mention all the environmental impact fees, taxes, and endless
regulation which increase housing costs way beyond where it would be without.
It's not just LA and SF (gold rush cities that have housing problems). In CA,
even the rural areas with miles of space in every direction, housing still
costs a lot more than the national average.

~~~
Bombthecat
I'm not sure where you plan to build in new york for example?

Build even higher buildings?

~~~
TulliusCicero
Sure, why not? If zoning regulations were relaxed, developers would definitely
be willing to build more housing. Even most of Manhattan doesn't have very
tall buildings, just look at Google Maps in 3D view.

~~~
cguess
That's mostly because of the geography of Manhattan though. The places with
tall buildings (Midtown and Downtown) sit on a solid base of bedrock, in
between this base is much deeper a lot harder to build to. Housing in
Manhattan isn't the big problem anyways, it's Brooklyn and Queens. But there
are a lot of political issues in there.

Personally, I don't want to live in these new developments because I find them
ugly. You can't tell the difference between a new flat NYC, London, Amsterdam
and Paris anymore.

~~~
TulliusCicero
> Personally, I don't want to live in these new developments because I find
> them ugly. You can't tell the difference between a new flat NYC, London,
> Amsterdam and Paris anymore.

This seems like a solvable problem though. Like if everyone complains about
how ugly everything is, why aren't there regulations passed specifying how
things should look (or should not look)? Developers mostly just want a
consistent way to build and make money, if you specify how things should look
most will fall in line instantly.

------
refurb
A friend used to rent out a spare room in SF on a regular basis. Two years
ago, he could get $1850 for a single room with it's own bath room, furnished.
We're talking 6-10 replies from a Craiglist post within 24 hours. Stopped
renting it out about a year ago.

He just posted it again. Zero takers at $1850. Finally got someone for $1600
(-13% decrease in rent) after a month. A dramatic change.

The rental market in SF is definitely turning towards the buyer.

~~~
denim_chicken
Yet $1600 is still absurdly high for such a simple living space.

~~~
s_q_b
That's about the cost of a studio in DC.

~~~
ryanSrich
Odd. 4 years ago I paid almost $2400 for a 700sqft studio in DC. Have things
changed? (Haven't lived in DC since).

~~~
s_q_b
I had a 2 bedroom lease in Adams Morgan, one block off 18th, for $2500 last
year. We've since bought a place a few blocks away, so I'm unsure if it's
risen.

~~~
ameen
How expensive was it to buy vs. to have continued the lease?

~~~
s_q_b
Well, it's much better to buy. But only if you have the capital. At the time
listings were only on the market for one to two days.

------
zazen
I know nothing about the San Francisco housing market apart from what I've
heard in discussions here on HN. The received wisdom here seemed to be that
powerful NIMBY lobbies in SF were preventing needed development and causing
the sky-high rent. But this article is talking about an "historic construction
boom". Did something change regarding development in SF? Or was the NIMBY
effect always a bit over-stated? Anyone care to speculate?

~~~
SomeStupidPoint
Speculation that this is the case in SF, but is an effect I've seen:

You can get a dip in average rent without (sufficiently) dropping bottom
quartile rents, which is what NIMBYism tends to block, by having a lot of nice
condos built.

The top quartile of rents dips heavily as places jockey for condo buyers,
everyone moves in to a nicer place as the wave spreads, but the price at the
bottom remains (mostly) the same (even if unit quality goes up), because the
oldest buildings get torn down at the end of the wave, rather than genuinely
increasing the housing supply (because land to develop on is still hard to
come by).

So it's possible average rents dipped, but service workers still struggle to
afford rent, even if they struggle in a nicer unit.

Tl;dr: I expect the building that happened raised low-end apartment quality
rather than drop price, even if average rent is down. Because NIMBYism.

~~~
zazen
This sounds plausible, and it chimes with the article's statement that the new
supply is at the high end. Thanks! If people were only blocking certain kinds
of development, that would explain why low-end prices stay high even while
there's a lot of construction causing the median price to drop.

~~~
SomeStupidPoint
I think of it as: NIMBYism keeps high-density zoned land high value, so the
floor never comes out of the market, even if you squish the top down.

Houses don't belong in (the core of) major metros anymore, but there are a lot
of wealthy home owners who live there, and have built up political networks
over decades or centuries.

It's a tragedy of our system that we let 20 residents keep out 200.

~~~
mooreds
Should the 20 just be bought out, or forced to sell, or allowed to rezone and
then sell one by one (with the first person getting the most money, as each
lot is turned into a high rise).

We are facing some of this in the city in which I live and I don't really know
how to address it (I can see validity in the arguments of both sides) so was
wondering what you see as the path forward.

~~~
SomeStupidPoint
This is a tough one.

I'm generally leery of things like eminent domain, because they can be very
problematic. On the other hand, there's a good chance that converting a lot of
blocks also means we need to up utility capacity in the area, which can be
very disruptive for residents, so it also makes sense to rebuild an area at a
time.

I like the idea of having the city nominate regions, and then any time 90% of
a block agrees, the whole block is sold as a unit (or maybe auctioned with
minimum bid) and rezoned at that time. (This kind of idea meshes well with the
development plan of having several high density clusters smattered around the
city as neighborhood focal points, which is what my city recently switched
to.)

It doesn't quite fix the utilities problem or some people being forced out,
but I think it balances out a lot of competing forces reasonably, and keeps us
from working with weird lots during development (as the city can repartition
the block during rezone).

------
partiallypro
Studio "luxury" apartments here in Nashville have long term leases at $1200/mo
for a studio. I was not impressed when I did a tour across the city; I asked
the occupancy rate at a few places, and was floored when they told me it was
only ~25%; these were 1yr+ old developments, which is apparently common place.
I've been telling people the city is in a bubble, but no one believes me.
Everyone says now is the time to buy, I think they're insane.

A lot of people from out of state that had higher real estate values could
sell their $400K-$500K home in California and come to Nashville and live like
a king. Now they are just poaching people knowing they'll pay up. Our hotel
rates are higher than New York City's on average. It's insane, and everything
thinks this will last. We'll see. Nashville wasn't mentioned in the article,
but I have a very hard time believing the city will sustain its current rent
levels, with such low occupancy rates.

It's actually cheaper to just buy a condo outright (which I think is still too
expensive $300K for a studio,) than to rent.

~~~
horv
I'm in Nashville as well, and was just talking about this yesterday with
people. The past couple of years has seemed to be almost entirely luxury
apartment complexes being built, and anecdotally most of the young people I
know here can't afford them, or if they can will just buy a house instead.

------
tankenmate
Can this please be re-titled as a US study? First blush of the article title
made me go "What? Seriously?"; the two markets I look at first are London and
Sydney.

~~~
soVeryTired
I've heard similar reports about the London rental market, but then again when
it comes to the housing market, the UK press report on every scrap of noisy
data they can get their hands on.

London has also seen a huge glut of (supposedly) high-end property come
online. Builders are struggling to sell, so they're now starting to offer
discounts on the new housing stock [1]. If what the article says is true, I
would be surprised if the same scenario didn't play out in London.

[1]
[https://www.ft.com/content/f6692d4e-8327-11e6-8897-2359a58ac...](https://www.ft.com/content/f6692d4e-8327-11e6-8897-2359a58ac7a5)

~~~
mschuster91
London, I believe, has a big problem with the Brexit because many banks plan
on or are already leaving the country. No banksters, no tenants for
outrageously expensive properties.

~~~
jacalata
Hmm, I haven't heard of any banks leaving yet.

~~~
kbenson
Here's some stories.[1][2] Of course, these are about future plans, not
actually leaving, so take them however you want. AFAIK,the real concern is not
that banks will actually "leave" the UK, but that they will downsize as they
move operations to other areas of the EU, which makes complete sense. Some of
the laws that allowed free access to EU citizens from the UK will end with
brexit, and while UK officials will try to get something similar in place,
there are EU officials that feel that a deal that's essentially the same is
not in their favor, and that the UK should pay a penalty for leaving. This is
the uncertain climate that is causing some banks to hedge their bets and move
some operations to the EU.

1: [http://uk.reuters.com/article/uk-britain-eu-banks-
idUKKCN12M...](http://uk.reuters.com/article/uk-britain-eu-banks-
idUKKCN12M0TZ)

2: [https://www.theguardian.com/politics/2016/oct/22/leading-
ban...](https://www.theguardian.com/politics/2016/oct/22/leading-banks-set-to-
pull-out-of-brexit-uk)

~~~
jacalata
I was responding to the statement that some banks were planning to leave and
some had already left - I have heard of banks planning to leave, but have
definitely not heard of anyone doing so. Was curious if the poster might come
back with any evidence for that claim but as they haven't, I think it was
probably just hyperbole.

------
Analemma_
Clicked on that list hoping to see good news in Seattle... turns out we're up
more than any other city in the top 10. Sigh. There actually is a decent
amount of housing construction in progress but it seems like it's not nearly
enough.

~~~
jorblumesea
Also Seattle Resident, has a few things going against it:

* Highly constricted physical space, poor public transit and almost continuous traffic problems due to natural bottlenecks. This means people have to live close or else risk a 60 min+ commute one way.

* Single family homes drive a lot of property demand here, not just luxury apartments. Those are still expensive and hard to come by, and they are not building much more of that within the city proper. Average home value is hovering around 500k. Apartment building will not offset this very easily.

* In general, the city was historically undervalued given the insane density of highly skilled and highly paid jobs. We have some heavy hitters and offices of some large international tech companies but rents remained low for quite awhile. This is just the adjustment.

The prices for apartments will level out eventually, but we still have some
way to go imo.

~~~
techsupporter
> poor public transit

I disagree. It's not perfect, and it's definitely no Manhattan subway system,
but I live car-free in Seattle while working on the other side of the lake and
it has been pretty awesome. The trolleybuses are smooth, there are a bunch of
regional express routes, and--especially after the prop 1 passage in 2014--the
span of service and on-time performance have both increased.

If your measure of "quality of public transit" is defined in miles of light
rail, yes, Seattle's is poor. But the buses, in my experience (though I don't
usually travel during traditional commute hours), are a great companion to the
light rail that we do have.

~~~
umanwizard
Seattle buses are okay compared to suburban non-cities like Phoenix or Silicon
Valley.

They're a disaster compared to other desirable world power cities with
functioning public transit, though. Seattle's transit system would be
considered a disgrace anywhere in Europe or Asia, or even most parts of the
northeastern US.

------
csharpminor
I'd be curious to know what the breaking point is for luxury condo developers,
i.e. how far do prices need to sink before they're in trouble? As an extension
of that, who are the investors that will take the hit?

Presumably, the capital put down for the construction of these condos gives
landlords and developers a hard floor on the prices they can accept. Is their
solvency dependent upon charging luxury rents, or could they get by leasing at
more moderate rates?

------
conanbatt
The past 2 years for me have been about the enormous exposure of how rent has
been going up and house affordability has become a real problem world-wide.

As legislation started to get promoted in different countries (Vancouver's
foreign tax, Berlin's Airbnb ban, Argentina rent-caps) I always thought that
the origin of this entire problem is the low rates for lending, and that these
laws would only be a hinderance to recovery.

This is still early to take for granted, but my suspicion is getting more
likely. I feel sympathy for the people that told me that houses are the safest
investment, and that renting is always worse than buying.

~~~
spikels
I agree that laws passed to deal with high housing costs are often
counterproductive in the long run. The classic example is rent control.

Can you explain your theory that low rates drive high rent inflation? Seems
like it would be the opposite for several reasons: low rates are associated
with low inflation, low rates make it much cheaper to build and operate
apartment buildings, etc.

~~~
didibus
Counter productive in what ways? Rent control works great for Montreal and has
for years. That city is very affordable to live in, because of it.

~~~
superuser2
Rent control still leaves people who want apartments without them, it simply
changes the allocation strategy from "willing to pay market price" to "was
here first" or, in the case of designated affordable housing, lottery.

Increasing density limits, or improving transportation to allow wider sprawl,
actually add housing supply in a way that might keep up with demand.

------
cwp
Meh. "Plunging" is a strong word for an 8% drop. Even if you buy the
"effective rent" argument, 22% isn't much of a plunge. This is a start,
limited to a very few neighbourhoods, and merely makes the housing market
slightly less insane.

~~~
skwirl
8% in a year is plunging. Factor in inflation, and 5 years at that rate and
real rents drop 41%. That would be a massive decrease in a short period of
time and it's hard to imagine it happening - which just supports the notion
that 8% in a year is a pretty big drop.

You should be celebrating this news and not complaining.

------
ChuckMcM
The rent concessions are the real leading indicator. As every month of "free
rent" in a 1 year lease lowers gross rent by 8% (4% for a 2 year lease, and
2.7% for a 3 year lease) As a strategy it assumes that the rent will come back
up after the lease period. When it doesn't the rents actually get lowered to
avoid being the highest rent in the list.

Also there is an impact on increasing AirBnB regulation both from cities and
from landlords. Now there are often very explict callouts in a rental lease
that specifically mentions getting money for the use of your apartment from
non-family members. That means you're not going to be able to monetize that
second bedroom to pare back your housing expense.

~~~
macNchz
A whole bunch of big new 'luxury' rental buildings have flooded the market in
my area of Brooklyn, and the 'free rent' concessions they're
offering–especially with a bit of negotiation–are substantial. Some friends of
mine recently moved into one (with a few months free rent), and it's shocking
how few apartments have been rented despite how long the building has been
available.

The effects of these buildings coming online have been noticeable in my nearby
neighborhood: two apartments in my 6 unit building that otherwise would have
been rented in a matter of days sat empty for several months until they
lowered the asking rent multiple times, I got an immediate 'yes' to a lowball
counter when it came time to re-sign our lease, and the number of nearby 1
bedroom listings under $3k has multiplied dramatically since the last time I
was searching for a new apartment.

------
ppierald
My anecdotal evidence shows a dramatic shift of my 20-something and
30-something year old co-workers to Oakland from SF due to affordability.
Oakland is close, cheaper (though rising), diverse, and close by BART. This is
probably putting a good deal of supply back into the SF market, but putting
pressures in the East Bay markets (Berkeley, Oakland, Alameda).

------
pfarnsworth
The best cure for high prices is high prices.

Very few trust that supply vs demand doesn't work, but it absolutely does.
Sure there will be temporary spikes in price, but as rents go to ridiculous
heights (I think $5000 for a 2 br condo is utterly ridiculous, and that prices
is about 5 years old in SOMA), it will abate at some point. As long as there
isn't a monopoly, or people aren't manipulating the markets, fair and properly
functioning markets will self-correct.

Always.

~~~
zeroed
They are manipulating markets.

Apartment communities (I first saw this in Bay area) are doing whatever they
can to make sure you end up in a particular month of a year. This is summer,
at least now.

Most of them are doing this. Some use lower prices for 6-7-14 months (the
number depends on what month right now). I personally signed up for 14 months
without realizing what would happen to me. Some try to just cheat. One of
apartment communities sent me a contract for 13 months without mentioning a
word. Fortunately I knew about this scam at that time and didn't sign it.

So as long as many people need to renew their contracts at the same time -
boom! Artificially heated market.

I hate them so much for doing it.

I wish more people were aware of it.

~~~
digler999
What if it's a more benign reason, like they just want to prevent leases from
ending in fall or winter when the demand is lower ?

------
freyir
A 2 bedroom in my building dropped from $3950 to $3250 over the past few
weeks. The landlord can't unload it. And today I got a notice that they're
raising my rent. Shortsighted -- they'll have another vacant apartment on
their hands soon.

~~~
onlyrealcuzzo
Ha, I'm in Hollywood, and my complex has been sending out emails offering
promotions to recommend friends on a bi-weekly basis for a few months now.
Vacancy has got to be around 20%. Meanwhile, there's 6 new luxury complexes
with over 1500 units opening or that have opened this year-- _JUST ON MY BLOCK
ALONE_ [2,3,4,5] (for reference, the entire population of Hollywood is roughly
22k [1]). The new complexes are practically ghost towns, Eastown in particular
was offering a free month for ages before finally dropping rents 10%. Sunset
Gordon Tower is literally kicking everyone out that moved in, which was only
17% occupied anyway [5].

Meanwhile, my lease is set to expire, and the renewal offer comes with a 10%
bump in my rent (as it has for the last two years).

The sad part is, I feel like it's working from an economic standpoint. Vacancy
was close to zero when I moved in (literally got the only apartment
available). Even though it's now got to be around 20%, the rent has risen by
over 30%. Pretty sure that means they're making 4% more over the course of 3
years, which given the dismal global economic growth, that yield isn't too
shabby.

With all the vacancy, you'd think development would be slowing, but it's
actually picking up even more. There's 7 new hotels planned for the block [6].
And there's several other residential towers planned for the block [7], 750
new units by 2018 just in one, the Palladium Towers [8].

Keep in mind that this is just one block. Roughly the same thing is happening
a mile up Hollywood Blvd at Highland. And to a lesser degree a mile down the
street at Western.

All of this is great. We desperately need the new units. The mixed-use
walkability will be an example to the entire city for how great Los Angeles
can be.

But where are this many luxury renters suddenly going to appear from? Wishful
thinking?

[1]
[https://en.wikipedia.org/wiki/Hollywood](https://en.wikipedia.org/wiki/Hollywood)
\- 22k population

[2] [http://la.curbed.com/2016/7/16/12206104/camden-apartments-
ho...](http://la.curbed.com/2016/7/16/12206104/camden-apartments-hollywood-
mixed-use-luxury) \- Camden 287 units

[3] [http://la.curbed.com/2014/3/9/10134626/6201-hollywood-
christ...](http://la.curbed.com/2014/3/9/10134626/6201-hollywood-christened-
eastown-readies-for-summer-opening) \- Eastown I 535 units

[4] [http://urbanize.la/post/eastown-apartments-phase-ii-
moving-a...](http://urbanize.la/post/eastown-apartments-phase-ii-moving-ahead)
\- Eastown II 515 units

[5] [http://la.curbed.com/2015/9/14/9921562/sunset-gordon-cim-
gro...](http://la.curbed.com/2015/9/14/9921562/sunset-gordon-cim-group-
eviction) \- Sunset Gordon Tower - 299 units (quite the circus).

[6] [http://la.curbed.com/maps/hollywood-hotels-
map](http://la.curbed.com/maps/hollywood-hotels-map) \- Hollywood Hotels Map

[7] [http://la.curbed.com/maps/a-guide-to-the-nearfuture-of-
the-h...](http://la.curbed.com/maps/a-guide-to-the-nearfuture-of-the-
hollywood-skyline-1) \- Hollywood Future Skyline Map

[8] [http://la.curbed.com/2016/3/22/11286562/hollywood-
palladium-...](http://la.curbed.com/2016/3/22/11286562/hollywood-palladium-
towers-approved) \- Hollywood Palladium Tower (planned)

~~~
chrisabrams
Most of these projects were planned and approved many years ago. One of the
challenges with development is that you start a project knowing people won't
move in for 3-5 years (when construction completes).

------
rietta
The rents are astounding to me as an Atlanta area resident. My fully loaded
mortgage+escrow payment on an entire 3 BR house with a full basement (in which
I have an office and wired for Cat6 ethernet) is less than $1100/month. There
are tons of tech companies within commuting distance and even more remote work
opportunities as a developer. Chances are good that we'll finally have gigabit
fiber to the home within a year and current Comcast service is serviceable at
75 MBps.

~~~
techsupporter
> The rents are astounding to me as an Atlanta area resident. My fully loaded
> mortgage+escrow payment...

I see this a lot of the time when rents for certain areas of the country come
up. My friends in Dallas and Austin say the same thing. FWIW, I own a duplex
unit inside the city of Seattle, so my views may also be a little skewed.

My usual response is, "yes, but then I'd have to live in [other city]." There
are a lot of advantages to living where I do, in my opinion; that's why I
chose to live there. The weather is a not-insignificant consideration. I don't
ever have to look at a weather forecast and see that the expected high is
100F-or-above for the next month. Natural beauty is another. Local culture is
yet another.

One other point about the cost of housing: you wrote "Atlanta area," so I
imagine you're OTP. By comparison, I'm paying $1,600/month to own my 2BR house
inside Seattle, and I don't begrudge any cent of it. Mortgages inside Atlanta
proper are possibly in the same range.

So it's not a question of being astounding or out of the ordinary, just
different life choices.

> Chances are good that we'll finally have gigabit fiber to the home

...and I have gigabit fiber, too. ;)

~~~
rietta
And yes, it is about weighing the pros and the cons. I personally have chosen
very much to refuse any engagement/job that requires daily commute into an
office. I understand that is a privilege that comes with being a developer and
not something everyone can do.

~~~
cinquemb
I was in the same position, but decided to just move Jakarta to live in a
fully furnished 2bd apt (along with other other amenities of the building) for
about $750/month (I paid this much for a room in a 3bd apt in Boston, with
nothing sort of the amenities). Different pros and cons (see remote working
cross timezones).

I think in the long run as more and more work allow for it, it will free up
pressure in extremely nominally inflated areas that I consider most top US
cities to be, but I see this more as a long term trend since there's a lot of
entrenched interests to treat real-estate more like a financial instrument.

~~~
mooreds
And remote work needs to get more and more mainstream.

If that doesn't happen, then the pressure will remain on the geographies with
many job opportunities, and most of the wealth will flow to the landowners.

~~~
cinquemb
There are some economic incentives for companies to push towards more remote
working: less capital expenditures of offices (which might matter more for
smaller companies), possibly some downward pressure on wages (depending on the
industry/skills), but I'm not too optimistic about it.

------
emodendroket
Surprisingly, everyone sees in this data exactly what they thought before
looking at it.

------
sytelus
This is quite a news. I just looked at renting page of my formal apartment in
Wayback Machine. They had listed 3 bedroom + garage at $2200 in Puget Sound
area from January to May. Now its $2100. Not a big decrease but I don't recall
I had ever seen a decrease during past 5 year or so. It's actually quite
shocking.

This probably means that the real estate price cycle theory is right. First
house prices goes up so construction boom starts and then supply overfloods
the market and suddenly there are no takers which brings rent as well as house
prices down. It's closed loop with delays so you get overshoots and
undershoots. This can be mark of price fall for next 3-5 years in real estate
as well rents.

~~~
adventured
It's fascinating that it's happening at a time when wage growth across the
board is at a eight to nine year high (and plausibly heading even higher so
long as unemployment remains where it is). So whatever supply is coming on-
line, is entirely cancelling out that wage growth.

------
incompatible
Apartments have been the last frontier of expensive mass-produced products.
Hopefully this is the end, and not just a temporary blip.

~~~
twelvechairs
Its the land not the apartment which is expensive. Land, especially in cities,
is finite. This makes it different to other mass produced products

~~~
rahrahrah
So build up. Here in London people don't build up, for some reason (I mean
other than office spaces, obviously). I think it's this nefarious british
mentality that old is good. So you never demolish any 2 story buildings, you
just build more outwards. Then you complain that the prices are insane.

~~~
james1071
The main problem is the greenbelt.

~~~
rahrahrah
See, there we go again. Why is the problem the greenbelt? Between central
London and the greenbelt there's a mind-blowing extension of small houses in
every direction. There is A LOT that could be built before getting to the
greenbelt. The greenbelt is only a problem if you want to continue building
small houses.

------
dalbasal
Do we know what policies are genuinely effective at improving housing
affordability? This is the one biggest thing the (proverbial?) middle class
have been struggling to make gains on over the last generation in a lot of
otherwise successful places.

~~~
acomjean
Public Transit/road infrastructure helps costs too. If you can get around an
area faster you effectively increase the number of units that are available
for people working at your location keeping prices a bit lower.

------
itissid
And I thought Jersey City and Hoboken were bad. I pay 1825 in rent for a 2
bedroom that's 30 min from my work. But thats because the landlord has not
jacked up the rent since I moved in 2 years ago. A new place as big as mine
today will probably rent at 2500, which is still not as bad as many other
places like SF.

------
morgante
Amazing, supply and demand actually works!

Someone should tell all the protestors who opposed construction of new luxury
condos because they thought it would somehow increase rents.

~~~
branchless
Yes, rents are set by wages as you have to pay them out of your wages.

Supply and demand also works for buying. Because central banks have ran with
ultra-loose monetary policy since forever credit supply is huge and prices
detach from wages.

What a total mess these guys have created. Easy on the way down, chaos on the
way back up.

~~~
gragas
> rents are set by wages as you have to pay them out of your wages.

Are you implying that there's some sort of grand-scale collusion on rent
prices? If most rent takers think "hey, the median salary is X so I'll just
charge X * 0.33" then what's stopping another rent taker from drastically
undercutting that price?

~~~
13of40
You could argue that home prices are tied to wages and rent is tied to home
prices.

~~~
ehnto
I would say that easy access to loaned capital has perversed the connection
between wages and house prices a bit.

~~~
gragas
>easy access to loaned capital has perversed the connection between wages and
house prices a bit

Only to a certain extent. Loaned capital is still limited by wages (no one is
going to give a $1 million mortgage to someone who makes $40k per year). But
again, I don't think wages has hardly anything to do with house prices; it's
all about supply and demand. Sure, most people might only be willing to pay
1/3 their salary on housing. That doesn't mean that the price for housing is
that number. If a huge supply of housing for less than that price floods the
market, then why would everyone continue to pay 1/3 their salary for housing
when they could pay 1/4 or 1/6?

------
czep
Strange concluding sentence about the prospect of an influx of Chinese
investors to rekindle rising rents. Is there evidence that such a trend is
likely in the near future? I have seen reports that a lot of money is
expatriated from China into real estate because it's easy to launder that way.
In general is it expected to increase so much that it would have a noticeable
impact on rents in the major markets?

~~~
repsilat
_I have seen reports that a lot of money is expatriated from China into real
estate because it 's easy to launder that way._

I don't know about rents, but overseas investment certainly drive up price to
own in Auckland NZ and Vancouver, Canada, though the latter may have stopped
due to changing tax policies. Auckland is as big as SF.

If you're investing in property overseas you want the value to be stable or
increasing, though. I don't think these people are value investors who would
jump into a market with declining prices because the houses were suddenly
underpriced -- quite the opposite, I think some would rush to get out in that
case.

------
rch
This looks like a short term dip while the market adsorbs new units. Am I
missing something?

~~~
Decade
No, that seems about right. The “Progressives” (I consider them to be a
peculiar West Coast form of conservative) have now made unprofitable
subsidized housing an integral part of any large-scale housing project, which
means housing can’t be built unless the financiers can expect the market-rate
prices to remain sky-high. So, when prices go down, they have to stop
building.

What would make a difference is additional YIMBY pressure to roll back these
harmful restrictions and delays, and allow housing to be _affordable to
build_.

[http://www.sfyimby.org](http://www.sfyimby.org)

------
tgamba
I am glad I had my SF adventure when I did. I lived there from 1996-2001 and
paid less than US$900 for a charming Nob Hill bachelor. That same apartment
goes for $3k today.

Currently I am in Toronto, paying CAD$1400 for a rent controlled one bedroom
downtown that I have been in for over a decade. Current market price for same
is CAD$1700, but this includes a flood of new condo units more luxurious than
mine.

Toronto is looking good in comparison to US cities. It has all the amenities
of SF, Seattle or Boston, though the IT salaries are not as high. Plus, no
Republicans.

------
rasengan0
PSA: if you're looking, be on guard

[https://www.bbb.org/council/news-events/bbb-scam-
alerts/2016...](https://www.bbb.org/council/news-events/bbb-scam-
alerts/2016/03/craigslist-abounds-with-rental-scams/)

------
pascalxus
SF still has a loooonnng way to "plunge" before the rates resemble anything
half way reasonable.

------
mrcactu5
everyone I know in New York City is complain about rent INCREASES and
GENTRIFICATION

Article: "East Harlem rents are among Manhattan's fastest-rising this fall"
[http://ny.curbed.com/2016/11/21/13703220/fall-market-
report-...](http://ny.curbed.com/2016/11/21/13703220/fall-market-report-nyc)

so I have no idea where business insider is getting it's data from. Also here
is a lovely map of the subway stations and the median rents near by.

Notice that Bronx hardly exceeds $2000 (compared to the reported NYC median of
$3100).

[http://ny.curbed.com/2016/4/29/11535674/map-nyc-subway-
rent-...](http://ny.curbed.com/2016/4/29/11535674/map-nyc-subway-rent-
comparison-renthop-analysis)

~~~
stale2002
That's because those are low rent areas that are still playing catch up to the
extremely high rent central city.

The article is most talking about the high rent areas that are now less
extremely high.

------
jpetitto
Not LA though!

------
felizuno
Market corrections in overpriced cities. Seattle still growing, turns out
sustainable growth is sustainable.

~~~
debatem1
Why do you think Seattle's growth in housing costs is sustainable? Certainly
the cost increases in single family detached units have been large and rapid.
My naive interpretation of that would be that such increases are a) unlikely
to continue indefinitely and b) are pushing demand for 2+br apartments to
unusually high levels. That's weakly supported by this data, which show a 6.4%
increase in 1br prices and 8.2% for larger units. Of course, many other
markets have completely taken single family detached off the table, so maybe
I'm not making an apples to apples comparison.

~~~
NotSammyHagar
seattle has more growth counted in the number of construction cranes than any
city in the us. prices of standlone houses seem to be increasing, apartment
pricing is less clear, but this article seems to know.

~~~
debatem1
Not trying to be dense, but possibly succeeding: why does this indicate that
Seattle's price growth is sustainable? If Seattle builds too many apartments
with those cranes surely the growth in prices will collapse (homes seem to be
supply constricted and to some degree a lack of supply has dampened demand,
but this might change if condos became very affordable). Alternatively, if
Seattle builds out too little then prices will grow unsustainably until they
collapse to sustainable levels due to supply restricted demand dampening. So
there seem to be two goldilocks zones: one where demand and supply are in
harmony, and the other where they're totally out of whack and the combination
of effectively liquid real estate and fluctuating value overdampen to produce
stable averages with unstable individual outcomes. Which is the claim here?

~~~
NotSammyHagar
You are right, current growth doesn't mean sustainable. I'd look at the
example of the bay area and the endless growth there. Seattle is cheaper, less
dense, has all the same pieces, allowing for lots of growth to catch up to
that level.

------
coldcode
Not in Orlando.

------
davidf18
Even with the rents decreasing, they are still way to high for most people and
adjusted for inflation, far higher than they were 30 years ago.

The reason for the high rents are structural -- the use of politics to create
artificial shortages in housing by use of zoning density restrictions. This is
the deliberate creation of market failures due to "rent seeking" \-- use of
politics to create artificial scarcity to benefit a special interest group.
The artificial scarcity inflates the value of property to landlords such as
Donald Trump harming renters.

An example, regarding taxi cabs: NYC had a law creating a limit on taxi cabs
to 13,000 medallions --needed in order to drive a yellow, hail-able cab. The
market value of the taxi medallion was $1.2 million which meant that for
drivers who typically lease cabs, a substantial part of their income went
towards leasing the cab with medallion. Thus, taxi riders (renters of use of
cabs for trips) were paying far more than they should and taxi medallion
owners (landlords) were receiving a huge windfall.

Then Uber/Lyft came to NYC and the political artificial scarcity of
(electronic) hail-able cabs was relieved. The result is that the medallion
price went from $1.2 million to < $700,000 and far more drivers were no longer
paying high leases to medallion owners and driving for Uber/Lyft instead. Our
prices for taking hail-able cabs have decreased and continue to decrease.
Everyone gains except the medallion "landlords."

This rent-seeking market inefficiency tremendously damages the economy. Fewer
housing units are built than they should be in an efficient market. Tenants
are paying a far greater proportion of their income for rent instead of goods
and services. Simply fixing this law that benefits wealthy landlords can be a
substantial stimulus to the economy.

Another cause of high rents is the number of illegal immigrants that are
allowed to stay in certain cities. This NYTimes article claims there are about
600,000 "undocumented" immigrants in NYC (of a population of 8.5 million)[1].
Almost all undocumented immigrants are in the country illegally and hence the
more correct word is illegal. These 600,000 illegal immigrants adds
substantial market pressure that otherwise would not be there if the law were
enforced and hence the rents are far higher for low-income New Yorker American
citizens than they otherwise would be.

[1]. "Some 574,000 city residents are undocumented,..."
[http://www.nytimes.com/2016/11/23/nyregion/economic-
tsunami-...](http://www.nytimes.com/2016/11/23/nyregion/economic-tsunami-
fearing-donald-trump-immigrants-in-new-york-spend-less.html)

~~~
drcross
Can you explain how illegal immigrants are able to rent in the New York
market? Surely the landlords will demand identification and references and
would refuse someone who is illegal?

~~~
davidf18
In Manhattan, generally, there is more background checking and credit rating,
etc. But I'm not so certain that is true in the outer reaches of NYC which
would have housing that is more affordable to lower-wage workers.

Overall, NYC (and others) do not check papers for public school, health care,
... at least as far as I know. In fact, there was a NYTimes op-ed within the
past month where 200 students at Berkeley are illegal immigrants.

------
mmcclellan
Where in Boston could someone possibly find a two bedroom for $2600?
Shenanigans

~~~
MrFoof
So here's the results[1] from Zillow for a 2BR for $2500 or less in an actual
Boston zipcode. These aren't all the results, as it limits the results to 500.
If you're not looking for a managed, new luxury apartment, it's tremendously
easy to find.

Moreover, if you go on Craigslist, you'll find far, far more. Zillow listings
are almost always represented by a realtor, broker or property management
company so it's only a subset of the market.

[1][http://www.zillow.com/homes/for_rent/Boston-
MA/house,condo,a...](http://www.zillow.com/homes/for_rent/Boston-
MA/house,condo,apartment_duplex,mobile,townhouse_type/44269_rid/2-_beds/0-656706_price/0-2500_mp/42.47197,-70.893574,42.199911,-71.258183_rect/11_zm/)

~~~
BWStearns
They're mostly in Brighton and way deep Dorchester. The commonwealth ave one
is as ridiculous as the same price being advertised for a real 2br in a
doorman building in Chelsea. This is akin to measuring salaries by the high
end of glass door. Sure. Someone may have gotten that price, or it could be a
lie, but you won't.

~~~
meddlepal
Yep, flawed study. The stuff in Brighton, deep Dorchester, Hyde Park and
Roxbury should be thrown out since a lot of it is very much not TOD and you'd
barely know you were living in Boston.

~~~
BWStearns
What is TOD btw? I think I agree with you but I'm curious about the term.

~~~
jeffwilcox
Transit-oriented development - built along trams/metro/rapid bus cooridors

------
alexktz
adblocked. bye!

~~~
canadathrowm
It is extremely frustrating that they actually show the content, let you read
a paragraph or so, THEN won't let you continue without paying in some way. I
won't be supporting this website.

~~~
massysett
You already weren't supporting this website. You want them to produce content
and then give it to you for free while using Adblock.

~~~
kodablah
While I don't agree w/ the parent posts necessarily, sometimes providing
discussion around an article has the effect of promoting it which is a way of
supporting the website by drawing eyes which do not adblock. Promotion is not
always direct to final consumer; popularity plays, especially on news
aggregation sites.

------
pmoriarty
Have there been any experiments in legislating ceilings for housing prices? If
so, what has been the effect?

~~~
fennecfoxen
> Have there been any experiments in legislating ceilings for housing prices?
> If so, what has been the effect?

As Assar Lindbeck put it, "next to bombing, rent control seems in many cases
to be the most efficient technique so far known for destroying cities." For
instance, in 1970s when the Bronx was burning, a major contributing factor was
New York City rent control. In some neighborhoods of the Bronx and in Harlem,
fully a third of the housing stock was literally abandoned by its owners: it
was easier to just walk away and let the building rot than to take any action
to repair it and continue to collect rent-controlled rents.

Even notoriously planned-economy San Francisco has backpedalled from the
price-ceiling approach, favoring instead a mandatory "right to lease at the
same inflation-adjusted price forever" in all its housing contracts.

~~~
PhantomGremlin
_it was easier to just walk away and let the building rot than to take any
action to repair it and continue to collect rent-controlled rents._

My parents and I lived in a rent-controlled apt in Manhattan in the early
1970s. Rent was $80/month. The 1973 oil embargo happened and heating oil
prices went up. Oh, did I forget to mention that the $80 rent included
heat?!!!!

Basically things were so bad for the landlord that it cost as much to heat the
average apt in the building as that apt paid in rent. Clearly not a
sustainable situation.

We moved out of the city the next year. But in retrospect we should have
bought our apt (for about $7,000) when the building went coop/condo.

So the tenants not only enjoyed below market rents for decades, but after the
landlord was bled dry they were able buy their apts for a pittance.

Hmmm ... 12 apts, maybe two voters each, vs an older couple, the landlords,
only two votes. I wonder why rent control existed for so long? (that was
sarcasm, I know exactly why it existed!).

As Maggie Thatcher said, the problem with socialism is that eventually you run
out of other people's money. I'm sure the tenants saw some large cost
increases once they went coop, because now they had to pay 100% of all the
building costs. But that only moved them into fair value territory. All the
money they "stole" from the old landlord in the previous decades would never
be paid back.

~~~
chimeracoder
Ironically, rent control may have been the single biggest factor leading to
the consolidation of ownership of New York real estate by the ultra-wealthy.

If you were a landlord, you couldn't afford to pay enough to buy your tenants
out of their apartments. But massively wealthy investors and big banks could -
and they _did_. They bought the rent-controlled apartments that were money
pits for small landlords, and then paid large sums of cash (under the table)
to the tenants to get them to leave. Once the tenants had left, the apartments
could be easily converted back to unregulated, market-rate apartments.

Small landlords literally couldn't afford to own the buildings, because they
had to spend money to operate them and received next-to-nothing in rent. So,
they had no choice but to sell them to the investors and banks who were well-
capitalized enough to negotiate these buyouts, resulting in the mass
consolidation of real-estate by a relatively small number of owners.

And of course, the original goal of rent control (ensuring that long-time
residents would continue living in the same neighborhoods) went completely out
the window, because it was in their best financial interest at that point to
_move_. And the secondary goal (providing "affordable" housing) was gone long
before that

> We moved out of the city the next year. But in retrospect we should have
> bought our apt (for about $7,000) when the building went coop/condo.

In retrospect, you should probably have kept living there as tenants. If you
were there in the early 1970s, you'd have been grandfathered into rent
control, and rent _control_ in New York (as opposed to rent stabilization) is
insanely profitable for the tenants, even if you weren't offered the type of
buyout that I described above.

It'd have taken you 7 years just to break even on the savings in rent by
itself, but between maintenance costs (which your landlord was required to
give you for free) and property taxes (easily more than you were paying in
rent), you'd probably still come out ahead today if you'd just stayed on as
tenants.

Of course, you'd have to live there continuously and never move, and the
apartment wouldn't be yours to pass on in inheritance. But the money you'd
save would be worth way more than that.

~~~
pmoriarty
_" Once the tenants had left, the apartments could be easily converted back to
unregulated, market-rate apartments."_

This is why rent-controlled apartments should never be allowed to go back to
"market rates". They should remain rent controlled in perpetuity. Problem
solved.

~~~
solidsnack9000
Carried to its logical conclusion, this probably creates a situation where
it's worth it to knock down the building and make all new apartments.

------
Spooky23
Well, duh. The dumb money has been funding way too many apartment projects.

Where I live (Albany, NY), they just built thousands of rental units within a
15 mile radius. In one example, they are trying to rent a "luxury" two bedroom
for $2500/mo, when you have a much nicer home a few blocks away for $200k+$50k
for a fancy kitchen, etc.

------
DanBlake
Zumper is pretty inaccurate when it comes to SF I have found. The influx of
new residents still vastly outpaces new construction + people leaving SF. As
such, rents are not going down. The easiest way to verify this is just to ask
anyone trying to rent in SF.

~~~
the_watcher
Rents are going down. I am moving this weekend, and in the 2 months I've been
looking a bit, it's very, very obvious. At first, it was just that you no
longer had to essentially arrive with 3 months of rent in hand and sign on the
spot. Next, there was emphasis on how "this is the only property at X price"
(which was false on it's face). When we finally signed, the leasing agent told
us "if the price is too high, make an offer." So we came in 10% below list
price and asked for a discounted first month of rent. They agreed immediately.
Stories like this are common to anyone currently in the process of finding a
new apartment.

~~~
x0x0
sf? Which neighborhood?

~~~
the_watcher
The only ones that I encountered that weren't notably going down were Russian
Hill and the Marina, but even then, the prices weren't rising, and it was far
easier to find a place in the first place.

