
Rising Rents Are Pushing More Tenants Past the Breaking Point - kimsk112
https://www.bloomberg.com/news/articles/2017-10-26/rising-rents-are-pushing-more-tenants-past-the-breaking-point
======
beebmam
In large cities across the US (and probably most of the world), there is some
very large scale foreign speculation in the housing market going on. This is
leading to rising rents and rising home prices.

In Seattle, for example, many (newly) wealthy Chinese people are buying houses
purely for investment purposes. I know some of them. One of them has purchased
10 houses, and lives in only one of them (when they are in the states).
They've made millions on just this speculation.

In the short term, this means housing prices are absurd. In the long term,
when these houses are no longer appreciating in value at such large scales, we
can expect a crash in the housing market. Which will likely mean something
similar to the housing crisis of 2008.

The Seattle city council has wanted to pass a law that would make it visible
to the public which houses were being bought by foreign investors, but it was
deemed illegal.

[https://www.seattletimes.com/seattle-
news/politics/proposed-...](https://www.seattletimes.com/seattle-
news/politics/proposed-seattle-taxes-targeting-foreign-buyers-investment-
properties-take-fire/)

To me, this is absurd. This is a human rights issue (homelessness is growing
by a large amount). This is also a national security issue; this speculation
cannot happen forever, and when it ends, I forsee an awful crash.

~~~
rsync
"To me, this is absurd. This is a human rights issue (homelessness is growing
by a large amount)."

Homelessness is a mental health issue. Nobody is homeless because of foreign
speculators.

Yes, people are indeed incentivized to relocate to housing markets that
Chinese people have never heard of like, for instance, _Tacoma_.

If those people spent half their time working and saving (like their parents
did) as they spent bitching about their basic human right to live in a
walkable neighborhood with artisanal foodstuffs they would then have a nice
down payment when the _inevitable crash comes to the hot housing market in
question_.

~~~
njarboe
It probably was the case 5 years ago that most homeless people in the US has
some kind of mental problem. These people were almost all men and you would
see them sleeping on the sidewalks or parks with almost nothing in the way of
possessions. Now, at least in Oakland, there are tents everywhere. From single
ones trying not to get noticed to tent cities with 10-50 tents all in one
area. Many of these people have a piles of possessions and some still have
jobs. Maybe not quite on the scale of Hoovervilles in the Great Depression,
but getting there.

~~~
webnrrd2k
I'm confused... Are you saying homelessness can't be a mental health issue
because they now have tents? Or because they have possessions?

~~~
njarboe
Not at all. I even stated directly that in the recent past most homeless
people had mental health issues. Now added to this first group are people that
just can't afford the rent and have been evicted or pushed onto the street.

------
maxxxxx
Seems the economy is finding the sweet spot where education, housing and
health extract the maximum amount of money from people right before they
break. Finding that spot while a avoiding a revolution has been the biggest
challenge for ruling classes throughout all of history.

~~~
techiferous
That's a simple take on a very complex system.

~~~
bo1024
The simpler the insight, the more valuable and powerful it is -- if correct.

I think it does capture a key basic principle underlying current trends. In
any economic system, there is some total amount of "welfare" or value
generated, and it gets split in some way.

So maybe you have a constant value of $2,000 per month for having a place to
live. 10 years ago your rent was $1,000 per month and so of the $2,000 worth
of utility generated by you living there, you got half and your landlord got
half.

Now your rent is $1900 and you still would rather pay it than be homeless, and
by many reasonable metrics the economy is better than ever, but your landlord
is capturing almost all of the value in the system and _you are reaching the
breaking point_.

And I personally don't think it's too simplistic to be true that, as powerful
companies optimize (including politically), this kind of transfer is occurring
in a lot of sectors in the US this decade.

------
adwhit
Rent is an amazingly effective means of redistributing wealth upwards. I have
easily paid over £100k rent in my life, always to people substantially richer
than I am.

Always enjoyed this Churchill quote - from 1909!

 _Roads are made, streets are made, services are improved, electric light
turns night into day, water is brought from reservoirs a hundred miles off in
the mountains -- and all the while the landlord sits still. Every one of those
improvements is effected by the labor and cost of other people and the
taxpayers. To not one of those improvements does the land monopolist, as a
land monopolist, contribute, and yet by every one of them the value of his
land is enhanced. He renders no service to the community, he contributes
nothing to the general welfare, he contributes nothing to the process from
which his own enrichment is derived._

~~~
mindcrime
So what's your point? Do you want to eliminate rent? Should people who either
can't afford to purchase a house, or who simply don't want to, be forced into
homelessness?

Personally I've paid over $115,000 in rent over the past 12 years, but I don't
begrudge my landlord their money. I attained utility in exchange for the rent
I paid, and have no problem with the arrangement. Not, of course, to say that
I'm _happy_ when rent goes up. But it's a conscious choice I make to live this
way, not some sort of exploitation.

 _He renders no service to the community, he contributes nothing to the
general welfare_

Housing isn't a service that contributes to the general welfare? I call
bollocks.

~~~
moultano
Land Value Tax.
[https://en.wikipedia.org/wiki/Land_value_tax](https://en.wikipedia.org/wiki/Land_value_tax)

This is distinct from a property tax in that it only measures the value of the
soil it sits on, so doesn't punish the landlord for improvements. The value of
the land itself is almost entirely outside of the landlord's control, it's
determined by the community around it. As a result, this is one of the least
distortive taxes.

~~~
chimeracoder
> This is distinct from a property tax in that it only measures the value of
> the soil it sits on, so doesn't punish the landlord for improvements. The
> value of the land itself is almost entirely outside of the landlord's
> control, it's determined by the community around it. As a result, this is
> one of the least distortive taxes.

When land value is taxed at a higher rate than property value, it creates a
perverse incentive for landlords - especially those who _don 't_ live in the
area in which they own property - to encourage blighting and sabotage the
value of the land, while instead reinvesting this money into improvements on
the property itself. That concentrates wealth even further in the hands of
people who can afford to own these insular properties in otherwise
"undesirable" areas.

Actively blighting a neighborhood to depress values and make it easier to
purchase land for new properties (either on the market or via eminent domain)
is _already_ a problem, and one that significantly skews power towards the
extremely wealthy and massively-capitalized institutions. Taxing the value of
the land separately from the property that sits on it (and at a higher rate)
would exacerbate this unbelievably.

~~~
gowld
How have all the economists missed this obvious point?

Murder also hurts property values. Fortunately, we have the ability to create
laws to punish destructive behavior.

Why would a landlord destroy the value of their own property, harming their
own ability to draw rent?

~~~
chimeracoder
> How have all the economists missed this obvious point?

They haven't. That's why taxing land value at a higher rate than property
values _doesn 't_ have support from mainstream economists.

> Murder also hurts property values. Fortunately, we have the ability to
> create laws to punish destructive behavior.

Murder is a lot easier to identify and prosecute than blighting. We already
have laws against blighting. They don't seem to work. Increasing the incentive
to blight is unlikely to make blighting _less_ attractive.

> Why would a landlord destroy the value of their own property, harming their
> own ability to draw rent?

You're missing the point. They wouldn't destroy the value of their property;
they'd extract value from the land (and neighboring land) to _build up_ the
value of their property. Land-value taxes encourage consolidating wealth in
improvements to private property that have _zero_ impact on anybody other than
the property owner (or tenant). That's the exact opposite of the desired
outcome, because it clearly works against the public benefit.

There are plenty of areas where this already happens, because there's enough
of an incentive for property owners to do this even without skewing the tax
code specifically to reward them for this behavior.

------
kylestlb
I really hope the economy shifts toward remote work as the standard (at least
in the career tracks where it is possible). The ever increasing share of
higher jobs moving to metropolitan regions will continue to make the places on
this list worse off. More remote work might also even out the salaries across
the US a little bit. One can dream...

~~~
allendoerfer
It will mostly help India, not the rural US.

~~~
kylestlb
Even though flying throughout the US is much easier and cheaper than to India
and back? Tons of companies already use talent from other countries to create
products, the lack of remote work hasn't stopped them.

------
corpMaverick
The solution is to build more. The free market should take of it. But the
market is not free, local economic interests wield sufficient political power
to prevent this.

This is happening in almost every medium and big cities in the U.S. It is
capturing a big chunk of the productivity gains in the whole economy. It is a
tax from one generation to the next. A national solution is needed.

------
wonderwonder
Where I live (Orlando) monthly rent has been rising at a rate of 8 percent per
year while wages have essentially stayed still. In the long run this is an
unsustainable trend.

If a low income individual is able to rent a house while working a full time
job and just make it every month, at the end of their current lease when rent
adjust upwards they will be forced out. Moving costs alone will cost them
several hundred to a thousand dollars. On top of that they need to find
another place to live which may not be possible due to the upwards pricing
trend. With little in the way of increased income, what is that person to do,
especially if they cannot afford to move and don't have a family able to
assist them?

I have no solution for this issue and certainly don't want to curtail anyone's
ability to purchase and profit from property but the future prospects of those
on the lower spectrum of incomes does not look good.

------
pinguinFromY
I live in eastern europe, in a city where the life quality is supposed to be
the best in my country, working as a software engineer, making ~4 times more
than the average salary and the rent and houses grew more than 100% in under 3
years. The problem is that the market adapted to us, the IT workers who can
afford a decent rent or buy a house but what happens to students (which are a
lot of them here) and people who make the minimum salary (which is ~250 euros
/ month) ? They are forced to live 3 or 4 in the same apartment or stay in a
nearby location outside the city and then commute a longer distance. I expect
a market crash in a few years and I'm wondering what will happen. My landlord
did borrow a crazy amount of money to pay for an apartment and if the market
crashes I expect my rent to go down but that won't happen anyway since the
bank probably won't lower his rate. We are all fucked really. This is
something that will happen in all growing cities, at one point something will
explode.

~~~
bittercynic
Inflation might bring the rent and prices back in line without the euro/dollar
amounts having to come back down.

------
nickpp
Heavily regulated (construction) market => high cost of building new (housing)
units => low supply => high sale prices + heavily regulated (rental) market =>
high rents

Simple economics, no?

~~~
ThrustVectoring
Sale prices aren't coupled to rents like you think. Landlords charge what the
market will bear - how high housing prices increase rents is through making
purchasing housing impossible for more people, who are then force to bid up
rents.

------
rednerrus
It should come as no surprise that housing is appreciating as rapidly as it
is. If someone is going to loan you $500,000 at 3% and that property is going
to appreciate at 8% a year, you'd be a fool not to take that deal.

We really need interest rates to get back in line with what it costs to loan
people money.

------
tbirrell
Google Cache Link to avoid paywall:
[https://webcache.googleusercontent.com/search?q=cache:-cyHPK...](https://webcache.googleusercontent.com/search?q=cache:-cyHPKwMGE4J:https://www.bloomberg.com/news/articles/2017-10-26/rising-
rents-are-pushing-more-tenants-past-the-breaking-
point+&cd=2&hl=en&ct=clnk&gl=us)

------
zaph0d_
The problem is getting worse as new jobs are mainly created in cities. They
also offer a more attractive infrastructure such as fast internet speeds and
shorter commutes, than rural areas. There are of course many other advantages,
but I think these are some of the most significant ones. This creates an
unhealthy growth, which we see now manifests in the completely out-of-control
rents worldwide. The only way this problem can be tackled is to invest
massively in the rural infrastructure and stop this disturbing trend towards
growing megacities and sparsely inhabited rural areas. Rising rents contribute
to an large extent on social inequality. As a renter will only get living
space for each month but nothing else of value in return, as opposed to buying
a house/flat. The calculation for renting has been fine in the past decades as
renting was often cheaper than buying a house, but this changed as we see now.

~~~
ryuker16
The issue with rising rents is zoning laws.

Since investors can't as easily build new housing, they invest in existing
ones as speculation.

If the demand is there, the skies should be filled with construction cranes
and new tech investment in building cheaper, faster, etc.

Instead we slap protectionism on it so everybody fights over a smaller piece
of the real estate pie.

------
swendoog
I'm so tired of seeing these articles, and then seeing nothing done to fix the
problem.

I feel like we've been seeing "HOUSING COSTS PROHIBITIVELY HIGH" and "RENTS
OUT OF CONTROL" for years now in California and yet can anyone point to
meaningful progress on a solution? The legislature is inept and completely
unable or unwilling to address the issue head on.

SB-2 for example. This is the kind of legislation we're getting in 2017, when
the median home price in CA is twice the national average, and less than a
third of CA households can afford a median priced home?

Most reform I've seen focusses solely on building more affordable housing
(i.e. government programs for low income), but never addresses the fact that
even market rates are stratospheric in some areas. Asking for better market
rates does not mean we can't also solve low income housing.

------
elchief
Same in Vancouver

[http://www.cbc.ca/news/canada/british-columbia/census-
data-r...](http://www.cbc.ca/news/canada/british-columbia/census-data-reveals-
what-metro-vancouverites-already-know-rents-are-through-the-roof-1.4371734)

It's the Chinese purchasing places (to dump their laundered money at any
price), then leaving them empty, so they don't get worn down from use.

And Canadians paying those same insane prices and they trying to get renters
to pay their mortgage.

And everyone renting on AirBNB instead of to locals

Re: down-votes, you think I'm being racist but this is what is actually
happening:

[http://vancouversun.com/news/national/exclusive-how-b-c-
casi...](http://vancouversun.com/news/national/exclusive-how-b-c-casinos-are-
used-to-launder-millions-in-drug-cash)

~~~
linkregister
That article describes the process but it doesn’t actually say how much
property was purchased or whether this affected the real estate market.

It might be other Canadians performing the real estate purchases. Until BC
actually publishes some stats about what percentage of places are foreign-
owned, we won’t really know.

------
wheresmyusern
right now i spend 80% percent of my money on rent. through a lot of thought
and iteration, ive been able to reduce all of my expenses quite dramatically.
but rent absolutely resists my efforts to reduce. it is unmitigated greed. i
was talking to my previous landlord and i very carefully broached the subject
of why he charges so much and his response was kind of a mental double-think
-- he charges what the market can bare. he gets way more money than he needs,
and so i call it greed.

i find it very strange to look at the situation in renting -- you have some
people who are called "owners" who own the land and they make other people,
"renters," pay to stay on the land. what is the difference between renter and
owner? why do owners get to sit back and sit on their asses, contributing
absolutely nothing, having all their bills paid, not working more than a few
days in a month? why do renters have to break their backs all day long just to
afford to be able to sleep underneath a roof at night? i just find it very
strange that nobody thinks this is unfair -- it is unfair isnt it? one guy
does no work and another does tons of work and the guy who works is worse off?

anyway, the whole system is completely unfair and insane, so i decided that i
should get out of it. im planning on buying land within 100 to 200 miles of
the city. im going to build an icf house with metal roofing and near passive
climate control. interestingly, doing this can cost less than buying a new
suv, which i would have never guessed before doing the calculations. if you
add a healthy solar system and trade your car in for a chevy bolt, one might
even commute 150 miles both ways for free quite regularly. as is usual, i
expect there to be many people who will call me an idiot and say none of this
is possible -- i am looking forward to scrutinizing actual arguments or
evidence if they bring any to the table. for those who arent triggered by the
concept of cheap, low maintenance living, i would love to connect and exchange
tips. check out these awesome websites while youre at it.

[http://earlyretirementextreme.com/](http://earlyretirementextreme.com/)
[https://www.mrmoneymustache.com/](https://www.mrmoneymustache.com/)

------
hackermailman
Rising rents doesn't seem to effect the number of applicants though, every
time I've viewed a place here there was a lineup of 20+ other renters there
waiting as well. They pushed us through in under 10 minutes then another 20+
people showed up for the second appointment already gathering outside. There
was no time to dispute the lease they dangled which stipulated you had to
vacate the day the lease expired in order they could bypass provincial rent
increase limits of 3.7%, and make you sign a new lease with any increase they
wished.

~~~
switch007
I wonder if breaking point be when rents exceed the means of _2_ people?
Something like 60% of their combined take home pay.

~~~
humanrebar
In urban centers, you'll just see three or four professionals per family home
or apartment. The families will leave town, either to the suburbs with a soul-
crushing commute or to a smaller city.

------
rm_-rf_slash
Everybody on this thread should spend the next five minutes reading about
Henry George, his historic work "Progress and Poverty" and the Single Tax:

[https://en.m.wikipedia.org/wiki/Henry_George](https://en.m.wikipedia.org/wiki/Henry_George)

[https://en.m.wikipedia.org/wiki/Progress_and_Poverty](https://en.m.wikipedia.org/wiki/Progress_and_Poverty)

An except from his book:

 _" Take now... some hard-headed business man, who has no theories, but knows
how to make money. Say to him: "Here is a little village; in ten years it will
be a great city—in ten years the railroad will have taken the place of the
stage coach, the electric light of the candle; it will abound with all the
machinery and improvements that so enormously multiply the effective power of
labor. Will in ten years, interest be any higher?" He will tell you, "No!"
"Will the wages of the common labor be any higher...?" He will tell you, "No
the wages of common labor will not be any higher..." "What, then, will be
higher?" "Rent, the value of land. Go, get yourself a piece of ground, and
hold possession." And if, under such circumstances, you take his advice, you
need do nothing more. You may sit down and smoke your pipe; you may lie around
like the lazzaroni of Naples or the leperos of Mexico; you may go up in a
balloon or down a hole in the ground; and without doing one stroke of work,
without adding one iota of wealth to the community, in ten years you will be
rich! In the new city you may have a luxurious mansion, but among its public
buildings will be an almshouse."_

~~~
Danihan
That's like saying it's easy to buy a stock and sit on it when you know for
sure it's going to go up. Obviously.

------
dba7dba
Govt should adopt a policy of gradually increased property tax based on the
number of housing units (or total assessed value of all housing property) one
person/business owns.

It should be to the point where one cannot use buying/selling/holding housing
property as a way to amass wealth infinitely. Maybe to a certain point, but
not to the extent allowed now.

To me, holding a vast number of rental units and amassing a huge income (not
for one's living expense but for increasing wealth) is not much different from
extracting oil from the ground. Maybe even worse, because high rent/housing is
negatively affecting a regular citizen even more directly than dirty oil.

~~~
beager
I'm under the impression that New York City does this. Effective property tax
rates in the 5 boroughs are strikingly low contrasted with surrounding
counties, but only for a certain number of units. After a certain number, your
property tax notches up to a rate I believe is comparable to surrounding
areas.

Not saying this particular policy ameliorates the issues you're talking about,
just that a precedent for it exists in taxation policy in the US.

------
lend000
These comments underscore the fact that real estate is increasing everywhere,
not just city centers. However, it is magnified in city centers, and here are
the (apparently not) obvious primary causes:

\- A higher proportion of people want to live in small city centers.

\- There are more people, and the same amount of land.

This is one of those things that can never truly be solved, without
questionable eugenics programs, some other rate-limiter on population (like
famine), or expansion into space.

Please, tell me I'm wrong and continue to blame it all on foreign speculators,
corporations, and landlords, like most of these existing comments do.

------
EGreg
Can't such a story be written pretty much any time?

When landlords can't find people to pay the rent, they'll lower the price
(relative to inflation).

Inequality on the other hand leads to speculators usurping the use price of
houses and other things for investment purposes.

That was the real cause of the financial crash, not NINJA loan recipients as
many conservatives have claimed. Remember all those seminars on how to "flip
your house"? Many of those speculators declared bankruptcies.

These days, though, speculation on that scale can only be done by the top
percentiles of people.

------
quickthrower2
This is about households < 30k/yr. What can be done I wonder?

Social housing? Minimum wage increase? Rent assistance?

~~~
sampo
> What can be done I wonder?

The best option would be to build more. Unfortunately, this also seems to be
the least popular option.

~~~
downrightmike
Building expensive housing is the game right now and they go unpopulated.
There is no desire to build affordable housing.

~~~
jogjayr
It's not so simple as "luxury housing" vs "affordable housing". Location
dominates every other factor when it comes to how much a place should rent
for, including fancy amenities. Why else does a shoebox in SF cost twice as
much as a modern 2-bedroom apartment in downtown Atlanta?

If developers build more luxury units then the prices of the older apartments
will drop. At worst it's better than having no new housing stock at all.

------
Bromskloss
Don't rents simply reflect supply and demand? It seems unlikely that they
would rise beyond the "breaking point" for _everyone_ or even most people.

Also, whenever someone is homeless, that's someone for whom the rents are
above the breaking point.

~~~
poorrights
Just because enough people can pay $2,500 per month for a studio doesn’t mean
the people who can’t deserve to be homeless.

~~~
Bromskloss
I say nothing about who deserves it.

I'm talking about the headline, which makes it sound like rents being past
people's breaking point (0) is something that could happen to the population
at large, and (1) hasn't always been the case for some.

------
shmerl
_> The share of households considered rent-burdened--meaning they spend more
than 30 percent of their income on debt--ticked down in 2015_

Do they mean more than 30% of income on rent? And does it mean income minus
taxes?

~~~
kilovoltaire
It looks like it's defined based on pre-tax gross income. (Here's one
reference that mentions it[1] and I saw a few others as well)

So it would be an even higher percentage of after-tax income.

[1] [https://www.nytimes.com/2016/10/23/realestate/how-much-of-
my...](https://www.nytimes.com/2016/10/23/realestate/how-much-of-my-income-
should-be-budgeted-for-rent.html)

------
TaylorGood
A friend today listed an ocean view property where the owner bought it sight
unseen, never visited from overseas and is selling it at double digit gain. It
was empty the entire time.

------
thebiglebrewski
The rent is too damn high!

~~~
acomjean
I'm assuming this is a reference to the short lived political party, who's
sole platform item was based on rent.

[https://en.wikipedia.org/wiki/Rent_Is_Too_Damn_High_Party](https://en.wikipedia.org/wiki/Rent_Is_Too_Damn_High_Party)

~~~
kimsk112
Or the book. [https://smile.amazon.com/Rent-Too-Damn-High-Matters-
ebook/dp...](https://smile.amazon.com/Rent-Too-Damn-High-Matters-
ebook/dp/B0078XGJXO/)

------
burntrelish1273
There are 6 vacant homes, with often rooms plural, for every single homeless
person in the US.

------
adamnemecek
Bernie 2020!

