
Millennials and the Working Class Are Leaving America's Expensive Cities - jseliger
http://www.citylab.com/housing/2016/04/where-millennials-and-the-working-class-are-being-priced-out/480243/
======
jahewson
> The affluent and the talented are flooding into superstar cities and tech
> hubs, creating a vicious competition for space that is pushing out the
> young, the less advantaged, and those who do not own homes, reinforcing the
> deepening class divides in our cities.

The author managed to jump to this conclusion without actually offering any
evidence for the claim, or even entertaining other explanations of the trends
seen in the data.

Likewise I can claim that millennials are leaving because baby boomers have
rigged the housing market in their favour, saddled them with debt by
hollowing-out funding for education, placed an undue tax burden on them via
property tax controls, and locked-out up to 80% of the rental market in some
cities via rent control, which allows older generations to avoid participating
in a fair market and massively inflates prices in the remaining 20%.

But no, it's talented people's fault, apparently.

When the previous generation has kicked away the ladder, why are we surprised
that those following them can't climb upwards?

~~~
manyxcxi
I'm buying a house right now, and while I don't feel it's rigged- it sure is a
pain the butt.

You realize rent control isn't just about baby boomers, right? Pretty much all
the minority advocacy groups fight for more rent control, or at the very least
section 8 housing- and I'd like to see a single study showing a city > 100,000
people with 80% of the market locked up in rental control. I have a hard time
believing any market would even get to 30%, after all the people with REAL
money (the developers/land owners) want nothing to do with it.

Also agree with you on getting let down by our parents/grandparents on the
education issue. I was born in '82 and had it rough, I can only imagine what a
kid born in '92 had to deal with.

Edit: I'm moving from Seattle to Portland, so does that mean I'm one of these
people they're talking about that has to move out, or one of the assholes
moving in? Both?

~~~
busterarm
The number of units in NYC under 'rent control' is ~30,000.

Yes, it's that low. It's less than 2% of the available housing.

~~~
mancerayder
Nope, nope, you have it right but in the context of this discussion you have
it wrong. :-) There is rent control and rent stabilization, two separate items
under the rubric of "rent regulated housing". See, those terms have political
and legal connotations that don't necessarily perfectly match with the
colloquial or intuitive phrase "rent control".

Rent control is specific to a tiny percentage of buildings and units, relevant
to the situation where a) the tenant is in a rent-controlled building [ build
before 1941 ] and b) the tenant or their descendants have been continuously
occupying the unit since 1971. That's your rent control. Rent doesn't ever go
up. The stereotypical picture here is of an older woman in her 70's or 80's
living in a three bedroom walk-up apartment in Greenwich Village paying $500 a
month while other units rent for $6500 or some such.

Rent stabilization is a different matter. About one million units in NYC (out
of 2 million, perhaps?) are rent stabilized. That means a lot of things, but
in summary it means the rent can't go up by a percentage set yearly by a board
of individuals called the Rent Guidelines Board.

Now it gets interesting because in NYC, a rent stabilized unit can be cheap,
well below market, depending on how long the tenant's been there, or it can be
high. A unit can actually fall out of rent stabilization if the tenant makes
above 200,000 a year and the unit hits 2700. It gets more complex: the
landlord can make improvements to the building and use that to increase the
rent to a degree; rent stabilized units are typically pre-war units/buildings
but not exclusively, as a now-expired (this year) program called 421a gave
developers tax breaks in exchange for rent stabilizing their units (even if
their starting rent was market rate).

As an aside, and back to the original point -- here in NYC we're in the throes
of some major class conflict and it centers enormously around 'affordable
housing' in this city of 8.5m (up from 8m in 2000). Our mayor was elected on
the platform of providing cheaper housing. Gentrification is a huge topic
here, subject to daily barrages in rags like the Gothamist (whose comments
section has commenters with about 50% the average IQ of the people here, I
might add).

So approximately 50% of our housing stock falls under some form of housing
regulation.

Source, I'm a NYC resident and landlord; also, this:
[http://www.nycrgb.org/html/resources/faq/rentcontrol.html#di...](http://www.nycrgb.org/html/resources/faq/rentcontrol.html#difference)

~~~
nicwolff
"That's your rent control. Rent doesn't ever go up."

Huh? Controlled rents go up whenever the New York State Division of Housing
and Community Renewal says they do; right now they're in the process of
increasing by as much as 9.6% by 2018
[http://www.nytimes.com/2016/01/01/nyregion/facing-
increase-r...](http://www.nytimes.com/2016/01/01/nyregion/facing-increase-
rent-controlled-tenants-complain-of-being-singled-out.html) and since 1975
they've gone up 707%
[http://www.nyshcr.org/Rent/PublicHearingInformation/SAFR-
Pre...](http://www.nyshcr.org/Rent/PublicHearingInformation/SAFR-Prelim-with-
tables.pdf)

~~~
mancerayder
Fair enough. I stand corrected on that sentence.

A few nuances need to be pointed out, though. While they increase, they
increase to levels set by the city based on a calculation that incorporates
costs of things like taxes, utilities and whatnot.[1] In addition the owner
has to apply for the increase, which is laborious and more than half the time
never even is done. But the point is that they started at very low levels, and
even if things eventually catch up, rent controlled units are typically quite
below even rent stabilized units in rent asks.

If a genie appeared and magically offered you a choice between a stabilized
unit and a rent-controlled one, equivalent in every other way, without knowing
any other facts you'd most likely pick the rent-controlled one, even if
there's been a 7-fold increase since the 70's as you point out, because you'd
be more likely to pick the cheaper of the two.

1 - "New York City Local Law 30 of 1970 stipulates that Maximum Base Rents be
established for rent controlled apartments according to a formula calculated
to reflect real estate taxes, water and sewer charges, operating and
maintenance expenses, return on capital value and vacancy and collection loss
allowance. The Maximum Base Rent (MBR) is updated every two years by a factor
that incorporates changes in these operating costs."
([http://www.nyshcr.org/Rent/FactSheets/orafac22.pdf](http://www.nyshcr.org/Rent/FactSheets/orafac22.pdf))

~~~
busterarm
Except you can't pick a rent-controlled unit, because you can't get into one
unless you were in before 1971. You can be transferred one as immediate-family
but it requires 2 years of financial interdependence between you and the
tenant -- not easy.

------
J-dawg
When I look at London, I'm amazed this trend isn't happening faster.

London is full of young people who are basically just breaking even, spending
50% or more of their monthly income on rent. I think people tell themselves
this is ok as long as they're gaining experience and moving up the ladder.

The fact that people aren't moving away in greater number says more about the
stagnant UK economy outside of London, than anything else.

I think we're on the cusp of a massive re-think of how we live and work in
cities. This will either come through regulation (rent controls, bans on 2nd
homes, tax on unoccupied buildings, etc), or innovation (maybe we'll all have
homes outside cities and come and stay in Tokyo-style capsule hotels during
the working week).

Right now, millions of people are working hard every day to make a relatively
small number of landlords richer and richer. It's unsustainable, and I think
some major societal change is coming.

~~~
mpswardle
You're completely right about the economy outside London. I'm from London and
love it but i can frankly say the UK's biggest problem is having only one
genuinely world-stage level successful city.

Look at our productive friends in Germany, they have Berlin, Frankfurt,
Munich, Hamburg.

It's not surprising rent is so high when all the good jobs are in one place.

~~~
arethuza
Well, as an Edinburgh resident I'm personally mystified as to why anyone would
want to live in London! :-)

[NB Of course there are perfectly good reasons for wanting to live in London -
just never appealed to me!]

~~~
TheOtherHobbes
London is a handful of very pleasant millionaire villages - Primrose Hill,
Hampstead & Highgate, Ken + Chel etc - surrounded by terraced Edwardian worker
slums.

There's also been a new build boom in the East. Some areas were almost
affordable for a while.

The big advantage compared to the rest of the UK is networking potential. Even
the biggest competing cities - Manchester, Birmingham - are an order of
magnitude less happening. And places like Leeds and Swindon have almost
nothing at all.

The UK has really screwed the proverbial pooch here. Compared to traditional
industry, Internet and creative businesses have huge potential for almost no
infrastructure spend, and can create jobs almost everywhere.

Aggressively promoting startups across the country should have been a no-
brainer. But... that's not what we got.

~~~
makomk
The other smaller startup city is Cambridge, which in some ways is even worse
- less dense housing and a complete lack of decent transport links in of any
kind, because all our transportation centers on London.

------
gozur88
So... people are leaving places they can't afford to live? I'm not sure I see
the problem - this isn't a new thing. I loved the town where I went to
college, and stayed there a few years after graduation. But the combination of
high housing costs and low wages meant I'd never buy a house if I stayed.

So I left and went somewhere that had a better CoL/wage ratio. That's life.

~~~
moonshinefe
Be quiet and accept capitalism in other words. Brilliant, out of touch
response.

Some people have lived their entire lives in cities, paid into the taxes and
helped build businesses, infrastructure, and the like, only to be kicked out
due to lack of regulations in the housing market and the flood gates opening
and driving prices through the roof.

I suspect you haven't experienced it given your flippant response.

~~~
humanrebar
Blaming capitalism for this missed a lot of facts. Housing supply is
artificially restricted through zoning and other regulations. And housing
demand is artificially stimulated through various tax breaks and subsidies.
Neither are market forces and they certainly combine to drive up prices.

Maybe other factors are at work here. I hear foreign nationals like buying
real estate to hedge against their home countries' political and economic
stability. But that wouldn't be capitalism either. It would be foreign policy
affecting Britain and the US for a change, instead of the other way around.

~~~
emodendroket
I don't think so. Ultimately, this could not happen if the market did not set
rents.

~~~
humanrebar
The market sets rent within the parameters it is given. Maybe an entrepreneur
could build taller buildings with cheaper per-unit prices, but zoning
regulations cap building height. In that way, the market isn't really setting
the absolute price. On top of that, many localities literally overrule market
prices with various forms of price fixing, affordable housing mandates, etc.

Would it be an open market if we only removed one regulation, height
restrictions? Nope. But to blame capitalism when other major forces are at
play is not a full assessment of the situation.

------
alexc05
It's almost like a long-slow-great-depression. We can see these trends
(average house price in Toronto / Vancouver exceed $1m) but nothing happens to
reverse them.

Plodding and lumbering forwards, the depression continues.

Recently I've read a few articles about how "the Exodus of millenials
threatens these cities' economies"

[http://www.vancouversun.com/touch/news/exodus+millennials+th...](http://www.vancouversun.com/touch/news/exodus+millennials+threatens+metro+vancouver+economy/11070861/story.html)
(specifically, Vancouver but consider this as a cannary in a coalmine)

Some of the massively expensive cities don't have the infrastructure to
support a London-like commuter lifestyle. LA traffic & all the young people
leave? They'll go somewhere else entirely.

~~~
Tistel
I left Vancouver and currently live in Toronto. The real estate bubble monster
is a truly frightening beast in those cities. Outside of tech (I am a
programmer) and banking, so much of Canada's economy is in real estate.

[http://www.bloomberg.com/news/articles/2016-01-29/canada-
s-o...](http://www.bloomberg.com/news/articles/2016-01-29/canada-s-one-legged-
stool-economy)

~~~
jboles
Same issue with Australia. Too much of the economy involves digging up rocks
and flipping houses.

------
tmnvix
I predict that communes will make a comeback.

The conditions are ripe. A generation of hipsters (I don't say that in a
disparaging way) that have a fetish for authenticity, craft skills, and clean
living; are also financially stretched to their limits even when sharing
houses; have a strong desire to be part of a community in a society that is
focused on the individual, and can't afford to create a community the
traditional way (i.e. by starting a family). Communes (not necessarily rural)
are coming back.

~~~
timmaah
Regulations won't prohibit them?

Rural are possible but cities aren't cool with people setting up shop in
uninspected old factories or lofts.

~~~
tmnvix
Despite the huge market demand for property, a lot of it is under utilised.
There are some very big houses out there. Like up_and_up, I also spent some
time living in a large shared house that was more of a community. Central
city, a garden with chooks, nine bedrooms, usually twelve or more occupants,
shared responsibilities, budget, cooking, etc. We were each spending about the
same for rent, food, electricity, gas, phone, and internet combined as others
in shared house situations were spending on rent alone.

Our home was a true community hub. We hosted a lot of events. It was a great
way to live as a young person. In my opinion it was the cooking roster (you
cooked once every two weeks for everyone else in the house) and the fact that
we all sat down to a shared meal that made it work. Without that it would
probably have devolved from a large family-like situation into something more
like a large hostel situation.

------
moonshinefe
Don't waste your time blowing all your money on overly expensive cities, move
away, live a higher quality of life, build your families, and let all the
millionaires left in the cities that over charge for everything alone.

We don't need them at all.

~~~
alistairSH
That's all good and fine, but even cities that were once considered affordable
are beginning to see large price increases. Seattle, Austin, Denver, etc. Yes,
they remains affordable relative to SF, NY, London, but there was a time I
could sell my house in suburban DC and pay cash for a house in any of the
first three. That's not true any more.

~~~
TACIXAT
Time to start looking elsewhere then. Baltimore and Detroit come to mind.

~~~
alistairSH
Baltimore's older harbor neighborhoods definitely have some appeal.

One of these days, I need to make a pass through some of the old steel belt
cities. Don't know enough about them to know if I'd want to live in them. Big
down side is most of them are significantly colder than DC or the other places
I listed.

------
Unklejoe
Not trying to come off as a snake, BUT,

Since these trends seem to be at the beginning stages, how would one best
capitalize on this?

I feel that actually owning a property is going to become less and less common
for people as time goes on, so maybe now is the time to push hard to invest in
rental properties? The wealth classes seem to be getting more and more
quantized, so I’d like to try my hardest to get myself above the rounding
point before it’s too late.

I have a lot of friends who will simply never be able to afford to actually
purchase a house. They’re renting and living paycheck to paycheck, which
basically means they’re “stuck”, as it’s very hard to save for a down payment
for a house at that point.

However, if they were only able to get over the initial hump of getting the
down payment, they would be fine, since mortgage payments in many places are
less than rent, but I digress…

~~~
rm999
I've been saying this for a couple of years, but if I were into real estate
investing I'd pour money into rental properties in secondary and tertiary
cities. I lived in Baltimore 10 years ago and was visiting last weekend.
Neighborhoods that were effectively no-go zones back then (think of areas with
shootouts in The Wire) are full of cafes and hipster shops now. 10 years ago
you could get a house that sells for 400k today for under 150k. I predict that
pretty much every city of a few 100 thousand people within a couple hours of a
bigger metropolitan area is going to grow like this.

I'm also very interested in the trend towards "micro" apartments in expensive
cities. They will require code changes, but the idea is solid: make tiny but
affordable housing for young single people. [http://www.nydailynews.com/new-
york/nyc-micro-apartments-art...](http://www.nydailynews.com/new-york/nyc-
micro-apartments-article-1.2478722)

~~~
soylentcola
Live and work in Baltimore now (been here around 10 years) and it's definitely
a thing. Our main issue is that this "reinvestment" in the city is happening
at a glacial pace--much slower than needed to address the seriously neglected
and decayed infrastructure that's been piling up since the white-flight of the
50's and 60's.

Still, the city's population is much lower than it was during the boom years
of the 30's-50's so gentrification, while certainly spurring some conflict and
debate, is nothing compared to a Manhattan or a San Francisco.

Since much of the recent shifts have spread out from the redeveloped
waterfront and Rt. 83 corridor, you still see huge differences in home prices
over the space of, say, 10 blocks. Looking at mostly typical Baltimore
townhomes renovated in the past 10 years, our house which cost $240k would've
cost $350k if it had been maybe 10 blocks south in the more gentrified Canton
neighborhood.

And now, a few years on, new renovations on our block are being listed for
those $300-400k prices. From a long term investment perspective, it would seem
that values will be holding steady or rising in my immediate area but in
bigger terms, I think it relates quite a bit to the overall topic of this
thread. Younger people (and probably some not so young) are still interested
in home ownership but can't (or won't) afford to pay DC prices or even the
prices of surrounding suburbs.

I truly hope (selfishly, as a Baltimore resident) that this signals a wider
shift to reinvestment or just investment in smaller cities that may have seen
major declines during the 60's-80's as those with means moved out to the new
burbs. Living within a few miles of work is great and being able to walk or
bike places is awesome. I don't know how much you'd need to pay me to get me
on that hour-long highway commute from the suburbs every day.

------
s_q_b
If I get to choose the age cohort that defines the word "millennial", I can
probably get the data to say "millenials" have whatever migration pattern I
desire.

~~~
stephengillie
[https://en.m.wikipedia.org/wiki/Texas_sharpshooter_fallacy](https://en.m.wikipedia.org/wiki/Texas_sharpshooter_fallacy)

------
gumby
OK, there's some data but were's the insight? If millennial move out, does
that mean that as the current population ages out, post-millennials all stick
around / move in or does it mean they'll become dead zones of old people? A
vibrant environment needs a mix of ages (and other demographics).

------
atemerev
This is actually great.

It looks really strange in the modern globalized world that everybody worth
something in tech have to physically move to Bay Area.

The world needs new tech (and other talent) hubs, and market pressure helps in
this diversification. No need to resist it.

~~~
pteredactyl
What's strange is people who do not see the value in face to face
communication and think remote is equal to everything else.

~~~
atemerev
What's the difference between video chat and face to face communication? I
don't see any.

And, for that matter, resolving the issue in Slack is often much faster.

~~~
pteredactyl
For me it's literal presence. Some people may not be able to feel it, but I
do. And for my best work, it matters.

On the other hand, I do agree oftentimes it is faster to resolve issues in
chat, over the phone, or whatever digital reduction du jour.

------
Tistel
I live in Canada, did a degree in CS and work as a programmer. I do ok money
wise. I consider myself lucky that I enjoy programming. I live in Toronto and
have zero chance of ever owning real-estate (unless there is a massive real
estate correction which would blow up the Canadian economy). Even if you
consider a hypothetical marriage and doubled my income, it would be out of
reach.

Its even worse in Vancouver.

I don't think its the end of the world. With a bit of luck and discipline, my
retirement will be funded by investments.

(edit: i am using the rule of not spending more than 30% of after tax income
on housing)

------
emodendroket
I just read yesterday that the suburbs were coming to an end because in the
future everyone was going to live in areas like Manhattan. Shocked to learn
that's not the case.

------
naveen99
For good reason. Smaller towns are more livable then ever. With uber you can
do without a car even in small towns and distant suburbs. With high speed
internet and delivery, you rarely have to go shopping into a city center. With
wikipedia, github, and youtube, education from advanced topics to daily diy
projects is available to villagers. With tinder, there is a singles scene
where there wasn't one before...

~~~
emodendroket
lol. That is definitely not the reason and many of those things are not
necessarily practical for working-class people (like taking Uber everywhere)

------
Bombthecat
Well, something like that is happening in germany. Everyone want to live in
the cities. Literally paying any price for rent. And then complain about the
price. Soon or later they will there own undoing not be able to pay the rent
anymore and moving out.

I live outside the city so I don't pay insane rents. While I watch to blow
that over.

I say no problem with that. It is there fault. They don't need to live there
and, especially pay any rent which is way too high.

------
mabbo
But as people leave those expensive cities, won't they become more affordable?

I mean, they are expensive because there are more people than available
housing, and because there are lots of people making lots of money so they can
spend more on stuff. But if those people want to leave, that reduces demand so
prices should reduce.

Eventually, we should reach an equilibrium (or at least something more
stable).

~~~
emodendroket
So you think they're going to become more affordable as poor and middle-class
people move out and are replaced by well-heeled professionals and the
international elite? I think that is unlikely.

~~~
mabbo
Fair point

------
Rhapso
Time to build new cities.

~~~
godzillabrennus
... On Mars!

------
pmlnr
It's not just America, and apparently, a 9-5 job is working class as well,
because major cities in Europe are unfordable for someone with a job like
that.

------
dschiptsov
Yeah, squeezed by two major trends - landlords optimize for profit
maximization, while employers optimize for wages minimization, gives no other
choice.

It is exactly the case of losing ground/territory to better competitors in
ecology - manual laborers would be pushed out of overpriced neighborhoods by
JavaScript-coding hipsters and their managers.

~~~
emodendroket
Well, there is at least one other choice in government intervention. We don't
actually _have_ to let rents keep going up.

------
some1else
I wonder if they're going anywhere in particular, or just spreading out.

------
api
In a sense you could say this is the market working. America is huge and there
are _lots_ of good places to live. We also have this amazing global
telecommunications network thingy. Who knew?

------
iamlacroix
tl;dr gentrification

