
L.A.'s crisis: High rents, low pay, and $2k doesn't buy much - jseliger
http://www.latimes.com/local/california/la-me-lopez-renters-struggle-06042017-story.html
======
jseliger
This is also really a zoning story. L.A. used to be zoned for 10 million
people in the late 60s and decreased that tremendously in the early 70s:
[https://la.curbed.com/2015/4/8/9972362/everything-wrong-
with...](https://la.curbed.com/2015/4/8/9972362/everything-wrong-with-los-
angeles-housing-in-one-graph).

Today we have improved technology along almost every dimension yet the city is
zoned for less than half as many people.

We are paying zoning's steep price:
[https://object.cato.org/sites/cato.org/files/serials/files/r...](https://object.cato.org/sites/cato.org/files/serials/files/regulation/2002/10/v25n3-7.pdf)
(that's a link to a PDF).

~~~
jly
I would look also at the seriously distorted property and land taxation system
in California as an additional contributor along with zoning.

A few decades of Prop 13 have done an amazing amount of damage to the housing
markets all over the state, by disincentivizing the sale of property. This has
contributed heavily to reducing the supply of housing and distorting the
market, among other problems.

If California made some modifications to it's taxation policy - perhaps
lowering income and sales taxes while leveling the playing field on land
taxation - home owners could come out paying a similar total tax bill while
adding needed fluidity to the market.

~~~
dv_dt
I support Prop 13 for primary homes that owners are actually living in, but
commercial rent deriving properties should have never been covered by it.

I take this position because I'm really not interested in kicking little old
ladies out of their homes of multiple decades just because some property price
bubble has driven real estate to crazy levels. Basically without prop 13,
every bubble is going to drive the poorest and most vulnerable home owners out
of their homes, and that is a pretty ugly side effect. That is the original
intended protection of prop 13, but commercial properties were somehow rolled
under that same umbrella.

~~~
kcorbitt
I'm not convinced that Prop 13 is the best or only solution to the "we don't
want to kick senior citizens out of their communities" issue. Prop 13 only
helps you if your property has appreciated in value anyway. So by definition,
all of its beneficiaries are sitting on assets that have appreciated,
sometimes enormously.

Currently, Prop 13 caps property taxes as a percent of the last sale price.
What if instead we allowed property taxes to increase with home value, but
deferred collection of the incremental tax increase until the sale of the
home? The back taxes owed could even be capped as a percent of appreciation.
Given that the property's price has by definition increased, even after paying
the back taxes the seller still gets much of their money back, the government
comes out whole, we don't force old people to sell prematurely and the tax
burden is shared more equitably between old and new owners.

~~~
mjn
In my opinion, Texas gets this right (as a left-winger who's lived in Texas
for a number of years, I don't get to say this that frequently). If you're
over 65, you can defer property taxes on the home you occupy as long as you
continue to own and occupy the home. They aren't even just frozen, you can
simply not pay the taxes at all. This means you can't lose your home due to
inability to pay property taxes. But you don't get to play both sides and get
a property-tax reduction while _also_ passing on a big capital-gains windfall
to your heirs. The taxes are deferred, and when the home is either sold, or
transferred to heirs upon your death, the deferred taxes are assessed against
the capital gains and/or the estate. (If the estate ends up being worth less
than the deferred taxes, the state eats the difference, but deferred taxes are
recovered from whatever value it does have.)

~~~
RhysU
What happens to someone who lets the taxes build up but needs to sell (medical
bills, say)? This screams of unintended consequences where the state taxes a
windfall from someone forced to sell.

~~~
desdiv
Taking out an HELOC against the property might be one solution.

~~~
JamesBarney
The property taxes take precedence over loan collections, so no one will give
you a HELOC when you have a bunch of back taxes.

------
rukittenme
I'm seeing a lot of "I fear that..." in this thread. I just have to laugh.
This isn't a new or unique situation. The only thing that has changed are
people's preferences. My Great Aunt lived in NYC with 6 other girls. Roommates
were required to survive the high rents of post-war NYC.

California has always been gripped by NIMBYisms and choking regulation. You
get what you vote for.

What can you do against the tyranny of good ideas? It's a good idea to make
use environmentally friendly building materials. It's a good idea to build
earthquake resilient homes. It's a good idea to require certain standards of
home building. It's a good idea to rent control the apartments of the elderly
so they can continue to live in their home of the past 50 years. It's a good
idea to X..Y..Z.

Is it a good idea to create a generation of serfs?

~~~
utternerd
"A government big enough to give you everything you want, is a government big
enough to take away everything that you have."

For all the talk of "negative externalities" I see on HN and the valley in
general, I never see people discussing the rampant "negative externalities" of
the laws and regulations we pass. It's unfortunate there's so little
introspection going on, and so much reliance on the monopoly of the Government
to further what Group A or Group B wants. (But it's OK, because I agree with
Group A!)

~~~
Daishiman
Corporations big enough can have a humongous power to take away everything
from you.

------
macawfish
Rent and debt are far too often taxation without representation. It's that
simple. This is especially true in situations where landlords sit back and
collect, without taking due responsibility for the shape of the living spaces
they supposedly "own". And people put themselves into these feudal
arrangements for so many reasons. That part is _not_ simple.

Why do people want to be landlords over others? Why do you want to live in a
world where it is normal to take huge debts, only to hand off the monthly
payments to people who are barely treading water?

This whole business of playing musical chairs with our homes and communities
is beyond ridiculous. The amount of furniture that gets thrown out every month
is shameful in the face of global climate change.

~~~
m-j-fox
> Why do people want to be landlords over others?

Incentives.

I'm a small time landlord. I was able to rent out my old house at a rate that
covers the mortgage and a manager. When you factor appreciation, equity and
tax breaks my net worth increases at a rate of $3k/month even though on paper
I barely break even. I'd be dumb to turn down such a deal.

The richest man in California owns the Irvine Company. I assume he faces
similar incentives at scale.

~~~
macawfish
On one level, I get that: it is economically sensible to play the landlord
role, even at a small scale. And in a lot of ways, you're doing something
really important. You're providing someone with a place to live, one that they
don't have to worry about taking long-term care of. You've decided that you're
going to be a long term care-taker of this home. Assuming you're a good
landlord, you really are doing some good for the world.

But would you really be "dumb" if you did things differently? Or would you be
following a different set of economic values? Seriously, think about that. I
challenge you to rethink your "smart vs dumb" idea. It's "smart" to drive and
rely on a car. But on another very important level, it's also incredibly
foolish, a.k.a. "dumb".

And I'd argue that what you and your renter have done is also pretty "dumb".
Why? Because you and your renters are paying the bank _that much_ for a house.
The cost of building a new house is much less. This is an _old house_ , but
the bank said "this house is actually worth more than a new house, because you
can simply pass the debt onto someone who doesn't have the option of buying a
house at this moment, even though they urgently need a place to live". The
house itself probably isn't inherently "worth" that much: it takes a lot of
work to keep up an aging house. Yet all of this rent money is harvested from
the occupant's time/earnings/savings: money that could be _invested in the
house_ gets sucked into some exponential function that translates to the bank
taking thousands of dollars a month from your renters. Since the bank is so
"helpful", you get to keep a very small amount allowance so that you can do
repairs/profit. Of course, in the end you'll "own" the house, you'll have paid
off your mortgage. Or maybe you'll sell it to someone else, who will enter
into a similar agreement with the bank. Regardless, by the time someone has
paid off the mortgage, banks will have gotten off with something in the range
of 0.5-5x the entire inflated value of the house just for handling sacred
paperwork. To me, that's _DUMB_.

This kind of thing is technically forbidden in Islam, Judaism and arguably
Christianity, but not in the USA.

By the way, I'm right there with you in doing dumb stuff like this: I'm a
renter.

~~~
dionidium
A lot of what you just said suffers from a pretty big misconception: it's
_land_ that's worth money, not the house that's on it.

Every single news story about how some tiny shack in Vancouver or Palo Alto
now costs $x has the same problem, so you're in good company. But it's still
not the right way to think about this problem.

~~~
macawfish
That's a good point, and according to the board game _Monopoly_ , you're
totally right. In the above post I complained that housing costs don't reflect
the quality of the housing itself. Land speculation is probably a huge part of
that, if not the dominant contributor.

But my whole point is about "rentier capitalism", and it applies whether
you're talking about land, houses or SaaS.

In a free market, of course there's gonna be ebbs and flows as people and
industry come and go, but look at this chart:
[http://www.economist.com/blogs/graphicdetail/2016/08/daily-c...](http://www.economist.com/blogs/graphicdetail/2016/08/daily-
chart-20)

Those huge, correlated roller coaster curves aren't based off of natural
fluctuations in land values in all those different places. They're based on a
kind of big distributed Monopoly game where a bunch of people frustratedly
flipped the board over in 2008. Now we're going in for another round.

Meanwhile, the north pole is melting, and there's tons of work to be done in
retrofitting houses for climate change, in switching to new kinds of fuel,
planting gardens sustainable agriculture, fixing broken stuff. What are people
doing instead? A lot of people spend much of their time doing _dog eat dog
capitalism_. Chasing rent checks and debt repayments. Doing the 9-5 grind.
Driving 40 miles a day to work jobs they _don 't believe in_. Not everyone of
course, but too many people!

We really need to shed this feudalistic way of doing things, and that's going
to take people evolving how we participate in markets, what's considered
"smart" or "dumb".

~~~
dionidium
_Those huge, correlated roller coaster curves aren 't based off of natural
fluctuations in land values in all those different places. They're based on a
kind of big distributed Monopoly game where a bunch of people frustratedly
flipped the board over in 2008._

Couldn't this be that the underlying value of the land didn't change at all in
2008? That people still really value land in desirable coastal areas and will
do just about anything to get it? That what did change was the amount of
capital available to regular people to get it?

Nothing about their underlying desire changed at all.

------
siliconc0w
Yeah the homeless population is insane - a long heat wave and I wouldn't be
surprised if we had riots.

I'm lucky enough to have a rent-controlled place in Silverlake but it does
come with other costs because the owner doesn't really maintain the property.
Hallway light doesn't work and we strung up Christmas lights in our kitchen
because we can't get an electrician to fix the light in there.

A lot of the startup jobs are on the Westside but considering those easily
adds an additional 18k/year in housing costs or doing that terrible 2-3 hour
commute everyday.

Thinking hard about moving to Oregon or something and just doing remote work -
I've lost most of any enthusiasm I've had for LA.

~~~
thechao
Come to Austin. Or Houston; San Antonio, Dallas.

~~~
JBlue42
\- Austin is fun and has some good companies but too damn humid (and I'm
originally from the South). And I think the exodus from CA the past few years
have really overwhelmed their infrastructure

\- Houston/Dallas seem like just more sprawl. LA is actually pretty dense in
parts and can have good public transit. I know people from Dallas that have
been happy moving back though.

\- Don't know much about San Antonio

~~~
thebradbain
Dallas native here who goes to school in LA!

Yes, Dallas is much more similar to LA in that regard compared to New York,
although still a magnitude less spread out than Los Angeles (and traffic is
nowhere near as bad): I would say geographic distances in Dallas proper (not
the exurbs, which I don't consider Dallas as most are in their own counties)
are one-fourth to one-half shorter than Los Angeles.

Also, Dallas has been increasingly developing their Downtown/Uptown scene to
mimic Austin, and is where most all young professionals / startups are
located, as the past generation's upper class still prefer the centrally-
located neighborhoods of Highland Park and Preston Hollow just outside of
downtown for their large single-family homes, meaning high-rise apartments in
Dallas go for about $1.5-$2k and are located next to work.

Also, the mayor in Dallas is all for the rapid development of higher density
housing, which greatly helps with housing supply (though single-family home
property values in these desirable neighborhoods are increasing about 10-15%
year over year due to the influx of new people and no more space for single-
family homes in Dallas proper).

------
vondur
I'd also like to add that LA county has the highest number of illegal
immigrants in the country, with and estimate of 1.1 million. That is surely
exacerbating the housing situation. This also likely exacerbates low salary
problems too.

~~~
sjg007
Net illegal immigration is trending down due to enforcement and a less robust
US economy. The only way to improve upon the situation is to improve
working/living conditions in Mexico, accept it as a given, or kick everyone
out. NAFTA is an attempt at #1 but it is a double edged sword, you lose jobs
in the USA but get more corporate profits / cheaper products) from cheaper
labor in Mexico. What I think was unexpected was that China came a long and
really reduced labor costs further while cloning the intellectual property.

Conditions in Mexico (and South America) did not improve enough though; China
has amassed major purchasing power (such that expatriates are buying
properties to hedge and take capital out) further increasing costs globally in
affluent cities.

So cities and communities should ideally increase density (available product)
in response to demand. They could in fact raise their tax base, improve living
conditions/services and reduce costs. This is all in support of the growing
tech economy.

In LA there are probably more renters than owners and perhaps those that are
able should vote. I think the problem is people don't and when they want to
buy or think about it they realize they are SOL and either have to gentrify
some part of LA or move out.

~~~
TACIXAT
>a less robust US economy

I know it's kind of tangential to your point, but any sources on this? I was
under the impression we were humming along.

------
ugh123
L.A. has a major NIMBY problem: as soon as anyone gets a whiff of new housing
development you'll see someone pile on the fud about how it will increase
crime and homelessness (ironically) in their neighborhood.

~~~
1812Overture
I've heard people in the same breath complain that a housing development will
ruin home values and cause gentrification.

~~~
closeparen
Gentrification and displacement are distinct. Downward pressure on home values
mitigates displacement, but the presence of more above-median-income people
_is_ gentrification.

It can change the social fabric of a neighborhood (different taste in retail,
different participation in neighborhood social life, etc), even if the
original lower-income residents are still there.

I think this is something we should accept, but they're not technically wrong
to call it gentrification.

------
TheMagicHorsey
There are places within 3 hours drive of SF, where you can pay $1000 to buy an
acre of land (200 acre parcels minimum).

At some point, telecommuting technology will encourage an exodus of tech
workers.

Some people, yes, want a city life.

Others don't want to lose 50% of their earnings on buying or renting housing.

~~~
bogomipz
>"At some point, telecommuting technology will encourage an exodus of tech
workers."

But we already have Slack/Hangouts/Github/HipChat/Skype/Trello etc and
most(the majority?) of the tech jobs in SF require you to come into the office
no? I don't believe its the tech worker themselves who are short on
encouragement.

~~~
shostack
While this is HN, with its associated demographics, the reality is that many
office jobs just aren't as feasible for remote work. Face time and hallway
conversations can be incredibly important for a healthy company.

~~~
bogomipz
Can you say specifically what office jobs can't be done remotely and why?

Also can you say what type of content can only be communicated in a hallway
but not via video conferencing, chat, phone or email?

~~~
closeparen
Have you ever actually used a phone or video conference? Laggy, artifact-
laden, unintelligible, half-duplex (pretending to be full-duplex but you can't
actually speak simultaneously and hear each other), incredibly awkward and
slow compared to actually being in a room with someone.

Landlines could solve some of those problems, but how often are all parties
going to have landlines?

Some of the most important information I've picked up at work has been from
overhearing keywords and jumping into a conversation across the room, chatting
with coworkers at lunch, etc.

I could do something that resembles my software engineering job if I only
worked on the tickets as written and the Zoom meetings as scheduled, but not
nearly as well.

~~~
bogomipz
To answer your question, yes I have actually used a phone or video conference.

I currently rely on wifi calling on my cell phone and it works flawlessly. I
also rely on Vidyo, Skype and Google Hangouts. All of the latest versions of
these work just fine. There are many distributed teams that use these to great
effect every day, mine included.

>"Some of the most important information I've picked up at work has been from
overhearing keywords and jumping into a conversation across the room, chatting
with coworkers at lunch, etc."

You could also miss out on these if you happened to be in the bathroom or
getting a coffee at that time, or wearing headphones. "Being within ear shot"
seems like a strange requirement in 2017.

------
Simulacra
There's a proposal that was floated some years back in Atlanta around grocery
stores. South of interstate 20 is a food desert. So the proposal said that a
corporation and it's subsidiaries could not build a new grocery store anywhere
in the city, without also building one in a disadvantaged area. It never went
anywhere but I wonder if this might work in an area where more housing is
needed. In order to get the building permit you are required to offset one
project with a low income project in pre-determined areas.

~~~
thescriptkiddie
San Francisco has something like this. Conservatives are constantly trying to
kill it because they perceive it as a barrier to new construction and
therefore an artificial constraint on supply. Of course, these same
politicians also vote for stricter zoning regulations, so they might not
actually be interested in increasing supply.

~~~
closeparen
Liberals are also constantly trying to kill it because we'd prefer to have
socioeconomically diverse neighborhoods, rather than "stick the poors in a
crappier building somewhere else where the luxury tenants don't have to see
them."

The preferred alternative is to allocate some percentage of units in the new
building to low-income tenants.

Of course, some "progressives" want this percentage to be high enough to make
development totally nonviable.

------
1024core
I fear that this is the future of the country: vast majority of the people
barely getting by, and a very small minority leading cushy lives. I see more
and more people living in RVs, just making ends meet. On the other hand, if
you're in the right line of work and in the right place, you're making out
like a bandit. I've seen 25-year-olds making in high 6-digits, and 72-year-
olds collecting shopping carts at the local grocery store.

I have a feeling of dread about an upcoming large-scale social upheaval, but I
can't quite put my finger on it. I think Trump's election is a symptom of the
trying times we live in.

~~~
malandrew
Why is someone's age relevant? Whether you are 25 or 72, how much you earn is
based on how much value you provide. A 72 year old has 47 more years of life
to have potentially capitalized on.

~~~
nickthemagicman
That's exactly the issue. These people have no value to provide modern
society, because they're either not smart enough, or dont have the requisite
quals to go into white collar work. Their 72 years of life experience were
working hard in a plant and being loyal to a buiness, which then shutdown or
outsourced their jobs

Historically, there were places for these people. Manufacturing, truck
driving, etc. White collar people are working on automating them out of
existence.. So now they deserve to starve ? Because they're hard workers,
honest, loyal, decent people, but just can't cut it in the modern professions
that provide value? That's the Crux of it. That explains Trump to me

~~~
cubano
> These people have no value to provide modern society, because they're either
> not smart enough, or dont have the requisite quals to go into white collar
> work.

Or you have something on your SE history that makes you totally unsuitable for
hire, according to the muckity-mucks in charge.

~~~
nickthemagicman
EXACTLY. Someone made a mistake at some point like we all do.

------
oblib
Well, this is hardly a new crisis. I lived there before and after Prop 13 and
it was a crisis then too. They way I solved it for me was to leave California.

If you live and work in L.A. odds are good you're spending about 1 out of
every 10-15 years of your life in traffic. And that's a 24/7/365 year. Deduct
sleep and work from what remains and you don't have much of a life left.

I figured that out sitting on the Ventura Fwy one day and started planning my
escape when I got home. That was 30 years ago I never miss it a bit.

I visited LA for the 1st time last year when my wife and went to "Desert
Trip". In some respects it was better, and I tip my hat to Californians when I
say that.

They only thing I'll say "fer sure" was worse are "In-n-Out Burgers". They
weren't even close to as good. Neither were the fries. I was sad about that
and to be fair I kinda do do miss those.

------
contingencies
High rents? Are you kidding? LA is _cheap_.

In 2010 I had a (OK, admittedly old) house on Mulholland Drive for $1700/mo. I
had moved from London in 2009 which cost double that. Right now in 2017 I have
a bog standard 118m2 apartment in Shenzhen for $1450/mo and there's absolutely
no view, private orchard, wild deer, blue sky weather or cachet! In Sydney
even unfurnished 85m2 in a cheap area would be AUD$2750 = USD$2060 and Hong
Kong people recoil in horror at how cheap my place in Shenzhen is, they pay
USD$3242 for unfurnished 85m2 in a cheap area.

------
scandox
Dublin, Ireland. Same exact problem.

Knowing both sides of the social divide I absolutely blame the landlord-
centric culture - which includes a lot of very nice people that I know. But
those nice people just should not be given such an easy ride. They're earning
far too much from what is a very non-innovative activity. The cultural bias in
their favour is overwhelming, however, since everybody who finally manages to
buy a property silently joins their consensus.

------
dmh2000
I know it would be tough for senior citizens to move but there are lots of
places in the US where you can rent a nice apt in a decent neighborhood. for
quite a bit less than $1000. One bedrooms < $500. Maybe instead of trying to
somehow conjure up lower rent housing in LA, set up a program to help people
on fixed incomes relocate elsewhere. This would go for folks who work minimum
wage too.

~~~
mason55
Are you suggesting another city? The problem is that if your support network
is in LA then moving somewhere else might not be feasible (or might not save
you any money if you now have to pay for care).

~~~
JBlue42
Yeah, a lot of my friends from LA worry about being able to stick around so
they can have a house, kids, and grandparents to look after the kids (and for
them to be able to look after the grandparents).

------
shams93
It's especially brutal that unemployment tops out at 450 a week even if you
can barely make your rent you have to try to pass brutal engineering tests
when you're not able to eat for days or weeks

------
jgalt212
Let's not forget ZIRP and how it was an incredible boon to landlords. The Fed
doesn't seem to care about rent inflation, or asset inflation, because in the
aggregate it's not that high, but in a number of cities rent is bleeding the
middle and upper middle class dry.

~~~
kevinburke
In theory low interest rates encourage borrowing to build more, but we haven't
seen the "building more"; CA added 2.3 million residents since 2010 and only
400,000 housing units.

The problem is much more about local cities and NIMBY's having too much
influence in the planning process.

------
pcsanwald
wow, the latimes site is just unusable. endless popups, scrolling is seemingly
broken, ugh.

------
bfrog
This is a growing concern even here in Chicago honestly. The problem isn't
rent avg, it's rent avg in neighborhoods you would actually want to live in
are growing to unpayable levels.

------
Tempest1981
What are some persuasive arguments that might convince NIMBYs to support
rezoning their neighborhoods for higher density? I.e. to build consensus, vs
just name-calling?

~~~
jessaustin
This is a good thought, but one doubts that arguments against self-interest
could ever have much persuasive force. NIMBYers like to talk about all the
catastrophes that will ensue if the community changes, but the primary
catastrophe on their minds is the one to their Zestimate®.

~~~
Tempest1981
People I've talked to seem more concerned about traffic and congestion,
parking, and Airbnb.

They aren't planning on moving (ever), so their Zestimate seems irrelevant.

~~~
Tempest1981
If there were a way for them to cash out, and go somewhere "better", that
might be attractive. OTOH, all of their friends probably still live nearby --
esp if they've been there for 20+ years. Tough to pick up and go. I'm trying
to imagine an incentive.

------
notadoc
Sounds like a typical west coast city nowadays.

------
codedokode
> tight 700 square feet

That is pretty much space for only two people. But $1600 is not cheap, I
agree.

~~~
jraines
NYC anecdata: a couple years ago my girlfriend at the time split a $2700,
400sq ft 2 bedroom on a 7th floor (!) walkup in Chinatown.

Unrelated, but she's an architect and pointed out illegal parts of nearly
every residential building we set foot in in NYC.

------
EGreg
One word: automation and outsourcing reduces demand for local labor.

------
rootsudo
Yet people stay in places they can't afford.

------
cryoshon
it isn't just LA that's suffering in this way... it's the entire country.

the rent is too high. the pay is too low. the costs of essentials are rising.

nobody will do anything.

we're on track for self-destruction.

~~~
tdb7893
I'm paying 1k a month for a 2 bedroom apartment and I can get anywhere in
Minneapolis or St. Paul in less than 30 minutes. People don't seem to like the
Midwest but apartments here are way cheaper for many cities.

~~~
nether
There are a lot of small towns that are very livable in the US. Most
journalists are in big cities, so you don't hear of them written up, except
for the occasional "meth town crisis" piece. I have a climber friend who
bought some land in Quincy, California. He designed and built his own house,
along with a guest house and garden. He and his family live a quiet life of
outdoorsy pursuits, rock climbing and backcountry skiing, while enjoying the
small town's community theatre and organic food co-op. Cherry trees line the
streets, and they taste really good.

~~~
cylinder
What do they do for income?

~~~
TomMarius
I have similar friends, he's a software developer.

------
MachinShinn-
The article sites a 1 bedroom, 900 sqft aprt with stacked washer/dryer and new
appliances for $2100.

Is that expensive? I live in a 988 sqft, 1bedroom apt with washer/dryer with 2
roommates. We pay around that amount.

I consider myself very well off. I work 1-2 hours a day for myself online. I
just chill/play games/eat out/lounge around Starbucks most of the day. I sleep
~10 hours a day.

Sounds like the people in the article are just lazy. No one has a God given
right to a detached house in LA... Just move. Your $1000 social security check
makes you a God in the Philippines, Thailand, Macedonia, etc.

