
Why Rent Is So High and Pay So Low - saurabh
https://lareviewofbooks.org/essay/why-your-rent-is-so-high-and-your-pay-is-so-low-tom-streithorst
======
nostromo
This article doesn't answer the question and seems primary based on nostalgia.

My theory: the Fed's zero interest rate policy is very good at inflating asset
values: S&P500, housing, you name it.

Rising income is a second-order effect: we hope that rising asset values will
lead to increased wages. That used to be the case, but no longer is. Why?
Because of automation and globalization probably.

So, the Fed has the pedal to the metal for seven whole years and we get
mediocre job growth, no real wage growth, but screaming high housing costs and
stock market. And who owns the most real-estate and stocks? The wealthy do,
which is why inequality is growing.

Even though I'm critiquing the Fed's policy, I don't have the answers and
would probably pursue the same policy. It's a real conundrum. Perhaps basic
income, or some other "throw money from helicopters" idea is the solution.

~~~
adam419
Here's another solution:

Respect the wisdom of markets. Allow corrections to take place and don't bury
malinvestment under the rug only for it rear it's ugly head worse later on by
acting as if you have a better intuition on what the price of money should be.

Most people accept the virtue of free markets. Yet many don't see that the
actions the Fed has been taking destroys the concept of a market by
artificially supplementing supply or demand in an unbounded way based on a
perceived sense of greater understanding.

The problem is it's really hard for most of these policy makers to build a
platform based on "Let's do nothing and let the markets correct themselves".
In such complex domains like an economy the action bias is very real,
problematic, and the best thing to eliminate if you want to renormalize
markets.

~~~
tcbawo
This is a gray area. If we allowed a large automaker to go bankrupt, we
probably would have lost the supply chain and many supporting industries which
would be gone (from the US) forever. Same with banks. As much as we detest
bailing out bankers, allowing the US to economy to be cut off from credit
would create lasting collateral damage.

~~~
spiralpolitik
The counter example is Iceland who told the banks to get lost and is the only
European country who's economy is now ahead of where it was in 2008.

[http://www.independent.co.uk/news/business/news/three-
charts...](http://www.independent.co.uk/news/business/news/three-charts-that-
show-icelands-economy-recovered-after-it-imprisoned-bankers-and-let-banks-go-
bust--instead-of-bailing-them-out-10309503.html)

~~~
varjag
Ireland, the example shunned by krugmanites, has followed the IMF/ECB advice
and is in better position than it was in 2008.

~~~
tcbawo
I see some mixed data on Ireland.

A quick search shows an unemployment rate that just crossed below 10% in
April. From 2000-2008, the unemployment rate ranged 4-5% (with very high
unemployment in the 80s and 90s).
[http://www.tradingeconomics.com/embed/?s=ieuert&v=2015080617...](http://www.tradingeconomics.com/embed/?s=ieuert&v=201508061744d&d1=19150101&d2=20151231&h=300&w=600)

Also, government debt to GDP rose steadily and is near historic highs,
although has recently begun to fall:
[http://www.tradingeconomics.com/embed/?s=irldebt2gdp&v=20150...](http://www.tradingeconomics.com/embed/?s=irldebt2gdp&v=201508071422d&d1=19150101&d2=20151231&h=300&w=600)

By which measure is Ireland in a better position than 2008?

~~~
patrickk
The _only_ reason Ireland's unemployment fell is because of emigration.

The economy is a disaster, especially for young people, home repossessions are
just getting started by the banks (who were the actual ones bailed out,
wrecking the economy by driving government debt through the roof.) The actual
situation on the ground is grim, despite what the official figures might tell
you.

Source: Irish person who emigrated.

------
sytelus
TL;DR

 _We vote and so politicians listen to our desires. Falling house prices would
be a boon for renters and first-time buyers (and probably for society at
large), but their political clout is less than that of middle-aged, middle-
class property owners._

Link baity article with no real "answer". Rents and house prices follow simple
supply and demand over long term. Cities are either already saturated or don't
allow new constructions limiting the supply however people never stop flocking
to them year over year. Even the medium size cities see net inflow of 50K-100K
people every year - which means you need that many more new housing units
_each year_. So ultimately only a few % of people gets to live in city and
everyone else are forced to suffer commute. This % keeps declining because
population total keeps growing and so the rent keeps rising.

Rent control etc can distort the economics for a while but not over long run.
They are just "pain killers" when what you need is real medicine. The real
medicine is simply policies that diversifies the areas. For example, encourage
businesses to move in surrounding towns by offering tax benefits, build solid
transportation network, open new public schools, encourage more constructions
outside popular area, build communities with attractive facilities, build
venues for cultural and sports events outside of cities and so on.

~~~
crzwdjk
Cities are only "saturated" if you consider existing zoning. American cities
in general are distinguished by having a very large proportion of single
family homes, right in the city, generally on relatively large lots. And of
course, the homeowners are relatively influential in local politics so they
vote for policies that prop up the value of their assets by creating
artificial scarcity. Some cities have been building more than others and they
have lower rents: this has more to do with local land use policies than with
how "saturated" the city is.

~~~
sytelus
Even if you removed all these single family homes inside city and built
skyscrappers instead, the additional units will get filled up pretty soon and
at some point not too distant, you will be in the same situation again where
you are now. The key fact here is that cities are seeing huge migrations from
other areas since last couple of decades. There 100s of thousands of people
piling up each year. Eventually they _will_ get saturated. In large scheme of
things, cities are artifact of ancient times when transportation was hard and
natural landscape for habitat was scarce. Now both problems can be solved even
for extreme places such as Dubai and there is no reason for huge swaths for
human population to be concentrated in cities.

------
kjdal2001
The author looks to be drawing a lot of conclusions from a very limited set of
data. His examples about prices are only from Manhattan and London. He also
compares median wages in New York to rents in Manhattan, which is just lazy. I
don't doubt that the rent/income ratio has gotten worse in New York over time,
but an apples to apples comparison would have been nice to see.

I don't even disagree with the sentiment expressed in this article. I just
think it was woefully under-researched.

~~~
choppaface
This is a great point. The author's last graph tries to make the point that
that the fraction of income taken from tenants has outpaced tenant wage growth
over a period of decades.

In present day SV (especially SF), most landlords will require tenants spend
no more than 30% of their income on rent as part of the application process--
it's a somewhat fixed rule-of-thumb. As rents have risen, a lot of tenants in
non-rent-controlled housing have been effectively priced out and displaced
elsewhere.

So it's actually not so easy to demonstrate that landlords have been taking a
larger fraction of tenant income; one must adjust for the fact that greedy
landlords will also drive away poorer tenants. Simpson's Paradox at work.

------
tomp
The money quotes:

"If house prices fall, the middle aged and middle class will be in an uproar.
[...] Perhaps even more critically, banks need house prices to rise, or at
least not collapse."

"More quality housing would increase its stock, and with supply rising to meet
demand, prices would fall. This would be great for young renters, bad for
middle-aged property owners, bad for banks. Thus it is not likely to happen.
Property prices, at an all time high, are not likely to fall, and if they do,
expect the government to put a floor under them."

I couldn't agree more. I'm young and capital-poor, so this fact is a huge
problem for me. I don't see a solution.

~~~
ryandrake
> I couldn't agree more. I'm young and capital-poor, so this fact is a huge
> problem for me. I don't see a solution.

Vote for politicians not obsessed with propping up the business and real-
estate portfolios of wealthy middle-aged people? (assuming you can find such
politicians)

~~~
tomp
Easier said than done. Unfortunately, these issues are so far removed from the
public's mind that no politicians even bother talking about it.

~~~
ryandrake
It's not far removed from the public's mind. People know they're currently
getting shafted. They have just been convinced that anything in the best
interest of wealthy middle-aged people must also be in their best interest,
because everyone thinks they will one day be wealthy middle-aged people.

39% of Americans think they are or will one day be among the top 1%:
[http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-
hop...](http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hope-over-
self-interest.html)

------
morgante
It's a great question. I wish the article had answered it.

> If they wanted to drive down rents, government could fund the construction
> of public housing, as they did during the Golden Age.

In housing, government is very clearly the problem, not the solution. It's
government zoning regulations which keep demand far below supply: if we'd just
lift the ridiculous restrictions, supply would rapidly rise to meet demand.
Similarly with the rent control: all it does is impose higher rents on
newcomers and the young while providing a great entitlement to the middle-aged
and aging.

> you and I could quite easily have gone to the ATM, slipped in our card, and
> been told the money we thought was safe in our accounts was gone.

It's almost like he's never heard of the FDIC.

------
dsr_
The velocity of money is too low.

When money flows through many hands quickly, prosperity is the result.

When money stagnates and accumulates in deep pools, the economy suffers.

Reducing the number of people being employed reduces the speed of money.
That's been happening.

Increasing wealth disparity reduces the speed of money. That's been happening.

Government spending increases the speed of money, but money spent on projects
that end up with high concentrations of wealth (stadiums, military) are not as
useful as projects that enable further speed increases (transportation,
infrastructure, sanitation, urban renewal).

------
crimsonalucard
The concept that you can "own" property and charge "rent" for it has been an
economic drain on the world.

When a cash exchange or transfer is made, it is usually for a product, aka
GDP. There is no GDP involved with paying rent. A landlord is someone who can
sit on his ass and live off of the GDP the tenant generates in the form of
"rent" while offering no GDP back to the economy. The landlord is essentially
a parasite, offering nothing beneficial to the economy, he simply can suck the
life blood out of you through this strange concept of "owning" the habitat in
which you live. Life is a bitch, but it is what it is.

~~~
hiou
I would love it if the person who downvoted this anonymously would chime in as
to why. Because this is exactly what a landlord is.

~~~
crimsonalucard
I can see why. This argument goes beyond simply just landlords and rent into a
critique about the dark sides of capitalism itself.

In capitalism you can not only own land as an landlord but you can also own
labor. Someone who owns the corporation, can sit on the profits, dividends,
and growth without producing actual GDP himself. It's very similar to the
landlord situation. The owner of the corporation essentially sucks the
lifeblood of the work output generated by employees while doing no work
himself. Y-Combinator at its very core is a product of this system, hence the
possible downvotes.

Capitalism is great, but landlords and freeloaders who get richer and richer
without producing any GDP themselves is a huge negative attribute that is
intrinsic to capitalism. Ironically, it is the hopeful opportunity of becoming
a freeloader that drives the risk-taking entrepreneurial qualities which in
turn make capitalism so effective.

~~~
hiou
I would say that investing looking for growth and creation(Y-Combinator), is
much different than buying an unchanging asset, doing nothing to it and simply
collecting a non-trivial portion of the renter's value created. It's the
difference between creating new value and simply gaining control of a static
asset to extract rent.

EDIT: I should add I appreciate that you took the time to shed some light on
what the downvote may have been about.

------
patmcguire
Worth noting the decline in how much is spent on food: in 1950 it was a third
of household income, now it's 13%. So part of the cost of living has
drastically decreased.

~~~
ArkyBeagle
Almost all sectors of the economy have delivered much improved value since
1950. In many cases at reduced cost.

Real estate, education and medical care are subsidized. When you subsidize
something, they cost more and you get more of it. So we constrain residential
real estate development by regulation - zoning, permitting.

~~~
brc
All the sectors free of excessive regulation and central planning have shown
massively reduced costs.

Energy and housing - increasingly micro controlled to a fine detail, both
spiralling ever upwards way in front of inflation.

Healthcare: massively regulated, increased costs.

Hiring people : massively regulated, increased costs (for the buyer) result :
less buyers meaning less employment.

The problem is _clearly_ excessive regulation but any problem is immediately
met with calls for more regulation.

Until this becomes so incredibly clear that people can no longer deny it - it
will just go on and on.

------
akamaka
Can anyone recommend further reading that gives an in-depth analysis of
housing costs?

There's no end to articles exploring the various political angles, but what
good are those without understanding the underlying economic constraints?

I'd be most interested in sources that use raw data, introduce mathematical
models, and take into account measurable factors such as land availability,
construction costs, incentives to invest, transportation, and so forth.

~~~
dougmany
I read a book on local investment and slow money but I can't remember the name
of it. It talked about how the stock market has become divorced from putting
money back into business creation. How it is just the sum of the money people
have laying around. I want to extrapolate that to housing and blame the high
values on investment divorced from construction but now I'm just repeating
your question.

------
gmarx
Funny, if you look at news and popular media from the 1970s you get the
impression is was an awful time economically and pretty much everyone agreed
we were doomed. Rents were cheap in NYC in the 1970s? I don't doubt it; ever
seen "Taxi Driver"? Yes rent control is great for people in rent controled
apartments. The flip side is that as demand rises everyone who hasn't been in
NYC for 40 years is SOL...which seems analogous to the complaint the author
makes at the end about middle aged home owners vs new renters. As a renter, I
agree the current situation is ridiculous but the author doesn't explain it.
He just notes who has incentive to favor the current situation and winks

~~~
talos
Up until loopholes were introduced in the 90s almost every apartment in NYC
was rent stabilized, which is a very modest version of rent control. Over half
of all non-public apartments for rent are still in this program. Almost no
apartments are traditionally rent controlled anymore.

Rent laws are often blamed for the city's problems in the 1970s, but there
were plenty of other issues (underinvestment, depopulation, municipal
bankruptcy).

------
dgreensp
Can someone explain why worker productivity increases would ever enrich the
worker? This sounds like a Golden Age fallacy. What forces in a capitalist
system lead to paying workers more? Workers are not entitled to the value they
create, they are just compensated for their labor. It would have to be
competition from other employers who are paying more (because they too are
making more money for what they are paying workers, but have strategically
decided to apply it to raising salaries). However, if you have an oversupply
of workers and a shortage of jobs, this dynamic does not really exist.

~~~
andosa
Unions for example.

------
rubyn00bie
A couple of corrections as this article is sort of making assumptions based on
falsehoods:

Real wages stopped going up in 1972, not the 1980s, and real wage are what
matter.

[http://www.pewresearch.org/fact-tank/2014/10/09/for-most-
wor...](http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-
wages-have-barely-budged-for-decades/)

Unemployment also hit some record highs in the 70s:

[http://data.bls.gov/timeseries/LNU04000000?years_option=all_...](http://data.bls.gov/timeseries/LNU04000000?years_option=all_years&periods_option=specific_periods&periods=Annual+Data)

So, I think to say that it was bad only for rich people is a very unusual... I
think it was probably worse for poor people since they don't have safety nets.
It was also the beginning of the end for real wages which have never reached
their 1972 peak.

Those are some pretty large assumptions to be wrong on, for the rest of the
article, so I'm not really sure how to take it...? Maybe the author can
clarify for me?

Edit: better source for real wage data, and clarity.

------
ilaksh
The economic systems are over-simplified, poorly automated, and disconnected
from real physical and social science and measurements.

Money is a very useful technology but the 'economy' really encompasses
everything, and expecting some interest rate changes to save a sick economy is
like a doctor who is only aware of the existence of the cardiovascular system
and has one move -- rapid chest thrusts to get more blood pumping.

By harnessing technology we can make our systems much more sophisticated than
that.

------
touchofevil
I spent a few minutes posting a comment on this article only to find in the
morning that the comments had been disabled. Not a great way to encourage
discussion! Anyways, here's my comment that was deleted:

I really enjoyed this article, however, I think you have glossed over what
really led to the 2008 banking crisis. The banks bundled subprime home loans
into securities that were then sold off to investors. As I understand it, what
actually put the banks at risk was that banks were selling "Credit Default
Swaps" (CDSes) on those bundled mortgage assets. These CDSes were essentially
unregulated insurance policies that banks sold to insure the bundled mortgages
against losses. Since the CDSes were not technically insurance policies (even
though they really were) the banks did not have to keep money put away to
cover those insurance policy payouts if the mortgage-backed assets went bad.
This resulted in the banks selling many more CDSes than they could actually
cover. I'm not an economist or banker, but as I understand it, the unregulated
CDS market is what really put the banks at risk in 2008. I highly recommend
the book The Big Short by Michael Lewis for anyone interested in the 2008
crash.

------
tim333
I think the author is kind of mixing some different effects

1) The switch of bargaining power from workers to capital with Thatcher and
Regan. I basically agree with him at least in the UK and US. Less so in places
like France.

2) High asset prices - largely due to very low interest rates.

3) Rents to wages. Outside of popular cities like London, NY, SF I'm skeptical
it's got much worse. I don't have that much data but here's a graph for NZ for
the time period and it kind of goes up a bit and down a bit without much of a
trend. [http://transportblog.co.nz/wp-
content/uploads/2014/07/Rodney...](http://transportblog.co.nz/wp-
content/uploads/2014/07/Rodney-graph-2.jpg)

4) Rent to income in NY, SF, London

In the old days where people worked in mostly industry and agriculture it made
sense to be where that was happening. Now when a lot of people are information
workers it makes sense to go where the smart people are at so everyone piles
into the top cities even if it means packing twice as many into an apartment
as used to be the case.

So if your rents so high relative to your wages it's probably because you are
in a popular location with a restricted supply of property.

------
dpc_pw
The reason is monetary. Private debt increased and has reached it's peak.
Previous generations have borrowed their prosperity, and next generations are
living in an economy that is already full of debt obligations.

Everyone should see one of the few economists that actually does a proper
craft:
[https://www.youtube.com/watch?v=jqzfOQXCwFg](https://www.youtube.com/watch?v=jqzfOQXCwFg)

------
thedevil
This makes me sad. The title sounds promising, as if the article contained
interesting analysis. But it doesn't. The author doesn't understand
economics... Or anything. He peppered in a few facts and statistics to sound
credible, which he probably looked up after he wrote the article. I would
accuse him of click bait, but I don't think he understands what that even
means.

------
PythonicAlpha
Reagan ended the Golden years and turned the US around from worker friendly to
money-friendly. The result are low taxes for income generated from pure money,
high speculation, bailouts for the big corporations and the decline of the US
middle class.

Many of the other "western countries" just copy this trend and get the same,
just with a few years between.

~~~
bluedino
The oil crisis and recession of the 70's happened before Reagan was even on
the ballots.

~~~
PythonicAlpha
The oil crisis and recession of the 70s has nothing to do with the situation
today, at least not directly. More important where the political decisions
that where made in this time. Of course they where not all made by Reagan
alone, but he was one of the major breaches.

------
ipsin
I was disappointed that I could not actually scroll of down to read the
article on mobile Android/chrome.

~~~
runj__
If the viewport is small enough it seems scrolling is disabled. I usually
browse the web on the right side of my 15" screen and was confused when I
wasn't able to scroll.

I find it weird that most people don't plan for people with 900px or so wide
browsers.

~~~
charonn0
It's trying to display a lightbox advertisement that is too big for the
viewport. So, scrolling gets disabled but the lightbox doesn't render
until/unless you enlarge the window.

------
happytrails
How many people died during WW2? It all seems like supply and demand to me. If
we want lower housing prices in major cities we need more supply. Anecdotal,
L.A. is built to the max horizontally. If L.A. would allow more vertical space
to be used prices would drop.

~~~
timr
About 400,000 US citizens were killed in WW2, or about .0003% of the entire US
population in 1945 (140M).

It didn't have a huge downward impact on real estate prices.

~~~
powera
400k is 0.3% of 140 million, not 0.0003%.

------
bikamonki
Eh, supply and demand? While the good places are ever harder to find for
cheap, we the humans are ever easier to replace. The solution will come from
the sharing economy, a sort of airbnb for long-term renting mixed with a
facebook-dating-like social net that [almost] guarantees one does not move-in
with a Freddy Kruger. I even think we will start seeing two or more families
sharing a big house. There is also an incentive to property owners to go this
way b/c risk is minimized by the multiple sources of income to pay for the
hefty rent.

In general terms, the world of one of everything for each one is ending, all
the uber-like business models that are popping around prove it feasible and
profitable.

------
harryh
(60 * 12) / 5000 = 14.4% which is about 1/7th not 1/10th.

Kinda depressing where there is a glaring math error in the 2nd sentence.

Edit: Well I suppose the NY median wage could have been higher than the US
median wage that he quotes, but who knows? He doesn't even say.

------
im3w1l
So this article gives an explanation for _why_ people would want to push up
rents and property values.

Anyone know the _how_ of it? Rising rent compared to wage would normally lead
to increased building, so this must be prevented somehow.

~~~
thoward
I would point the finger at NIMBYism and the fact that new developments in
places like San Francisco, London, and New York have to hop through many many
hoops to get built (and pass muster with a surprising number of
"stakeholders").

Here is just one example...

[http://www.bizjournals.com/sanfrancisco/blog/real-
estate/201...](http://www.bizjournals.com/sanfrancisco/blog/real-
estate/2015/06/mission-housing-opposed-by-unions-sf-development.html)

The TL;DR of this article is that a large new apartment block in SF is being
held up by a construction union because the developer is refusing to hire
union labor for every contractor role in the project.

Maybe we should reduce the red tape around building new structures and see how
far that gets us before plowing more money into public housing and other
government interventions.

~~~
Frondo
Or maybe the developer could just hire union labor to build the apartment
block.

~~~
thoward
Nah, that's what I'm talking about. Makes things too complicated and
expensive. How about this...

If you have the capital, you can build whatever you want as long as you don't
physically endanger other people (building meets earthquake and fire codes,
etc.)

~~~
Frondo
Why is it "too complicated" to hire union labor? That seems like an easy thing
to do, especially since the developer would have ready access to a large labor
pool, of which union labor would be one component.

------
jrbancel
What is the ideal ratio of rent/net income?

Personally, I don't want to spend more than 20% of my net income on rent +
utilities. That way, I can save 50% and use the remaining 30% for food and
entertainment.

I am currently at 16% in Seattle and I leave in a very good apartment, but I
got lucky.

~~~
meric
I rented a 3 room apartment. Sublet out 2.5 rooms. (I'm sharing one room.)
Reduced my rental expense to 0%. Paying bills only. Only 15 minutes train to
the second most expensive city by property prices relative to income in the
world. (Sydney)

~~~
Jacqued
Unfortunately you have to find a landlord that lets you rent a 3-bedroom AND
sublet parts of it, which where I live is completely unheard of (unless you're
high net worth and pay premium rent, but then why have flatmates ?). Plus,
you'd pay income taxes on the subletting rents and that builds up really
quickly.

~~~
meric
Yes, I used some salesmanship I gleaned from working in a startup and paid 5%
premium rent. The landlord isn't worried about subletting. They want the place
taken care of and to be assured you can make rent payments regularly and on
time and don't trouble them too much. Convince them you're a better option
than a family of 5 who also applied for the property and you too can sublet
the place. The rent I pay is tax deductible from rent I receive. I chose to
have flatmates and pay premium rent (paid for by flatmates) to live free in a
renovated apartment close to the city. My office doesn't come with a space I
can park a camper van.

------
legulere
Reasons why rent is so high not named:

\- A constant influx of people into the cities especially as inner city new
york had a bad reputation

\- Apartments get bigger. Even if you rent a small one others are causing high
rents through making space more scarce

------
cletus
I've been thinking about this a lot lately. I live in NYC so I see some of
what's happening in the property market here. I've also lived in London,
Zurich and Australia.

The problem, ultimately, I think is trade agreements.

I came across this comic [1] recently that resonated with me. Trade agreements
aren't about trade anymore. Tariffs and protection are at all time lows.
Really they're about the free movement of capital.

The English-speaking world and much of the rest of the developed world has
embraced the idea that real estate is a speculative investment. This includes
allowing foreign capital to flow in and buy up property.

A lot of Manhattan condos are bought by the wealthy, many of them foreign, who
don't live here at all (ie it's just a means of parking money) or they visit a
few times a year.

The NYT has done a piece on this [2]. Luckily, much of Manhattan is still co-
ops. For those of you unfamiliar with the history of this, NYC imposed rent
control on property owners in the post-war era (up until 1973). Coops were a
reform to allow building owners to divest themselves of apartments being
rented below cost after the massive inflation of the 1970s.

Rent control tenants were offered their apartment at a discounted rate. They
became owners and the owners divested themselves of the loss-making asset.
Win-win.

Co-op residents technically own shares in a corporation. That corporation owns
the building. Your shares give you the right to inhabit a certain apartment.
You must however abide by the co-op rules. Some are lenient, some very strict.
Co-ops can dictate a lot of things like:

\- Whether or not you can use the apartment as a pied-a-terre;

\- Whether or not and how much you can sublet your apartment (some note at
all, some very lenient, lots in between);

\- How much financing is allowed. Many require a 20-25% downpayments and
significant post-close liquidity. The more aristocratic buildings don't allow
financing at all.

And so on.

The net effect though is that most co-ops tend to be fully or near-fully
occupied, at least until you get to the very high end. This is actually good
for the building and (IMHO) the city.

Without this NYC would be doomed to become a desert of unoccupied condos.

There are problems. Property tax is grossly unfair as the system is decided by
the state government in Albany and they have heavily skewed it in favour of
SFHs (single family homes). Plus for incumbent owners there are Prop 13 like
caps on rate increases.

Also within apartment buildings there are problems. A $100m condo pays
$18k/month in property tax. A $3m condo pays $3k. How does that make sense? It
probably dates back to Bloomberg's idea that attracting billionaires who never
live here is somehow good for the city.

At the same time as all this you need property investment to some degree as
that's what provides the rental market. So you can't eliminate it entirely.
But this is what I think you need:

1\. A higher bracket of capital gains tax paid by non-residents of wherever
the property is. This should include any residential property held through
corporations or trusts.

Now you have to be careful with this because there's also the flipper market.
These are people who buy distressed properties, fix them up and sell them. I
actually believe these people are providing a useful service in rehabing
neighbourhoods.

2\. Property taxes that are in line with market values that don't discriminate
on property type;

3\. Higher property taxes for non-residents (and trusts and corporations);

4\. No property transfer taxes like NYC's "mansion" tax.

Lastly, I don't have a huge amount of sympathy for the argument that people in
entry-level jobs should be able to, say, afford to live in Manhattan. Why? Why
is living anywhere a right? You hear the same thing about San Francisco.

At least in NYC there are options if you're on a lower income (Queens, NJ, NY,
many of which have good transport options). Whatever problems there are in NYC
the Bay Area is a mess an order of magnitude worse.

Vouncouver is another place that's had property driven up to sky-high levels.
In that case it's because of rich Chinese seeking a safe harbour for their
money and/or (ab)using the invest-to-immigrate program in Canada (how is
buying an expensive house investing in Canada exactly?).

Freedom of capital is a problem. It allows companies to avoid paying taxes
with transfer pricing. It allows voters to vote themselves huge benefits from
the government treasury and then abandon the city, state or country when that
debt collapses on itself.

[1]: [http://economixcomix.com/home/tpp/](http://economixcomix.com/home/tpp/)

[2]: [http://www.nytimes.com/2015/01/11/realestate/new-york-
citys-...](http://www.nytimes.com/2015/01/11/realestate/new-york-citys-
emptiest-co-ops-and-condos.html)

------
mrbig4545
My rent is low and my pay is high. North England is good for that.

~~~
switch007
Tell me more. High by southern standards? I'm hearing more and more about high
paid tech jobs in the north but haven't seen any figures. I'm sick of the
south and seriously considering moving north.

~~~
mrbig4545
I don't know, I haven't worked in the south. But I earn £45k, my rent is £650
for a house with a big garden and a garage, a loaf of bread is 75p and a beer
is in the range of £1.30-3, usually around £2.20

When I was in London, I couldn't get a beer for less than a fiver

~~~
switch007
Useful, thank you. I know people paying that and more for a room in a shared
house down here :)

------
coldcode
If the rich keep getting richer and the poor poorer, eventually either the
poor will die of starvation or disease or the rich will die in the guillotine
- History.

------
davidf18
The author does not cite the true reason for the high cost of housing in NYC
(I live in Manhattan), SF, (and I'm told Bombay) which is 1) using politics to
create artificial scarcity of housing through zoning density restrictions
("rent seeking"in microeconomics or "green belting") and 2) overuse of
historic landmark status. This is well-recognized by economists, but I suggest
reading this Op-Ed by Harvard economist Edward Glaeser
[http://www.nydailynews.com/opinion/build-big-bill-
article-1....](http://www.nydailynews.com/opinion/build-big-bill-
article-1.1913739) Nobelist and NY Times Columnist Paul Krugman cites Glaeser
as well.

What I find frustrating is that people write and publish articles without
consulting the experts like Glaeser or consulting any economist for that
matter.

Prices rise because of scarcity. The high cost of housing is from inflated
land costs through politically induced scarcity which is done through zoning
density restrictions and overuse of historic landmark status. It is really
that simple, yet many writers don't seem to understand that concept.

------
andyl
Globalization and participation of women increase the labor supply. Wages
fall. Supply and demand.

~~~
PythonicAlpha
Participation of women was invented, not because it was needed, but to
compensate for (relatively) reduced wages of the workers.

------
curiousjorge
you dont know high cost of living with low salary if you haven't lived in
vancouver, bc.

[https://docs.google.com/spreadsheets/u/1/d/18UwaThgGikSXzinn...](https://docs.google.com/spreadsheets/u/1/d/18UwaThgGikSXzinnLNHx7P3_HQSenggWbV262_UmuTk/edit#gid=0)

You can see based on that the average is around $45~50k CAD (if the salary
field is blank assume $50k or less as these are less well known, smaller
companies with tighter budgets)

rent for studio or 1 bedroom apartment in downtown area where lot of jobs are
located is around $1300/month (nvm, it appears to have gone up in the past 3
years, $1700/month according to another users comment).

~~~
ryanSrich
Portland, OR is getting pretty bad as well. Average cost to own a home in 2015
is $313,000[1]. I can't find a current house hold income figure but I know
it's pretty low. Definitely below the national average IIRC.

The thing to note is that many of those houses selling for ~$300k are very
small (< 1000sqft). So the average housing cost for a family of 3 is probably
much higher.

1\. [http://www.movingtoportland.net/wp-
content/uploads/AverageMe...](http://www.movingtoportland.net/wp-
content/uploads/AverageMedianSalesPrice_May2015.png)

~~~
cpncrunch
$313k? That's a pittance compared to Vancouver where the average home is over
$1M. Even in the shitty east side with drug-dealers and prostitutes hanging
out on your street you still pay over $1M for a detached home.

~~~
ryanSrich
Fair enough. Perhaps rental was a better comparison. They are very close, and
Portland pays way less than Vancouver (in addition to the US not having
healthcare) - I'd say it's more expensive to buy in Vancouver, more expensive
to rent in Portland.

1\. [https://www.rentjungle.com/average-rent-in-vancouver-bc-
rent...](https://www.rentjungle.com/average-rent-in-vancouver-bc-rent-trends/)

2\. [https://www.rentjungle.com/average-rent-in-portland-or-
rent-...](https://www.rentjungle.com/average-rent-in-portland-or-rent-trends/)

~~~
abandonliberty
Houses in Vancouver are traded equities. They are more subject to external and
speculative investors, rather than just local income and demand.

As a result, the price-to-rent ratio has been unreasonable in a similar way to
Amazon's stock price.

------
Yakimoto
Long winded article and it doesn't even answer the question.

Rent in NYC is high because people are paying it.

Your pay is low because you decided it is. Lots of CEOs think their pay is low
too as they drive a new Lexus off the dealership lot.

~~~
pierrealexandre
The article provides historical context and a framework to think about the
question. I think it does a better job answering the question than your last 2
paragraphs.

~~~
oldmanjay
The article tries to backdoor an emotionally resonant populist political view
in the guise of concern. If you think it does a good job answering the
question, that probably just means that you have a converging viewpoint.

~~~
rjurney
Yeah, nothing is persuasive. Everything simply confirms or disconfirms what
you already know. There is no learning. I will die knowing what I knew
yesterday.

Life is shit, eat Arby's. Am I following along?

------
kuni-toko-tachi
Utter leftist nonsense. Reagan was responsible for the biggest and longest
economic boom since World War 2, he freed millions of people from the
miserable tyranny of communism. His tax cuts and deregulation revitalized the
American economy. By winning the cold war through strength, he allowed Clinton
(forced by strong Republican leaders in Congress) to demilitarize and reap the
cost savings which balanced the budget.

The decline in wages has nothing to do with him, it has everything with
productivity gains through technology and by loss of bargaining power through
illegal immigration and by "free" trade agreements like NAFTA - passed by
Clinton - which were pure crony capitalism purposely designed to chop the legs
out from underneath the American worker. This, combined with out of control
government spending - which funnels money printed out of thin air through Wall
Street is what caused the conditions described.

------
happytrails
Labor has been on the decline for years. The union corruption and bashing
seems never ending. The ignorance in the general populace allows this to
happen, as people will vote against their own best interests.

I would assume that the populace movement that is gaining steam with sanders
and warren will start to expand if the inequality continues.

~~~
AnimalMuppet
If the unions are corrupt, why do you assume that it's in my best interest to
join one?

~~~
happytrails
Why do you assume I said that?

~~~
AnimalMuppet
> Labor has been on the decline for years. The union corruption and bashing
> seems never ending. The ignorance in the general populace allows this to
> happen, as people will vote against their own best interests.

"The union corruption seems never ending." I agree. Unions are corrupt too
much of the time. (Any is too much...)

"Labor has been on the decline for years... The ignorance in the general
populace allows this to happen, as people will vote against their own best
interests." I presume that this is supposed to mean that labor is in the best
interest of people.

So it looks like you said that unions are corrupt, and that labor unions are
in the best interest of people. Hence my question.

