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U.S. rent has increased 175% faster than household income over past 20 years (phys.org)
455 points by finphil 46 days ago | hide | past | favorite | 385 comments



Housing cannot both be a good investment and affordable by definition unless new supply outpaces demand. The problem is that for so many Americans, their house constitutes the majority of their net worth which naturally causes them to advocate for policies that increase their property values which among other things, includes zoning limitations that depress new supply.


Land absolutely would stay a good investment. Land that can house more people, in a city where more people need housing than used to, isn't less valuable than land that can house fewer people. Development's goal is to increase property value, that's the whole point of it. Nobody would spend money to develop if they were going to lose money on it. That's going to continue as long as population rises. When talking about land-owners (which zoning discussions, especially around single-family zoning, often means), the land value isn't what's protected by zoning. Development may reduce the desire of a new owner to live in a single family home next to an apartment building, but now you have another developer willing to buy your land to build their own multi-unit building, and that's gonna be some good money.

The cities that have had less crushing affordability problems are the ones that have been able to continue expanding outward - the outskirts land that used to be empty now has housing (and got more valuable as a result of this development) and the inner areas (slowly) has been getting denser, especially as old industrial property gets redeveloped and such. But many of those cities have just as much zoning and restrictions around density as NY or SF (usually more!). The difference is that they were able to go outward to better keep up with demand increases. I don't think any US city has been able to address rapidly rising demand through upzoning and density alone - redevelopment of existing residential will always be much harder and slower than of empty perimeter land. Density, on the other hand, has seemed to ultimately cause demand increases in NYC and SF greater than the supply increases it has provided.

If population growth stops, though... all this changes. Or even if just the net migration to various cities shifts around!


People who say that have never owned land and have a simplistic fantasy in their mind.

Listening to people that have owned land you hear things like:

- A creek was at one edge of our property right outside of it, and the state required us to build a bridge, getting the license for the bridge was costly and time consuming

- The creek changed course and cut across our property, the federal government had new requirements that had costs and approvals necessary

- We lost money on the property, despite land being a finite resource and all the dreamers being perma-bulls on land ownership, there was no way we could turn this into an income generating property that would be profitable.


Sure, we have anecdotes about how not every property is a profit bonanza, and that there are often a bunch of surprise costs.

That's why there are big development companies. The advantages of scale apply here as much as anywhere. Lose money on one, make money on others to offset the risk. What you call a "simplistic fantasy" is a century-long phenomenon in the US at this point of increased population in major urban areas leading to rising land values and the conversion of empty fields into developed areas.

There's no guarantee that population growth will continue to increase demand, or even that demand in developed areas will stay high - there have been a lot of cycles in that time as well, with extreme examples like Detroit to balance out the SFs of the world - but that's a very different argument than "we need to increase development so that we make housing less of a good investment," which I'm claiming is a blatant contradiction when it comes to the value of the land that is being developed. A shitty house in NYC is worth more than a nice house in Austin not for the building, but for the value of the slice of land it sits on, because the area has been developed more which has resulted in more demand.


owning land in a high demand city is a wildly different experience than owning land in a rural area with creeks. The issue is not just that "land is a finite resource so any piece of land will increase in value" the issue is that "vacant urban land has very few alternatives for people who need it so the price consistently rises in areas with growing economies".


Land often has a lot of strings attached. For example you need to maintain it, make sure there is no wild foliage, people don't start camping, it is safe (someone gets in and breaks leg? Nightmare), then maybe you need to build a specific thing or cannot build anything at all and so on.


> For example you need to maintain it, make sure there is no wild foliage, people don't start camping

You really don't. Dirt lots coated in rusty chainlink, gang tags, weeds, and tents are traded hands all the time, even in Downtown Los Angeles, for top dollar. Maybe you hire a crew to weed wack once a month if that. Even land zoned for a single bedroom bungalow goes for a lot of bread, because one day in the future that zoning can change and there is always demand in a big city with a lot of jobs near a major harbor and airport for more units, and parcels in big cities are finite.


This is not true. Maintenance is necessary for dirt lots in downtowns. I own a few parcels in the middle of dense cities. You have to deal with soil erosion, animals digging up soil which blows away, problems with trees (due to storms, pests, hanging into other properties), property line encroachment, and vandalism.


I own land and never had those kind of problems. I assume 95% or more of land owners also never had those problems.


95% of land owners don't have creeks running through them

The point is that you have to be as discerning as a homeowner or even more, and this can limit the supply of decent land to own or highlight how impractical it is or how it isnt a solution to anything

Even the other sister replies shifted the goal post, this is a thread about housing supply and people talk about squatting on land in urban environments as a rebuttal to just owning land in the vast expanse of space available, which further reduces the possibility of alleviating the housing supply


> Development may reduce the desire of a new owner to live in a single family home next to an apartment building, but now you have another developer willing to buy your land to build their own multi-unit building, and that's gonna be some good money.

A portion of a constructed apartment building on your lot may be more valuable than your current house is there, but...

A) There's no guarantee that the value of your land to the apartment developer exceeds the value of your current use... after all, they have to pay to demolish and then improve it, and...

B) You and your neighbors may have put down roots, that have a substantial value, if difficult to directly economically measure.

C) Moving, itself, has substantial economic costs.

D) If an apartment building built next-door decreases the value of your single family home by 20%... there's no guarantee that there's demand or the possibility to build another one on your lot... and even if there is, the apartment-builder's estimate of your land value will be 20% less. You'll meet in the middle between (0.8 x your previous home value) and (the apartment-builder's estimate of the value of your land to him before improvement).


I think the intangible aspects here aren't relevant because the original poster was talking about the financial investment aspect itself being a reason to oppose development. I completely agree that qualitative reasons will cause people to want to control development, and personally am fine with this, versus just letting the people with the most money dominate the market.

For (D), though, I think this is generally overblown. There are no guarantees, and situations vary, of course, but trend-wise, I don't believe "partial" in-transition up-zoning has been a value-killer overall. In parts of the US that are densifying, these sorts of things are generally radiate outward from high-demand areas. But the single family homes in the high-demand city core areas still have more value than the ones further away, and if you look at the appraisal reports, it's because of the land value, not the structure. In the long run, that development cycle creates the demand that pushes up your own land value even if yesterday vs today, it was more attractive in isolation as a single family home next to another single family home. "Location, location, location" is a cliche but a valid one.

As long as your location stays in demand - and in our current city planning paradigm that's not been something that's been threatened before potential post-COVID reorganization - you're more likely to hit a virtuous cycle for property value here than a vicious one. The types of developments/apartments that are gonna be put up are gonna be determined in part by how much it cost to get the land, so if it was already valuable land, building a slum next door won't make any sense to the developer.


E) In the USA, if it's your residence, it's a taxable event for the capital gain, which can cost 6 figures in federal and state income taxes in a place like CA. Plus, in CA, until this year, you usually lost your Prop 13 basis forever.


Land has operating and maintenance costs. But let's imagine a vacant lot of land which doesn't have those, and it's mortgaged or not any more. That still has property taxes.

So unless land is generating revenue to offsets the ongoing costs like taxes and operating/maintenance costs, it's a loser, operationally speaking: it has a negative cash flow.

If the asset doesn't generate revenue, it has to go up in value to offset costs, as well as to account for inflation, in order to just break even for its owner.

Land is a great cash cow for the state. People are permitted to "own" a parcel of land, but they are really just renting it from the state. Secondary, it's great for landlords.

People have to live somewhere, so if they don't pay for their own maintenance costs and state rent, they have to pay some landlord. Thus they mentally discount those things in order to justify the buying of land. When their property goes up a little bit, they think only of the difference between the new value and original principal, forgetting to looking at how much they sunk into the property, because all that time they had to live somewhere, and they take it for granted that you always have to pay people and cover costs in order to live somewhere.

The only owners who unconditionally profit from landlords. If you own just one property that you live in, that's good for you only in a climate in which properties are appreciating. If you own multiple residential or commercial properties that generate rent, then you're laughing to the bank; you generally don't have to care about whether they go up, or not nearly as much. You are more affected by vacancies, during which you have to cover maintenance, taxes and other costs like mortgage, without any revenue. That's particularly true about commercial properties in a recession.


People always repeat this trope without defining "good"

To be a "good investment" owning housing doesn't have to have a better ROI than the S&P 500, bonds or the interest in a savings account. It just has to burn money more slowly than renting which is the alternative you'd be forced to spend that money on. That's a really low bar. One's primary residence can both be a good investment and affordable.


It needs to take both into consideration to be a good investment in some sense: it might make financial sense to not spend a large sum of cash on a down payment, but invest the money and continue renting (even if the cost of renting is significantly greater than the (property taxes + mortgage - tax savings) would be for the same property), as long as the returns of the invested money are greater than what you are losing on renting. A friend of mine did the math on this for a few property types in Northern California and it worked out to be fairly close in most cases.

With that said, there seem to be pretty significant stability and psychological gains to owning a house that may outweigh financial considerations of this kind. That is doubly true if the investment + renting option is within the same ballpark as the ownership option.


The issue that is often overlooked is the value of the down payment.

Say your home is $100,000(i know, i know lol). Your 20% down payment is $20,000.

You have to factor in the interest that $20,000 would generate in say index funds or whatever you would do with it, when comparing buying to renting--along with all of the other stuff people usually factor like taxes & upkeep.

In some areas this can make renting actually the cheaper option.


The down payment and cost of transaction, including inspections, taxes, and real estate agent fees, loan origination fees, other fees, cost of moving etc. In an average housing market it can take 5 years for those to pay off when compared to paying rent (do your own calculations, mileage varies dramatically).

Unless you have enough cash to pay for a house, you are either renting money or renting a place to live.


> It just has to burn money more slowly than renting which is the alternative you'd be forced to spend that money on

You also need to take into account the opportunity cost of owning land. You can rent and invest the difference in other assets like stocks.

If an asset class has much lower risk-adjusted returns than easily available alternative asset classes, I think it is fair to call it a poor investment.


You can get a lot more leverage with real estate than you can with stocks, so it's not exactly an apples-to-apples comparison.


I'm partial to the Georgist approach. I just makes sense, even though it is pretty backwards from what we're used to ("I'll have to pay more if my land is more desirable??")


Eh. I think it's more about decades of declining low interest rates. Low rates are only available to american's who can obtain credit, and leads to predation on those who cannot. It's about mortgage availability not housing availability.


You must not have been following the past 20 years. We have massive GSEs that backstop mortgages with the power of the Fed. Perhaps second to 2006, it has never been easier for low income borrowers to buy property. This is part of the problem.


I trade volatility for a living. I scrutinize the smallest changes in rates. Of course bad mortgages are not great, however in dollar scale vs. The corporate bond market, they are meaninglessly insignificant. The cdos they are baked into being bought at leverage (again due to low rates) is the problem.


Me too, vol is the only true asset class.

I don’t disagree with what you say. But affordability can only be solved by increasing supply. Everything else is just shuffling the deck.


In the most desirable locations housing is mostly vacant.


I would argue that housing is not a good investment, but owning land is. The house is transient... the land remains.


1. Most valuable land have buildings or housing on it already so it’s kind of inseparable.

2. There’s plenty of reasons land can lose value: people moving away, economic, environmental (climate change), cultural changes. Population growth is projected to peak in 2070.

3. (Land appreciation - inflation) has to be higher then property taxes at least. There’s also opportunity cost of not using that money to buy another investment instead.

Related: https://www.frbsf.org/economic-research/files/wp2017-25.pdf


It doesn’t have to be. I live in a house in the Netherlands that was built in 1675, and this isn’t terribly unusual. It’s not a special old house or anything, just an old one in an old city center.

I know it’s not super common in the US for various reasons, but it’s certainly possible to build a house that will outlast you, your children, and their children.


Wild, how was it constructed out of curiosity and what materials?


Timber and brick, I’m unfortunately not an expert on home construction and can’t give a more interesting answer but maybe someone else around knows.

A lot of homes and construction in the New England area is brick and I bet it will last quite a long time.


To piggy back: "timber framing" uses 6x6 or larger posts and beams for the structural members of the house and then is cladded over with brick, mud, or other materials to keep out water and air. Although we use still use wood (timber) studs in the form of 2x4s/2x6s, this is usually referred to as "stick framing" because the boards are much smaller. These smaller framing members require more fasteners to hold on claddings ie siding, vapor barriers, etc which means each nail/screw penetrations allows water and air to potentially ruin the house. Stucco and other masonry cladding like brick are naturally porous and water permeable.

Another interesting tid-bit is that while older houses are much draftier and usually less energy efficient, this "airiness" of the house allows them to dry out and avoid rotting. There have been countless class action lawsuits in the US because builders in the 80s and 90s created situations where exterior wall assemblies trapped water against the studs and didn't allow them to dry out in an effort to make the "air tight" and energy efficient.

The brick cladding on old New England style homes either have an air barrier between the brick and wood framing or weeps holes in the mortar to allow water out from behind the brick. This allows them to last much longer.


Can confirm. I know many people who live in New England houses ~150 years old.


This is mostly not a matter of construction materials. The oldest houses in New England are all wood frame (much cheaper for the colonists, still is today). As long as you keep the wood dry (maintain the roof and siding), it will last indefinitely.


My in-laws' house is from around 1750, and it's not unusual in New England.


This is true at a most fundamental level, but the things which make land valuable can absolutely change over time, in terms of its presence-in or proximity-to various other things (cities, amenities, natural resources), or ways that it is maintained or let go over time (soil erosion, pollution).

And of course, there are a lots of factors which are totally outside of the individual's control— a falling aquifer could make digging a usable well prohibitive, for example, or maybe your land is on the coast of Florida and will be underwater at high tide in another few decades.


What is land? Governments sell land rights piece meal. You might own the development rights to the land, but you still have to worry about zoning. And I would be surprised if there is anywhere in the US where you can buy land with exclusive water rights (underground or creeks/rivers). Water rights are almost always shared in some way. Mining (oil or ore) rights are not usually lumped in with development rights either. So if you buy land without a house, what are you buying? Future development rights? All the while you have to worry about squatters...


Land can be transient. Beachside communities are having tough conversations right now about this topic. In California the mean high tide line is where beachfront property legally ends. But the mean tide is moving inward every year. There are parts of California that will need to retreat in the next 100 years; properties have already been condemned.


Most land where I live is significantly more expensive that the houses built on them. Almost without fail when the property changes hands, if the house isn't brand new it's torn down and replaced. Doesn't matter if it's a perfectly fine house because the relative cost is so different.


I would assume you don't have a house in Toronto or any of the major Canadian cities like Vancouver, Montreal or Ottawa. Houses there rise in price by 2-3,4,5 k a week easily. You can purchase a house for 1.5 million (borrow 1 million at 1.9 %) and sell it in 10 weeks for for at least 30-50 k more. You ask how long can this last? It has lasted for a couple of years at least. I have seen the prices of Condos in a Co-op I was watching almost double in 3-4 months from 320k to 600k.


On average, this is not true. Citing this example is like looking at a specific stock (TLSA) and saying that the entire stock market quadruples every year. Looking at the broader picture, most REITs give returns similar the S&P 500.


>On average, this is not true.

While you might be correct looking at other markets, you would be surprised how average it is for Canadian Housing prices across Canada. It is impossible to not to earn a minimum of 20 % on any Real Estate transaction withing a year. It is very possible with a little luck to almost double your money on certain purchases in a very short time. I understand how difficult this is for people outside of Canada to understand but I'm not making shit up, it is reality and there is no limit to what the Gov will do to make sure it continues.


I think you're making a "Toronto and Vancouver is Canada" fallacy, which is ironically a very Toronto stereotype. Here in Alberta it's not so hot.


Golden Horseshoe population is 9 million, Vancouver area is another 2.5 million. It's not Canada, but it's a big chunk of Canada.


I mean the "Edmonton-Calgary corridor," which is certainly more spread out than the vancouver metro but is still a recognized connected urban region, at over 3 million people, is also not an insignificant chunk of Canada.

I'm pretty sure you can find well over 11.5 million peoples'-worth of regions to pile up into a counterexample for what the post was saying. I think the point is that "across canada" is a broad brush to use for this.


Oh yeah, it's a big chunk of the people, but the claim was "While you might be correct looking at other markets, you would be surprised how average it is for Canadian Housing prices across Canada. It is impossible to not to earn a minimum of 20 % on any Real Estate transaction withing a year." - that's not the case across Canada, only specific sections.


> While you might be correct looking at other markets

There is no reason to think he isn't talking about Toronto. Two years ago the average price in Toronto was around $800,000. The assertion was that they are increasing in price by $30-50,000 every 10 weeks for the last two years. That would be an increase of $330,000 over those two years. The actual increase, as of the latest figures[1], is only $245,000. And the latest figure shows up as an extreme outlier. One month earlier the two year growth would have only been around $160,000.

[1] https://creastats.crea.ca/board/treb


This is not accurate analysis.

Perhaps most important is to understand that zoning and open ended environmental review has added huge costs and risks to building and has effectively slowed construction. This is the primary reason that there are not enough units and most other problems we see emerge from this. There are important other factors such as the financialization of housing creating a situation where demand is essentially infinite and relates only to investors and not to families or income from labor.

As far as affordable housing goes, the majority of affordable housing is in older buildings. As buildings mature they tend to get paid off and reach a point where operating costs remain low until the structure needs to be rebuilt or replaced. This may be awkward to model, but realistic observation of markets shows that affordability is something that more or less inevitably happens to a property unless it gets removed or rebuilt relatively early in its lifetime because of a hot market.

Property values are traditionally supported by incomes. The current environment where property values grow well beyond incomes has little precedent and there is little reason to think this situation is stable. When people in the past talked about their property not losing value what they meant that there would be both income opportunities and reason to live in the area. When opportunities dried up or communities became undesirable then the housing values would crash. That is entirely different from expecting housing values should increase beyond incomes or inflation.


If new supply outpaces demand, wouldn't housing also in that case cease to be a good investment? (I think your first sentence has this wrong)


Housing is consumption, by definition. A house doesn't produce anything. It shouldn't be a good investment. It's probably optimal for it to rise at the same rate of inflation over time, to ensure that people aren't immediately under water on their mortgages, and so that they become cheaper relative to median incomes over the long term.


A house is consumption and it’s not a good investment. The value is in the land. Land in popular areas is extremely valuable and increasing in value all the time.

Yes, homeowners collude to restrict housing supply via regional politics. But the real problem is the centralization of jobs within big cities. This is bound up in the history of manufacturing in the west and the forces of globalization.

Remote work has the chance to reverse or at least slow this trend. In the short term it may lead to an explosion in real estate prices in areas within commuting distance of the big cities. In the long term I hope it leads to people spreading out a lot more and making housing affordable again.


What if you rent the house out? Can it be an investment then? It would produce a return, positive or negative depending on your costs and the rent you can charge.


I don't think the centralization of jobs is really the whole story or even close to it. If you look at BC in Canada, housing is ridiculously expensive, even at distances away from Vancouver and Victoria that would prohibit commuting for work, and even despite BC being mostly empty wilderness with plenty of room for every Canadian to move there.


Land in BC has higher demand due to favorable weather and topography, relative to land in other areas.


My wife and I owned a home in a nice community for 35 years. We lived our lives and raised our family in that home. It produced great value for us, year after year, for much of our lives.

The claim that a house doesn't produce anything seems incorrect to me.


While it makes sense that it should basically grow with inflation, I think that housing does arguably produce humans. Humans which work and drive the economy. This would imply that it should rise with inflation of course.


This is false. A house allows shelter which drastically increases human output and sense of well being, which is also good for production and consumption if you want to look at it from a strictly economic angle. I'm not sure where you're going with that. You can't make sure a mortgage will put you underwater, that's an impossibility in an economy that isn't completely state controlled.


How about the land that the house sits upon? That's a scarce resource for which demand will continue to rise over time. I envision no way for this to change until we figure out a new way to house people in previously-uninhabitable spaces.


It seems like you are assuming that population will continue to increase. Obviously it is not something that can happen forever.


Housing in the US can be seen as a luxury good as well. I really don't like that


Given our enormous homeless population, that would seem to apply here.


Yes, that’s the point!


I don't think the term 'naturally' is apt here. It implies that people are actually making a logical choice.

In the same way that a house is often the majority of the network of Americans, a job is often the majority of the income. This fact does not cause most of them to advocate for enforcing immigration laws, even though this choice reduces payrates for all Americans.


Immigration thing aside (I don't think personal-income-maximizing necessarily equals logical), I feel like this point is often missed. Most people who lobby for strict zoning don't do it with the intention of restricting supply to increase the value of their home. They usually do it for much simpler, more human, and often kind of stupid reasons (traffic, construction noise, fear of new and different people in their neighborhood, etc).


As an owner of two homes, I've never lobbied anyone for better zoning laws for me, and actually I've done the opposite. Not everyone is cookie cutter.


I imagine most home owners don't do any lobbying.

But it is true that politicians don't like increasing property taxes and other policies that could draw down the housing market.


The problem is that though a lot of homeowners would themselves benefit from dropping prices (most would love to trade up, and as long as we don't end in negative equity, dropping prices would help with that), most people don't seem to understand, and see the house as an investment of the "I can afford a more expensive house" kind (ignoring that those more expensive houses are also more expensive because of the price growth).

Overcoming the psychology of that is politically hard.


People feel great about their property value, until they sell and they learn that to buy similar place they often have to pay more that they got from the sale. It only makes sense if you want to leave everything behind and buy property in another state or country. Now that people have Bitcoin, hopefully they'll stop using properties as a store of value. Maybe we need a regulation that will cap rent profits to be no higher than inflation or something similar. We also need to loosen the regulation so that a family can easily buy land and build a house (only one per family).


It seems we are also living in the last throes of global population growth. Various factors seem to be influencing dramatic fall off in birth rate.

Housing is by definition in these circumstances a poor long term infrastructure investment.


Not yet. Many people will move from the country to the city still. Many people in the city will also want more space as they gain wealth. Population won’t top out until the end of the century according to estimates I’ve seen.


It's not zoning.

The same issue persists irrespective of supposed NIMBYISM.

The primary, most obvious driver is historically low interest rates. How much we can attribute to that is hard to say but it's #1 for sure.

During the 2008 crises, the Fed took toxic housing loans off their books, which 'saved the banks' but it also 'saved millions' from foreclosure i.e. creating a moral dilemma there as well and signalling the Fed won't let home prices crash.


You're mixing up cause and effect. Due to NIMBYism and insufficient supply was housing able to become an "asset class" at all. Again the interest rate has been historically low in order to facilitate low rate mortgages to help people finance the increasingly costly housing market.

Of course since demand outpaced supply the added funding just caused even more inflation. (Sure, it caused some new entrants to the housing market, but since the place where people want to live is still constrained due to zoning and NIMBYism, the prices literally skyrocketed in those areas.)


No, in your own answer you pointed out the cause: "low interest rates in order to help keep housing priced up".

That is literally the cause.

NIMBYISM cannot be a 'cause' of anything - there is always more demand than supply in SF and in many places (also - people have a right to manage their own communities as they see fit.)

If a million people try move to a village, the price of the houses goes up - the cause is 'zoning'? Or is the 'cause' the the people trying to move into the village? (Propped up with huge leverage due to ever decreasing interest rates?)


The cause is that more people moved into the city than there were housing units constructed. It isn't an either-or question, it's both. San Francisco has more demand than supply precisely because an insufficient number of housing units were constructed relative to the rising population. Had the city built sufficient units to accommodate the new residents there would be no shortage of supply. Had there been no influx of residents there wouldn't be either. But we can't just outlaw people from moving into the city, so the solution is to increase the supply of housing. And NIMBYism is a big obstacle in increasing the supply of housing.


I said no such thing.

Since 1938 US government is backing housing via guaranteed mortgages. These are "money supply-side" policies that boost demand.

I'm saying that just like with healthcare and higher education, since supply is fairly limited dumping more money into those markets just raises the price.

> there is always more demand than supply in SF and in many places

That doesn't mean much. The equilibrium point is what matters. If there were more supply prices would be a lot lower. Of course desirable lots/houses/apartments will be priced higher. The problem is that house prices are going up too much, the barrier to entry (to join the community) is going up, also rents are going up (the price to stay part of the community is going up).

Plus, it's not like the demand is infinite. Let's say 10 million people want to move to SF. That's a very finite number.

And I'm not saying sure, let's build HongKong2.0.

> (also - people have a right to manage their own communities as they see fit.)

I agree with the spirit of self-determination, but alas I'm not well versed enough in the ethical problems with determining which group's interest have primacy when groups' interests overlap. After all if someone commutes every day to SF they are just as part of the community, and they might like to move closer. They want density. But this obviously quickly leads to the tragedy of the anti-commons. Everybody in that "SF community" has a vested interest in living in a nice and healthy city, but they would have to agree on how to manage housing. Usually nobody wants to voluntarily give up their advantageous spot. Nobody wants a big construction and high-rise as their neighbor. The common resource (land) gets under utilized. (NIMBYism. Plus gentrification as people who want money sell their houses to exploit this situation, which then pushes up prices of local services, which puts even more people into financial peril, who then increasingly feel that selling their property and moving is their only option.)

(You might have read this recent story about newcomers and old timers in Austin: https://news.ycombinator.com/item?id=26567350 )

> If a million people try move to a village

That sounds like a disaster or a gold-rush. What's the fair way to manage this? A quota system? First-come first-serve? The current system is rich people only.


"And I'm not saying sure, let's build HongKong2.0."

Yes you are.

If they removed controls and zoning, SF would go radically vertical, and over 30-50 years, it would be NYC/Hong Kong like.

There is no 'ethical' problem here - there is plenty of land, people can move towards Sac. and other places. Those other places could feasibly chose to build taller builddings and more density as well.


I never said remove zoning completely :o

Far away plentiful land is irrelevant. People want to be close to where people want to be. Close to work and amenities. Close to SF proper.

> There is no 'ethical' problem here

Oh, ok. Great. Then maybe I'll just copy-paste my previous comment here to kind of try to indicate my disagreement? :D


In urban areas, I think it is hard to claim that the high rents have little to do with zoning.

I don't think the problem is low interest writ large, but specifically attempts to prop up the homeownership market with debt.

There's a reason that post-2008 private lenders have basically backed out of the mortgage market and let Fannie Mae & Mac hold the bag, even in the context of so much more money chasing yields.


This is incorrect zoning and "historic" zones prevent new building. A new 70 floor tower replacing an old 5 or 6 floor "historical residence" -drastically- increases density. Now go try and get that to happen in San Francisco in less than a decade.


70 floor tower is a bit extreme. What would really benefit places like San Francisco is replacing single family homes with 3-4 stories apartment buildings. Such a low buildings still make neighborhood look nice and cozy, while increasing density 10 times.


I don't see how you think what you're saying contradicts what I'm saying. Prices in urban areas are very much caused by zoning (primarily), but changes in macro-scale pricing of houses in the US are definitely related to supply of financing.


Only partially. Anyplace where you want to live has zoning that limits how many people can live there. Zoning won't stop you from building out on some ranch in the middle of nowhere (ranches are getting bigger so you can find some no longer used homestead to rebuild). However zoning will stop you from building in a city.


Yeah, but zoning outside of the city is a. Much more permissive, b. There are many places to build, and c. There is little demand for the type of housing that is blocked by zoning (ie. Fourlplexes and above) outside of the city.


Zoning does not 'cause' anything.

Demand does.

The notion is ridiculous - housing is extremely affordable in the US.

There absolutely is no affordability crisis.

There is merely 'a lot of people who want to live in SF and NYC'.

You don't have a right to move to a place and demand they tear down their homes so you can jam yourself in with others in a flat.

What is causing prices to increase is either:

a) more people b) interest rates or c) higher wages.

a - isn't happening rapidly (though partly) c - isn't really happening it's b, consistently over time causing greater and greater leverage.


> There absolutely is no affordability crisis.

Even with a very generous look at the general price index for homes, it is going up at a much higher rate than inflation. There's a reason that younger generations are buying homes at a much lower rate. The idea that there is no affordability issue just isn't rooted in reality.

> You don't have a right to move to a place and demand they tear down their homes so you can jam yourself in with others in a flat.

I'm not demanding that anyone tear down their homes. I think that if someone voluntarily sells their property to someone new, and that new person wishes to build a new construction on that property, they should be able to. It is a very new historical phenomenon that doing so (voluntarily building on your own land, not demanding that others tear down their homes) is difficult in major urban areas - that has not historically been the case.

It's pretty ridiculous to demand that people who "got there first" get to demand restrictions on how the "newcomers" get to use their legally acquired property.


  Now go try and get that to happen in San Francisco in less than a decade.
Go take a look at maps of the Mission Bay area (around the ballpark) from 2006 to 2016. It's unrecognizable.


I think interest rates almost can't possibly explain it.

The cost to take 4 single family lots and build a 12 story building to fit maybe 100 units.

The actual per unit construction cost is like $100k ($10M for the building), but that is because they are all custom.

Mass producing housing would easily drop prices 50%.

Let's say these 4 lots with houses on them are worth $1M each.

In the mass produced housing model, the price per unit including land is $140k.

This is ballpark a 10x difference. Why is the spread so high? It's not interest rates.


Ironically you've demonstrated why low interest rates might be a primary culprit.

(FYI the cost of the building it not hugely relevant, it's the land.)

Imagine that you can afford some kind of monthly payment for your mortgage - as interest rates go down, the larger the loan you can afford i.e. 'leverage'.

The longer people believe that interest rates will 'stay low', the more confidence they have in taking large loans. The longer the process goes on for, the longer people believe we are in a 'new normal' and feel confident in their purchases.

Ironically, the big swings in prices in real estate are a function of leverage (i.e. low interest rates): if an economic crash hits, fear causes a crash and then upswing commensurate with the leverage in the system.

NIMBYISM does not cause an increase in demand. Only 'more potential buyers' with 'more income' and 'more leverage' can do that. Since cities are not rapidly expanding in size with NIMBYISM, and wages are not radically increasing, it's likely a function of continuing high leverage.


> The primary, most obvious driver is historically low interest rates.

This doesn't align with the last 20 years of housing prices, which have dramatically risen/fallen/risen while the interest rate has barely budged.


? https://fred.stlouisfed.org/series/MORTGAGE30US

2000 interest rate - ~8.5%

2020 interest rate - ~2.8%


You're right. Me going back to 2000 isn't helpful because it doesn't reflect our current reality. Going back to 2011 is better.

By December rates were under 4%, setting the stage for all the years that followed.

ref: http://mortgage-x.com/general/national_monthly_average.asp?y...


> Going back to 2011 is better. By December rates were under 4%, setting the stage for all the years that followed.

Is that not when housing prices started continuously increasing?

https://fred.stlouisfed.org/series/CSUSHPINSA


I think you're right enough.

There are some nuances that supersede this point but I've run out of steam and lost the thread I was following.


Interest rates are the driver, but the proportionality is between the rate of change in mortgage debt/credit and the rate of change of house prices: https://www.google.com/imgres?imgurl=http%3A%2F%2Fneweconomi...


Well it does actually.

As interest rates stay low - the amount of leverage in housing increases, which creates more volatility.

The economic crises is obviously the primary forcing function during the crises and subsequent recovery. This will cause pressure one way, and then the other.

The amplitude of the swing is a function of the fact interest rates are so low, and leverage is so high.

They have been really low for a long time relative to the return on other assets, ergo, the leverage maintains and increases.

Obviously this is amplified by other aspects of easy monetary policy.

Put inversely: if rates were up 3 or 4 points, I don't think we'd see this kind of bubble in housing, not remotely.

We are living in weird credit bubble, and thanks to COVID it may never let up - i.e. this could be 'the new normal'. It's like Earth's gravity has shifted for good and we're all having to adjust to a new reality. Part of that new reality is crazy home prices.


The average 30-year mortgage rate in 2000 was 8.05%. Given a $2500/month target payment and 20% down, someone could buy a $423,870 house.

The average 30-year mortgage rate in 2020 was 3.11%. The same $2500/month payment with 20% down buys a $730,892 house.

Ignoring down payments (which differ greatly between the two examples) and other expenses like property taxes, the 2020 mortgage rate allows someone to buy 172% as much house as they could in 2000. This doesn't translate perfectly to rental prices, but property affordability via low mortgage rates is heavily correlated with increasing rent prices.

Not a perfect comparison, but it shows how much mortgage rates are driving the housing price boom. Scary to think what's going to happen when (if?) rates start going back up.

Source for historic numbers: http://www.freddiemac.com/pmms/pmms30.html


This is a really important point that more people need to think about. Sticker price and interest rate have an inverse relationship. But the price you paid is set in stone when you buy, though the interest rate can change over time.

For those who bought when rates were high and sticker prices were low, declining rates brought higher valuations. Additionally, the ability to refinance at lower rates meant that monthly payments were able to decrease along with total interest paid out on the loan.

For those who bought now (me!) at high sticker prices and low interest rates, the mechanics don’t work in our favor. Interest rates are only likely to go up, which doesn’t allow refinancing at a cheaper rate. At the same time, (inflation-adjusted) sticker prices will go down.

So while renting gotten ridiculously more expensive, home ownership also looks like an increasingly worse deal.


>At the same time, (inflation-adjusted) sticker prices will go down.

Who cares about inflation adjusted price when you have a mortgage ? Your rate will be X for Y years, as long as your income keeps up with inflation you'll get a net discount. Buying a property with loans is a good way of betting on inflation - I don't know if it will happen but if it does you'll win.

Worst case scenario is recession, you have reduced income and housing prices plummet - I don't see this playing out, running low interest rates to high inflation seems likely to me.


> Worst case scenario is recession, you have reduced income and housing prices plummet - I don't see this playing out, running low interest rates to high inflation seems likely to me.

And the standard case scenario is rising interest rates, where your highly-leveraged asset drastically underperforms the market (and may even produce negative real returns, if it doesn't keep up with inflation).


The FED and mainstream economists know that if interest rates will go up it will create huge deflationary forces (on top of existing ones) so they will do everything in their power to keep them low. I doubt we will see high interests for the next few years until debt ratios go a bit lower. The FED even mentioned that they’re willing to allow inflation to run higher for a while. That being said, it’s not a given that we will see inflation.


For debt ratios to decline, people have to stop going into debt as much. Or, they pay off their existing debts instead of using that cashflow to qualify for more debt. It's hard to imagine reducing debts unless you have a shock like '08 GFC, which changed the standards for acceptable underwriting.


> For debt ratios to decline, people have to stop going into debt as much.

Low interest rates and high perceived inflation causes people to take on increasingly higher amounts of debt. In some cases, it makes sense to borrow at 3-8% interest if you expect an ROI of 12-20% and you set aside 1/3rd of your gross return for taxes.

However this system has some positive effects. If you go out and build 3 homes and people buy them, you’ve effectively created 3 homes worth of wealth.


Disagree, rising interest rates in this economy would lead to a recession - the worst case scenario.

I don't see realestate underperforming inflation without some massive changes either.

And in case of rising interest rates, the first thing I expect to pop is overvalued stocks and money parking commodities.


The long term historical trend is falling interest rates. So at least for the last 100+ years, the standard case scenario has been that your highly leveraged and refinanceable asset outperforms the market.


The 18% interest rates in the 70’s are frantically waving their hands as an exception.


I’m eagerly awaiting my refinance into an 0.725% rate mortgage.


Which only matters if you want to sell. So never buy a house you don't plan to live in for a long time.


I don’t know too many people who would be excited at continuing to pay off a $500k mortgage on a house worth $400k.


Also, the bank will ask you to post the difference in money ASAP. The bank never loses.


Banks in the US don't do this on mortgages.


Interesting, looks like you're right. Also looks like you can improve the home (even DIY) and use that improvement to erase negative equity. Though of course it has to be the 'right' improvement, like kitchens and baths.


With fixed mortgages this is true, but if you get an adjustable rate, you’ll need to refinance and that’s when you need to requalify and meet loan to value ratios.


Half-facetiously, what about people who bought at (comparatively) low sticker prices _and_ low interest rates? If you had bought a house in (say) Austin 10 years ago, you would have gotten about a 3-4% rate, and the value of your house on the market today would be almost double what it was then.


It's easy to find individual markets (or time periods) where people have been lucky with overperforming house prices. I'm more concerned right now with what the future looks like for the median case.

Home ownership is still probably a decent deal overall (I bought two years ago). But home ownership was an incredible deal for boomers who have been able to refinance at progressively lower rates while seeing a disproportionate rise in home value.

Millennials now are stuck buying those homes with highly-inflated prices with not nearly as rosy a probable future. While it's certainly possible that housing prices continue to rise drastically, my own read of the available information shows that this was chiefly a side-effect of declining interest rates, which frankly can't get that much lower.


Interest rates can be negative.


Nominal interest rate (which is the rate quoted on your loan) cannot go negative. So your actual amortized payments for acquiring a home will never be subsidized by a "negative" mortgage APR.


Any reasoning you want to give on this? Negative nominal interest rates already exist in European countries as a counterexample.


For a consumer to borrow funds the nominal rate is negative? Where have you seen this? I'd like to see a citation.

The reason this rate cannot be negative is that demand will immediately fill it up and use it for arbitrage (shove the money under a mattress and pay back the loan later) before it can become negative.


> For those who bought now (me!) at high sticker prices and low interest rates, the mechanics don’t work in our favor. Interest rates are only likely to go up, which doesn’t allow refinancing at a cheaper rate. At the same time, (inflation-adjusted) sticker prices will go down.

This ignores the fact that, in some countries at least (e.g. Denmark), you reduce your debt if you refinance at a higher interest rate.

For example, if you financed your house with a $200,000 2% fixed-rate 30 year Realkredit loan, and the rate of interest increases to 4%, then you can refinance you existing mortgage at 4% but now you only owe $100,000.

This is how bonds work in general: a doubling of the rate of interest halves the bond price, and a halving of the rate of interest doubles the bond price.


I'm not understanding how this doesn't work out for you.

You got in at low interest rates. Why would you have to refinance? Why is not being able to refinance an issue?


>>Ignoring down payments (which differ greatly between the two examples) and other expenses like property taxes, the 2020 mortgage rate allows someone to buy 172% as much house as they could in 2000.

In nominal dollars this is correct, but the $423,870 2020-dollars is equivalent to $660,449 2021-dollars, or only 11% more house in "real" terms, not 72%.[1]

>>[...] it shows how much mortgage rates are driving the housing price boom

I think the dual combination of mortgage rates and inflation-adjusted real value caused the increase in nominal housing prices.

>>Scary to think what's going to happen when (if?) rates start going back up.

Given that lower mortgage rates were essential to keep affordability barely within reach, we are in complete agreement here that higher rates will be really ugly, even if they might be necessary/inevitable.

[1] https://www.bls.gov/data/inflation_calculator.htm


Framing it differently: I have $100,000 as a down payment for a $500k house. At 8.05% the monthly payment is $3,686. At 3.11%, it's $2,138. That's a savings of $1,548 monthly. 12 payments a year for 30 years that's a net change of $557,280.


You’re not considering that the market responds to these changes in affordability. If you can afford $3,186/mo today and the interest rate plummets, sticker prices will (over time, generally) track higher such that your monthly payment remains roughly the same.

It’s not a perfect relationship between the two—affordability does fluctuate, and the movements have a lot of latency between them—but on a societal scale the relationship holds.


A $423,870 house in the year 2000 is equivalent to a $654,070 in 2020 after inflation.


It's not a $423,870 house in 2000. It's an 8% mortgage, and we're comparing what that 8% mortgage would get you in 2020.


The point was to compare interest rates for a given monthly payment, which isn't influenced by inflation.


In the town where I live, a 400k house in 2000 would sell for around 2 million today.


Does this calculation include property tax (or home owner's insurance as another commenter mentioned)?


According to the US Bureau of Labor Statistics CPI calculator, $2500 in 2000 has the same purchasing power as $3800 in 2020. I believe that difference would be able to cover increases in property taxes and insurance.


"The average 30-year mortgage rate in 2020 was 3.11%. The same $2500/month payment with 20% down buys a $730,892 house."

Except what's happening I live is that now the $423,870 house costs $730,829. As well, for someone who doesn't already have a house, the down payment isn't something you can just handwave away.


Why would lower interest rates drive increasing rent prices?


Lower rates increase house prices. High house prices push buyers out of the house market and into the rent market. More renters increase rent prices.


> the 2020 mortgage rate allows someone to buy 172% as much house as they could in 2000.

You'd think so until you factored in vastly higher insurance costs - between 2000 and now.

source: five years of insurance increases more than doubled our 2000's monthly home payment


This is not a big deal as you make it sound. Insurance is like 1k per year these days on a $300k house. If it was $500 five years ago, this $500 increase is nowhere near as substantial as the interest rate change relationship described above.


My home insurance is ~$900/year for up to $750k dwelling replacement cost with $500k in personal liability, and my premiums barely went up over 5+ years. It might have been $850 per year initially. This is with Amica.


Dang, do you live in a flood zone in tornado alley? My property tax recently surpassed by mortgage payment but my insurance payment isn't close to either. I think it's around $1500 a year or so.


I wonder how much of this is due to supply/demand and the simple fact that more people want to live in about the same number of dwellings. Even if population growth doesn't explain it, urban population growth might. e.g. San Francisco has seen huge growth but constructed basically no new units. So it's not exactly surprising the prices go up.

The funny thing is, all the rich people living in these cities would never be able to survive without all the poor people commuting into the city to support them. The more expensive the city gets, the longer those commutes get. It's a horribly regressive system because now the poor people are spending multiple hours a day commuting, which is a huge opportunity cost of time that they could have spent advancing their social mobility.

At some point something has to give. You can't just keep filling cities with rich people if nobody is there to keep them running.


Everyone agrees that more housing needs to be built. The problem is that everyone wants it to be built elsewhere. This is especially strong in wealthier neighborhood that have the resources to influence politics. That's one reason why we gentrify poor neighborhood and build nothing in wealthier neighborhoods while often times protecting them as historic.

The solution is to remove control from local groups. That also would address a huge part of the many committees you need approval from to build something which is another massive driver of costs and deterrent to build especially cheaper units.


I agree removing local control is a good idea. One way to think about it is that there's kind of a game-theory problem where we have a bunch of groups that have realized they can push a cost to someone else. This results in bad and often unfair outcomes, like less powerful (poorer) neighborhoods seeing a ton of gentrification. By moving the decision-making up a level, we can mediate between the groups to get a fairer outcome. There are not magic bullets, and people have to be engaged with politics to make this happen, but it is possible.

I think the other thing that's not talked about enough is that building more housing has benefits for incumbents. If more housing is built in my neighborhood, my neighborhood will support more local businesses and other amenities which I can enjoy. It also means there are more social connections available. Additionally, population growth drives economic growth, which ensures that their locality remains vibrant. The ideology where we view more humans as strictly a cost, and never a benefit drives a lot of problems in our society IMO.


"I agree removing local control is a good idea."

- Great Britain, to the colonies

You'd better have a really, really darn good reason for throwing out democracy. Otherwise this is basically calling for taking away what someone else has just because we want it.


The state and national governments are also elected in my country, so fortunately democracy prevails! As I said in my comment, in my view there are issues that require coordination at a higher level, because otherwise it's just a game of shoving externalities onto others.


I see this problem currently coming to a head in my area (Coeur d'Alene, ID) We have long been a destination area for people looking to escape the cities but in the last year we have had 33-50% increase in housing prices (limited inventory seems to be the driving factor coupled with the urban flight).

Rental prices are to the point where even apartments are out of range for the average person who lives here. If you rent they want your income to be 3x your rent price. So currently if you are a single individual looking to rent that means you need to earn ~$36k/year to be eligible (also, a clean criminal and financial record as well). Issue is the minimum wage is $7.25/hr still...and if you work foodservice they can pay you ~$3.50/hr because your tips offset it.

We have a steady influx of people buying houses at over the already inflated asking cost because it "seems cheap" to them compared to where they live. What they do not realize is that if they lose their remote job (or if their pay is scaled to the region) they will have little/no chance of finding employment locally which will pay the amount they need to simply "live".

About 4 years ago University of Idaho released a study saying that 22% of the people living in this town cannot afford to do so...I wonder what that rate is now. I am starting so see more and more people sleeping in cars parked near the recreational areas and parking lots. Tons of multi family houses. Things are going to get bad really soon.

I can't speak for every area of the country...but in our case I suspect a large part of this is the waves of real estate investors who came through in the last couple years to buy up homes and are leaving them vacant (or vacation rentals). It seems like inventory is being artificially limited. To the people investing it is a win-win...either the house is vacant and you make a ton of money...or it gets rented as an airbnb for $3k/mo and they make even more. I suspect if they were to impose a 2x property tax on any property vacant for more than 6mos or vacation rentals it would very quickly effect the issues we are facing...but being as this town was structured by the tourism/real estate industry I do not see much hope.

https://cdapress.com/news/2021/feb/22/housing-market-heats-n...


It is bad in a lot of places. A starter home less than 10 years ago was $75k. Now it is $300k without an increase in wages for people starting out or working less technical jobs.

The housing pinch has already hit Twin Falls if you can believe that. One would have to move all the way to Idaho falls to know what it was like in the Boise area 10 years ago.


Idaho in general is getting hit hard. Montana will be next once things like Starlink take off. The primary limitation to living out in the middle of nowhere has been commute to high paying jobs.

I wonder how many people would move to Coeur d'Alene if they would have made the lake a superfund site...like they did the Silver Valley which drains into it. The whole bottom of the lake is heavy metal contaminated...but they don't show you that in the real estate ads. :)


Without an increase in wages. And economic instability causing lost jobs, as well as increasing rip stripping away earning power.

I make a lot of money as a software engineer and I don't think I'll get a home until I'm 45.


What is going on with your local economy such that you can equate "average person" and "minimum wage" like this?


Most people I know in town make $10-20/hr. There is a startup scene here but most of those companies either use interns or pay less than $20/hr.

There is a large portion of the population in jobs like nursing, banking, tourism or real estate but they are not the ones who are doing the jobs we are talking about.

Who is going to serve/cook the food? Where will they live?

Teachers make $29-49k in my area. Nurses $39-68k. (based on glassdoor).

Average hourly rate is $17.39 (payscale.com)

If you work 2000hrs/year your pre tax income is ~$35k. Right now there are 1bd apartments going for $1100/mo (albeit brand new with amenities such as pool/weight room).

So if you are lucky enough to make the "average" pay in the area that means you can get a 1bd apt...assuming you qualify. A very low end house you need to make $75k/year to purchase...again assuming you qualify.


> So if you are lucky enough to make the "average" pay in the area that means you can get a 1bd apt...assuming you qualify. A very low end house you need to make $75k/year to purchase...again assuming you qualify.

I think in many parts of western Europe average earners can’t even afford a 1bd apt.


I believe he means that if you were to randomly pick people from the working population (excluding children, disabled, unemployed, etc.), there is a 50% (or higher) chance that person makes minimum wage.

Extreme inequality combined with familial support. It's not uncommon now to have one or more kids living with the parents into their 20s while they go to college and build up their career, right as the homemaker enters the workforce with limited professional experience so you get 2+ minimum wage earners and one established professional bringing in support. Throw in the gig economy, which hoists capital and operational risk onto the employees (sorry, "contractors"), and you've got a majority of the working population making minimum wage.

It's even worse in university towns, where the college kids are almost guaranteed to be working for minimum wage while receiving external funding from loans or parents which can skew the numbers even more.


That's what I mean! On average this number is less than 3%. If it's managing to be 50% here, what is going on here to make the local economy so staggeringly poor? What does a place this devastated have to offer if the housing is not even cheap?


It is semi remote...but still has the "city stuff". Very beautiful area, year round recreation assuming you enjoy winter sports.

But it is a right to work state. I suspect that is part of the issue. There is very much a "Good ol' boys club" in town which has a tendency to employ people due to favors or connections (regardless of qualifications).

Even in the 90s when we had Agilent, Itron, and several other large companies in Spokane the area directly across state line was significantly cheaper to operate in. So we ended up with a few electronics contract manufacturers who got their start being basically sweatshops (yes...solderers get started out at minimum wage or barely above it).

I know a person who in the 90s was making $50/hr as an EE...last I heard he was making $25/hr to do the same job now. (When Agilent shut down it flooded the local market with engineers and techs).

edit: Adding this link for more data. Look at the percentage of renters below poverty level http://www.city-data.com/poverty/poverty-Coeur-d-Alene-Idaho...


Out of the 155.75 Million working Americans, 80.4 million make minimum wage. That's 51.6% (a majority) of workers making minimum wage.

So yeah.


You are off by a factor of fifty. That's like confidently announcing that US median household income is 3.4 million, or declaring that the US has a population of 16 Billion people. How do you react when people hold such crazy views?

Here is a recent BLS study called "Characteristics of minimum wage workers" https://www.bls.gov/opub/reports/minimum-wage/2019/home.htm

"In 2019, 82.3 million workers age 16 and older in the United States were paid at hourly rates, representing 58.1 percent of all wage and salary workers. Among those paid by the hour, 392,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.2 million had wages below the federal minimum. Together, these 1.6 million workers with wages at or below the federal minimum made up 1.9 percent of all hourly paid workers."


Just eyeballing it looks like only 25% of the US population lives in states where the federal minimum wage is also the prevailing minimum wage: https://www.dol.gov/agencies/whd/minimum-wage/state

So I'd guess closer to 10% of people make the minimum wage in their jurisdiction (1.9% x 4 + I assume more people make min wage when it's higher)

Very interesting though that 3x as many people make below the min wage as actually earn the "minimum" wage.


Those below the minimum wage are exempt workers such as waiters because they earn tips, and I guarantee you that their real income (on average) is much higher than minimum wage, but data is hard to come by as much of that income is unreported. Thus the 2% figure is a generous over-estimate.


That isn't true. In 2017, 80.4 million Americans were paid hourly, and out of those only 1.8 million made minimum wage or below. (https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm#)

More generally, I'd encourage you to question the mental model that made this sound like a potentially true claim in the first case. An economy where most people are paid minimum wage would be incredibly different than the one we actually have.


Per BLS, 80.4 million workers make an hourly wage, with 1.8 million at or below at the federal minimum. [0]

It is kind of fascinating that people have such wildly different ideas about what the objective facts are, and how that must flow downstream into their worldviews and politics. Between 51.6% and 2.3% is not a small difference! Those are very different worlds we could be living in!

[0] https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm#....


It is fascinating and horrifying at the same time. On the one hand, I am hoping the person was simply quoting something they heard in a rant online. On the other hand, I am hoping it is just a case of misreading available BLS data. Neither is exactly ideal and both paint rather sad picture of how we interpret reality.


> San Francisco has seen huge growth but constructed basically no new units

San Francisco publishes its Housing Development Pipeline here https://sfplanning.org/project/pipeline-report#current-dashb...

They may not be adding capacity at a sufficient rate, but they have tens of thousands of units in the pipeline in every quarter.


There's a huge spread between the number of new jobs and new houses. If you zoom out to the last 50 years it's pretty staggering. [1, 2]

[1] https://economics21.org/bay-area-the-land-of-many-jobs-and-t...

[2] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage


The fact that there are units in pipeline doesn't tell you anything about how many are being completed. As an extreme example, they could actually improve the pipeline numbers by refusing to grant occupancy on any buildings (which would be very bad for prospective residents).


Most of San Francisco’s housing pipeline is homes on former superfund sites and a landfill island in the middle of the bay.


San Francisco is producing a fraction of the housing it used to in the mid 20th century. Job growth is far greater than housing growth. (If the city can make space for office square footage, then why not for residential?)


I think this pipeline easily qualifies as "basically no new units".


San Francisco is a small city, only 49 square miles, 1/2 of which is parkland and a significant portion is landfill which liquifies in a serious earthquake. It’s also surrounded by water on 3 sides

I don’t understand why so many HN commenters seem to think it could magically become a dense metropolis like Manhattan or Chicago.

Even in the Gold Rush in the 1800s SF was unscalable the rent was unaffordable. It was always a high crime city. Just read about the history of the barbary coast.

Everybody who comes here purely for money wants this city to be something it just isn’t.


It could be three times as populous by developing its existing residential land to Paris or Barcelona proportions, neither of which have Manhattan’s physical form. The vast majority of residential land (nearly 80%) is unremarkable single family housing.


Sure, but we don’t want that. There is an incredible amount of space in the bay area which could be turned into droid housing and office buildings. ALL of those places have cheaper real estate, fewer homeless people (the #2 complaint of everybody here) and warmer weather.

It’s 2021 and Covid-19 has shown that remote work is viable.

Back in the day large tech companies like Sun, Peoplesoft and Cisco built offices all over the bay so that people had the option to work at facilities close to their home.

SF wasn’t even a significant tech destination before 2007.

My wife and I are actually moving to Barcelona when Covid is over, under the Non-Lucrative residency permit. If you think San Franciscans have a Nimby attitude and hate outsiders then you should go visit Barcelona.

“Unremarkabe single family housing”. So what, you want to take peoples’ housing via eminent domain and build more of the hideously dugly condo boxes they’ve stuffed all over SOMA and the Missiom?

I happen to love my unremarkable home in the Sunset in which my family has lived for 55 years.


Great that you love your home. That doesn’t mean other people shouldn’t be able to redevelop their own homes, but that’s currently illegal. It also doesn’t make your house or its architecture remarkable or worth preserving if you wanted to do something else with the land.

It’s quite rude to refer to housing for people as “droid housing.” What makes you any better than them?


It’s quite rude for you to say my home is not remarkable or worth preserving. You’ve never even seen it. You know nothing of my tightknit, diverse community which cares about things of more importance than ipos and user engagement.

“Droid housing” is san francisco slang for the soulless eyesore boxes containing cramped, slapshodnfaux “lofts”, usually painted a bluish slate grey or salmon pink on the outside, entirely devoid of character or quality.

Thankfully San Francisco’s direct democracy works well to keep this city small. There are many soulless sprawling cities which are seismically stable, devoid of character, flat and inhabited by people who don’t care enough to resist.


3x as dense??????? We are already 17,000 per square mile. New York is 28,000 per m^2.

You seriously think San Francisco would be livable at 51,000 pe m^2? It would literally cost $500bn in infrastructure investment to make that possible just inside the city.

101 and 280 would need to be 15 lames wide each, bulldozing 1/8 of the peninsula. We would need a half a dozen new transbay bridges and tunnels.

SFO would probably need another couple of runways and terminals.

You’re talking trillions of dollars in investment because tech companies prefer open office spaces to Zoom.


Koreatown in los angeles is a bit more than 1/3 the size of SF and achieves 42,000 per mile and is basically a mix of single family homes and 3-5 story apartments over parking. There is a subway that comes every 10 minutes. The 101 through here is not 15 lanes wide each, it's 4. The city still functions at this density, and could probably stand a lot more and function just as well.


Tripling the density of residentially zoned land is not the same as tripling the density per square mile. There’s lots of non-residential land between roads, parks, commercial areas, etc.

Why would we need more freeways if amenities are local? In fact, we could probably demolish freeways if more people who worked in San Francisco could afford to live here.

People don’t disappear if you don’t have housing for them. Why is building infrastructure in Phoenix preferable to growing it here? There are returns to scale with all of this. OAK is underutilized as an airport as well.

Have you considered that San Francisco is a pleasant place to live, and people want to live here independently of their employment situation? Prices were high before technology employment.


There seem to be a lot of replies to this claiming that San Francisco is in fact building a lot of new units, which is debatable at best, but San Francisco is definitely not experiencing fast population growth. The numbers are right here: https://www.macrotrends.net/cities/23130/san-francisco/popul...

The past 20 years is the lowest population growth the metro area has ever experienced. What it has experienced is growth in the wealth of the wealthiest part of that population, along with increased demand for office space, which competes for housing as a possible use of land.

The actual fast growing metro areas of the past several decades, i.e. San Antonio, DFW, Phoenix, Las Vegas, have also seen tremendous booms in housing construction.

The homelessness problem in San Francisco is not new, either. You can read about the history here: https://www.kqed.org/news/11765010/timeline-the-frustrating-...

It stands out to me in particular that the number of homeless people is about the same as it was in the 80s, but the public complaints being received have skyrocketed. What seems to have actually increased is the number of people either living or working in the city who aren't used to seeing homeless everywhere, presumably people from elsewhere displacing native San Franciscans. But both the absolute number of people in the city and the absolute number of homeless people in the city are not growing at any abnormal rate.


> San Francisco has seen huge growth but constructed basically no new units.

This is why San Francisco doesn't work anymore and isn't equitable until the electorate decides to build new housing. We shouldn't downplay a move to cities like Austin, Charlotte, and Atlanta that have no qualms with building lots of housing and affordable housing.

Why have a non-trivial percent of funding go to rent seekers, anyway?


Austin has always been expensive, now it's getting unbelievably expensive.


It should be noted that San Francisco is surrounded by bay and ocean on 3 sides and also contains a significant amount of land which is not really seismically sound, and 50% of which is protected parkland.

Those other 3 cities have significantly more capacity both to build up and out. Blame the electorate all you want but geography is geography.


I understand the "build more" concept, but a city (any city) shouldn't grow too fast. There's a huge risk in growing too quickly.

SF's infrastructure doesn't seem that it can handle more people. traffic is bad. Restaurants are full (have you been to a brunch?). Buses are full. More homeless than ever.

Letting the price rise, so people/companies will go elsewhere seems like an okay strategy.


> I understand the "build more" concept, but a city (any city) shouldn't grow too fast. There's a huge risk in growing too quickly.

Well, it's pretty clear from the explosion in housing prices that it's not growing nearly fast enough. I'd love to see some citation as to what "too fast" is and why you think SF is at risk of hitting that number.

> SF's infrastructure doesn't seem that it can handle more people. traffic is bad. Restaurants are full (have you been to a brunch?). Buses are full. More homeless than ever.

More housing = more people = more revenue. That revenue turns into more infrastructure, more restaurants, etc. In fact more density makes infrastructure more economical to operate on a per capita basis. Think Hong Kong.

Part of the reason there's more homeless people is they can't afford houses, which building units would help alleviate.

> Letting the price rise, so people/companies will go elsewhere seems like an okay strategy.

That's not a very free-market attitude!


More housing = more people = more revenue. That revenue turns into more infrastructure, more restaurants, etc. In fact more density makes infrastructure more economical to operate on a per capita basis. Think Hong Kong.

The cost of upgrading infrastructure in a busy city is enormously expensive. San Francisco is on a peninsula with no room at all to expand outward. The only solution is to build up and that’s a real problem in an area prone to earthquakes.

Plus there are a lot of people that like the character of their neighbourhood and don’t want to live in an apartment building. It isn’t their fault that SF became the global tech capital.


> The cost of upgrading infrastructure in a busy city is enormously expensive.

So having more people to split that cost with would help! To be clear Hong Kong island is far harder to build on.

> Plus there are a lot of people that like the character of their neighbourhood and don’t want to live in an apartment building. It isn’t their fault that SF became the global tech capital.

They’re also not entitled to that. In a democracy the many decide.


> They’re also not entitled to that. In a democracy the many decide.

Actually, yes they are. San Francisco is a participatory democracy. Between a large # of ballots voted for each November, we elect our board of supervisors and attend supervisor meetings to tell them how to vote.

If people don't vote, well, that's their fault.


Nobody is entitled to a view or a property value. It’s not written down, it’s not codified, it’s not an entitlement. It’s a side effect of poor policy.

I say that as someone who owns property in San Francisco.


The many struggle to organize themselves as effectively as the few. This is how it’s always been in politics. I’m not aware of any recent development that would change that dynamic.


In a democracy the many decide.

In a democracy the people who inhabit a place decide. Not the people who want to inhabit it. That's not democracy, it's colonialism.


lol, that's not colonialism.

  Colonialism: the policy or practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically.
However, with that in mind, I'm alluding to the kinds of people in a city like San Francisco. The older, rich, land-owning class tends to be very activist and tends to vote. The younger, less-wealthy, renter class tends not to vote. Therefore, the needs of the few are outcompeted by the needs of the many.


> They’re also not entitled to that. In a democracy the many decide.

We did decide, and continue to do so in supervisor meetings and in the ballot box. You might want to read up on federalism.


Basically all of Japan is earthquake prone, they do just fine. The building technology is there.


> The cost of upgrading infrastructure in a busy city is enormously expensive. San Francisco is on a peninsula with no room at all to expand outward. The only solution is to build up and that’s a real problem in an area prone to earthquakes.

People always ignore this fact. Infrastructure isn’t free. When all is said and done the Central Subway extension will likely have cost over $2bn for 1.7 miles of subway. [1] The new transit center cost $2.2bn [2]. Rebuilding 1/2 of the bay bridge cost $6.5bn. [3]

Consider that money for all of this is artificially restricted by Prop 13, and by California being a net-giver state, paying about $40bn per year more to the fed than we receive back, effectively being a piggy bank for poorer states.

> Plus there are a lot of people that like the character of their neighbourhood and don’t want to live in an apartment building.

Many commenters with a lot of hatred for San Francisco’s unique brand of dirext democracy are sadly OK with overruling the expressed will of the people not to turn our home into New York just so some tech billionaires can sell more banner ads.

1. https://en.wikipedia.org/wiki/Central_Subway

2. https://en.wikipedia.org/wiki/Transbay_Transit_Center

3. https://en.wikipedia.org/wiki/Eastern_span_replacement_of_th...


Well that's just inefficiency or graft. The rest of the world is able to achieve far more for far less cost.

> Many commenters with a lot of hatred for San Francisco’s unique brand of dirext democracy are sadly OK with overruling the expressed will of the people not to turn our home into New York just so some tech billionaires can sell more banner ads.

Who's our? Generally voters tend to be older, wealthier and landowners. The large pile of younger, less wealthy, more transient renters isn't represented well. I don't think the outcome means the system works.


Furthermore, it’s not even a big city problem. California High Speed Rail has been an immensely expensive project so far, an order of magnitude more than comparable systems, and the only segment built is in Central California, not the expensive coasts.


> Well that's just inefficiency or graft. The rest of the world is able to achieve far more for far less cost.

Citation?

> Who's our? Generally voters tend to be older, wealthier and landowners. The large pile of younger, less wealthy, more transient renters isn't represented well. I don't think the outcome means the system works.

That’s how democracy works. If you don’t vote, you don’t have a voice.


> Citation?

All costs below are in $USD nominal per mile of fully-underground subway system.

NYC subway extension, east side: $3.7B per mile.

SF Central subway: $928M per mile.

Tokyo: $400M

Beijing: $240M

Berlin: $327M

Naples: $194M

Milan: $175M

This is backed up by a Citylab analysis:

  Alon Levy at Citylab shows approximate range of underground rail construction costs in continental Europe and Japan is between $100 million per mile and $1 billion. Most subway lines cluster in the range of $200 million to $500 million per mile.

  The US has a range of subway construction costs of $600 million to $2.6 billion per mile. The US median price cluster is $800 million to $1 billion per mile.
And of course plotted in Tableau [5].

> That’s how democracy works. If you don’t vote, you don’t have a voice.

Indeed.

[1] https://www.marketplace.org/2019/04/11/subways-us-expensive-...

[2] https://www.nextbigfuture.com/2018/01/subways-and-light-rail...

[3] https://www.bloomberg.com/news/articles/2018-01-26/the-u-s-g...

[4] https://pedestrianobservations.com/2011/08/22/construction-c...

[5] https://public.tableau.com/profile/romic2976#!/vizhome/EnoTr...


> More housing = more people = more revenue. That revenue turns into more infrastructure, more restaurants, etc.

In an optimistic world, sure.

It can also be that you build a bunch of building. Then, there's an economic downturn, and SF is fucked and left with abandoned buildings.

There are cities that fell into this trap.

I'm not saying it will happen, but it can happen.

Growing slowly is a good way not to push yourself into that corner.

How slow? I dunno. I hope there's an expert that can evaluate it.


Some of that is solved by dramatically increasing density, though. Nobody enjoys long commutes and a lot of people who currently drive probably wouldn't drive if they didn't have to, so presumably with enough added high density housing and public transport capacity traffic could be curbed considerably. Rideshare services are a big factor too, but that could be resolved by enforcing a cap on the number of rideshare vehicles in the city.


Buses/light rail can increase the frequency during peak hours, a bus full of riders will pay for itself pretty easily. Restaurants are about to have access to their outdoor dining parklets they have built + their existing indoor capacity, which will likely make it much easier to find a spot for brunch. Cheaper prices will allow people to live closer to work and reduce traffic.

Homeless is a tough one. I'd say that reduced housing prices would help, but I think that will just reduce the rate of new homeless. I personally thing that we need to aggressively force them to seek help or get out of the most expensive city in the world. Saving up enough to find a place in SF in near impossible, and hacks like homeless shelters are often full of crime and reduce the housing supply for low income families.

We already fucked up the housing market with prop 13 throwing off the supply, we need to build a huge supply to counter that (unfortunately repealing prop 13 remains the 3rd rail in CA politics).


It's a bit of a chicken-or-the-egg problem. If more people move to SF then more brunch places will open and the city will be able to afford to run more busses.

Maybe SF could credibly commit to adding more density in the near future, but not immediately? That way speculators open brunch places before the customers arise, and there isn't a brunch shortage?


Those aren’t complicated problems. Buy more buses. Build more real estate for restaurants. And so on.


Well, robot servants are coming. Sure, there will be some truly rich individuals, who will employ human servants, but that will be a minority.

I agree with your point, but you will often find the plight of the poor is.. low on the priority list. It should be higher based on the average presence of guillotines on various message boards I frequent, but I assume the well-off have some sort of survival plan.


I am curious about this sentiment, the one about cutting off peoples heads and all. The times in history that this happened all you did was replace one ruling elite with another ruling elite. It didn't improve the lives of the lowest, in fact it usually really works out poorly for the poorest. See the rain of terror or the over throw of the Czar's in Russia.

In the U.S.A if you took EVERYTHING from all of the billionaires, there are ~700 of them you would net under $5T in total [1]. The existing debt of the USA today stands at a hair under $28T [2]. The estimated budget deficit for the next 10 years is $1.2T a year [1]! You do realize you can lop off all the heads you want, take all the money you want, and you will not have solved anything! You would still be a debt slave :( Raising taxes by itself will not solve anything you ALSO need to decrease spending, but no one wants to hear about fiscal responsibility.

The heads that need to go are those of corrupt politicians.

[1] https://inequality.org/great-divide/updates-billionaire-pand... [2] https://www.pgpf.org/national-debt-clock


The ones who actually did it (Russia) ended up worse off, but workers everywhere else in the world gained, because the elite became more willing to let go of certain privileges to pacify the working class.

The goal of threatening to kill someone isn't to murder them for the sake of murder, it's to negotiate with them from the fairly sensible starting point of "give me what you want or I'll kill you". If what they want is "fair wages and a decent life," that seems reasonable enough.


I am not sure that is true. Most of the Western world was reeling from WW1 at that point in time. Lots of young men were removed from the labor force. Quickly there after the rest of the world went into the Great Depression. After that they were on to WW2. I am not sure there are any direct lines that can be drawn from Russian's overthrow of the Czars. There were just too many confounding things that were going on to make a claim that the rest of the world improved because of it. One thing we can say, and it was still my central thesis, is that the majority of those who most supported the over throw didn't benefit from it at all.


I did not say it is rational, but you simply cannot ignore its existence in hopes it goes away.

edit: Come to think of it. You cannot ignore it precisely, because it is not rational. Rational people you can bargain with.


Agreed, I didn't think you stated it was rational. I was just mostly curious about the demographic of those people who think like that. I am not ignoring it, I am just really curious why so many others are ignoring so much human history on this subject. I am not saying their aren't grievances or lots of areas to improve upon, but it seems like a lot people who are upset because somebody else has something they want and all they care about is they want it. Like kids in a grocery store screaming that they want ice cream.


I wish I knew. I don't share the sentiment, but I understand its roots. And if things get bad enough, the demand will change from ice cream to yet unknown something else. If we take the analogy further, it would appear that we have no real parent figures now. No one wants to talk about the stuff that has to be done that you already alluded to ( lower spending AND higher tax burden ). All we have is a TV show.

Demographics-wise, I assume people younger than me, but I may be oversimplifying it. In practical sense, the more you earn, the less likely you are to support tax increase on yourself so maybe it is more tied to socio-economic status. Sadly, I have no data to back this up.


> You can't just keep filling cities with rich people if nobody is there to keep them running.

Rich people will just have people they need to keep things running live on their own now-very-large properties; and arrangements where your workplace also provides your housing might start to gain traction.


This idea is like a plantation or hacienda system or more recently a company town.


What's the advantage in having your company provide housing for you compared to buying it yourself? You see it happening for health insurance, but the only reason it makes sense is because it doesn't count as income so you save the taxes. This doesn't exist for housing so it really doesn't make any sense.


The advantage is that you have some control over your destiny independent of your job. If you piss off your boss, you don't lose your house.

All of these ideas to make workers more dependent on their benevolent overlords is basically creating a subservient population.


None unless you are faced with homelessness or this.

If company X is offering you a job, and you really need a job, and it's not enough to pay market rent, but X has company dorms available and it will be paid via a line item off of your paycheck, you might take it.

Anyone who needs this type of arrangement is likely going to get a refund at the end of the year anyway and doesn't care about the tax implications.

Amazon could start doing something like this to have labor for its warehouses if the housing market keeps pricing everyone out, for example. Maybe also office maintenance, food prep/delivery, etc. Didn't Foxconn house its workers at one point?

These could be the housing projects of the future if done at a big enough corporate scale. Would they decay into crime-ridden slums or would corporate housing police keep things in order, but in a dystopian manner?


There's a few other reasons to own your own place.

1) I kind of despise the housing market, but you do at least earn equity instead of throwing money away to a landlord.

2) If the company owns the place, your rent goes right back to your employer, making them an even stronger entity.

3) If you are at risk of losing your house by pissing off your boss, it means you'll usually adapt your behavior in a variety of ways dramatic and subtle to fit in.

4) Switching employers means you definitely need to move instead of just probably.

5) It's just a weird vibe when you live in a hive that isn't yours and is owned by the same entity that controls everything else in your life even if they were benevolent. They're daddy and you're baby, except they have little interest in you beyond pure self-interest.


we could escalate tax rates based on the number of housing units/square footage owned, which will curtail (but not completely prevent) hoarding of real estate. this would require spending political capital, and that would require some concerted effort by the public as the existing political capital holders have a strong disincentive to do so on their own.


> Rich people will just have people they need to keep things running live on their own now-very-large properties

Comparing that scenario to serfdom is amusing. If the property is sold, you could say that the people "come with", though they needn't get permission from their Lord to travel or move (barring any legal contracts like leases).


San Francisco has seen huge growth but constructed basically no new units

I've lived in SF for over 15 years -- this is obviously false. You could argue "not enough" units, but if you haven't seen new construction of multiple large buildings in multiple neighborhoods (Hayes Valley, Mission, SOMA, Market st., Potrero Hill, Mission Bay), then you haven't been in SF.

Literally walking around on the street, you can see thousands of new units. There was a pretty big uptick sometime around 2014 or 2016 as well. That said, prices are still the about highest in in the nation from what I can see.


>Average home tenure is 8 - 10 years, most of the time when people sell a home they are turning around immediately and buying one. Suppose I buy a $100,000 house and it grows 5% per annum in value for 10 years. I sell for $162,889. I turn around and want to buy the house I could not afford initially that started at $200,000; well that costs $325,779. Suppose I collude with other voters and get a 10% annual increase in value through zoning. Okay, my house is now worth $259,374, but the house I want to buy is $518,748. To whit, it costs me $96,485 more to upgrade my house.

>Even with the leverage that comes from getting all the value increases for only a fraction of the initial cost, it is a pretty rare market where the average homeowner will be better off by raising home values.

>Frankly the only time this sort of argument makes any sense is if people are planning on moving to far less expensive areas (e.g. retiring to the country) or if they plan to never purchase a home again.

https://marginalrevolution.com/marginalrevolution/2021/03/ho...


You are missing the impact of debt here (mortgages)

In your same example:

I have $10k, and buy that $100k house with a $90k mortgage. For simplicity let's forget mortgage repayments

After 10 years I sell for $163000, leaving me $73k for my next down payment

I can now "afford" a $700000 house assuming banks are willing to lend 90% LTV


Debt is a huge facilitator of price increases. Easy debt due to usury has been known to destroy societies. It's not for no reason that it's prohibited in Islam, Christianity, and Judaism.


I think it’s more accurate to say that many historic Islam, Christian, and Judaic societies prohibited charging interest.


How so? It's literally prohibited in the texts.[1][2]

[1] https://quran.com/2/278-279

[2] https://sunnah.com/muslim/22/132


Most modern-day Christians and many Jews are not textual literalists.


Just because some people refused to follow their texts, doesn't change the facts that it is prohibited in them. Jews still refuse to lend each other money with interest.


You originally said:

> It's not for no reason that it's prohibited in Islam, Christianity, and Judaism.

And it isn't (in most Christianity, and I think at least some Judaism). That's all.


Again, just because those Christians and Jews refused to follow their texts, doesn't mean that it isn't prohibited. The Quran documents and confirms this fact: https://quran.com/4/160-162


I think you'll find it easier to talk to people of other faiths if you stop asserting your religious dogma somehow binds them; it doesn't.


We spoke to them and they admit it. Furthermore, we're not asserting "religious dogma" by simply reading their books and calling them out on not following them.


Retiring to the country, or massively downsizing their homes, is exactly what most of my peers are planning. That, or stay put, in which case home value is largely irrelevant.


Assuming that the collective sum of human actions will approach a rational, profit-maximizing one, rather than be biased in some systemic, human way (thinking about how legislation will impact your current net worth vs. how it will impact the prices of houses you want to buy in 10 years)

Moreover, that assumes that the restrictions you put in place will impact everywhere that people want to move. It seems to me like it's more of a commons problem - people want to add restrictive zoning where they currently live because it benefits their net worth but they are harmed when others do it in places they might want to move.


I wish I could own a home, that I put equity into, and have a reasonable assurance of getting that equity back out, without having it be a highly speculative, leveraged investment. Alternatively, I wish renting was affordable in any place worth living. Instead I'm all in on another home purchase right now, which if the market doesn't totally tank I should be able to turn into a 300% ROI in the next few years. That's great if it all works out, but I'm comfortably upper-middle class in a desirable area, what the hell is everyone else supposed to do?


probably lower their standards regarding what constitutes "a place worth living". I'm renting a very nice studio for $1450 right now. 3BR rowhouses on my block are $1800-2000.


> Suppose I buy a $100,000 house and it grows 5% per annum in value for 10 years.

Suppose it doesn't. It's been years since we able to count on decades of unbroken, steady home value inflation.


South Puget Sound. Prices have gone up since 2008. The last five years, at least, have been double digit percentages. 2020? 19.1%. I have friends who bought in 2014 at $250,000 now selling their homes for $600,000+.


My mortgage has decreased from 5.25% to 2.25% in the past 20 years.

It’s weird how so many things seem to be geared to help people who don’t need the most help (although I appreciate it). Locking in a mortgage and not having to move is one of the best things to square up a financial situation.

Especially hard on friends who rented for 20 years who have been saving to buy but hurt by increasing rents over and over.


Rent to buy is a good strategy because you can justify to yourself living in a crappier place than you would want to own outright. Over time that allows you to purchase a house at a lower total outlay, including the rent you paid. During that saving period you also had the additional hard to quantify benefit of being able to move quickly and cheaply.

If you are doing rent to buy but living in frothy areas where rents are always rising and apartments rent for 4k then obviously it's not going to be a winning strategy for you.


Every area is frothy. You live where you have to live to work where you can find work. The assumption of this saving period is also fairly strong. It only makes sense if you're earning $60k a year or more, and actually can afford to spend less than a third of your income on rent.


> Every area is frothy.

IKR? What is it with leaving reality out of these equations?


I know quite a few construction workers who are much better off due to the housing boom...


Construction work isn't exactly a low-income job.


Residential? Yes it is.


I did attempt to read the paper but it's $400. It would be interesting to see where Houston falls in all this. The city has nearly zero zoning laws and has continually grown at the edges for the last several decades and has also traded single family lots for higher density housing in the inner and near city. In other words for people who say "well just let you develop more" it's happened here.


Houston is somewhat of a unicorn in this mix. To say the city has no zoning laws really only implicates a very small portion of the logical geographic area in the urban center.

The world-record sprawl (and commute times) of Houston are how the housing prices have historically been kept in check.

As someone who is actively working to find a home in this market, I can say for certain that these measures are no longer sufficient. Houston has a few unique hedges to the scalability problem, but it won't hold up to larger forces such as mass migration from other states.

Prices in the Houston market are still not within a range that would concern a Google employee, but for everyone who lives in the state and is receiving Texas-style wages, these prices might as well be as unattainable as housing in Manhattan or Silicon Valley.


Reporting of low house prices in the city limits of Houston is a bit of an illusion, true, because the city limits expand to many low density suburban areas that can have an hour commute to downtown in traffic. And there definitely several neighborhoods where one can participate in California-style bidding wars with other rich folks -- if you want a safe, walkable neighborhood close to the city center next to a good elementary school, expensive salons, and several fine sushi places, you will pay a lot. However, in Houston you always at least have the option of buying a cheaper house farther away. That's not even to mention the rents, which as far as I can tell have barely budged in the past 6+ years.


> if you want a safe, walkable neighborhood close to the city center next to a good elementary school, expensive salons, and several fine sushi places, you will pay a lot. However, in Houston you always at least have the option of buying a cheaper house farther away.

Yes if you wait for others to gentrify a neighborhood you'll pay the price. The third option is to take a risk and be an early adopter in an inner city neighborhood. Midtown used to be shotgun shacks that dated back to late 1800s. Now it's a sea of condominiums. East of Downtown (aka EaDo) was post-wwii starter homes and industrial, it too is now townhomes and condos. Third Ward (my neighborhood) was a mix of rental property and retirees and now has high and medium density housing mixed with condos and townhomes which are slowly pressing East towards TSU and U of H. The same happened to Moody Park area and Acres Homes is next.


Agreed on rent. It is holding really stable, but that will change once investors run out of $200~300k houses to slurp up. We are getting to the end of the song as far as I can tell. Last house I looked at under $300k had over 50 offers.


>Houston is somewhat of a unicorn in this mix. To say the city has no zoning laws really only implicates a very small portion of the logical geographic area in the urban center.

I'm not quite sure what you mean: Houston's city limits span 667 square miles! That's not a very small portion in the urban center. It's true that there are a few pocket cities embedded in the city that may have different zoning laws: Piney Point, Bellaire and West University, but Houston relentlessly grew through annexation until it was slowed by lawsuits. It still continues to grow though annexations... see [1]

https://www.houstontx.gov/planning/Annexation/docs_pdfs/Hous...

I also disagree about home prices being unattainable; I think implicit in your statement are assumptions about schools, neighborhood walkability and the like. There are plenty of places that aren't yet ideal but are far cheaper. In my zip code there are plenty of listings for houses and lots in the $100k range but at the top of the market there's a mansion for $2.1 million. Best of luck in your search for something with your criteria.


>$100k range

I would be interested in knowing this zip code.


Search 77004 on har.com and sort by ascending rather than descending price.


If your only constraint is the lowest possible home price, your best bet would be to get a tent from Academy and set up somewhere around 610 and Galleria.



Houston is an interesting data point in all this because (partially due to geographical luck) it does seem to a) be a form of solution to this problem that (b) many people will consider terrible and (c) other people will love. Mostly because even though it is not zoned much, most of the areas are basically interchangeable; you either like it or don't.


I think there are several problems here:

1. While it's important to have private investment in property because this literally creates the housing units people rent, there's simply too much speculation here. I like the Swiss model that is way more restrictive of who can invest (as in, someone can't come in and buy up all the land in Switzerland) and punishing to short term speculation;

2. Foreign "investment". Investment here is a euphemism. "Money laundering" is probably closer to the truth. Example: every US tax resident is required to declare all foreign assets (including being a signatory in a foreign company or trust) but... real estate is specifically excluded. Why? It's well known that in places like London, property is used to hide and park money by, for example, Russian oligarchs;

3. Property owners who are non-residents where they own property should be taxed at a much higher rate. Places are simply way better off if the people who live there own the property there;

4. Incumbents vote themselves massive tax breaks. This applies to both property owners and renters. Case in point: Prop 13 in California (eg Disney still pays 1970s tax rates on Disney Land, for example). Oh and rent control;

5. NIMBYism. People on HN like to paint this as the boogeyman. I think this is somewhat overblown;

6. Subsidies for car ownership. Building out requires more infrastructure (eg roads, schools, utilities). Suburbs are subsidized by the taxpayer;

7. Attacks on public transportation. For example, Santa Monica trying to fight the LA rail extension into Santa Monica (because, you know, that'll bring undesirables into the area). Sometimes this is done for pseudo-political but self-serving reasons ("it'll raise taxes!"). This exacerbates other problems;

8. General opposition to allow and opposition to living in higher density housing.

That all being said, I see the pandemic as helping to reverse the trend towards the move to a few urban centers. This is a boon for medium-sized regional centers and ultimately a good thing for a couple of reasons: it increases choices and cities beyond a certain size just... stop working. More cities under 2M people would be better than more cities of 20M people.


The reality on number 2 is that people in the US actually do benefit from elites in other countries viewing the US as a place to exfiltrate the wealth they've acquired in their origin country.

We are basically a fence for the plunder of the developing world.


Only the asset holding class benefits, but it slams the working class.

As foreigners drive up asset prices it becomes more expensive to acquire equity in your society as the rich get richer.


What is the Swiss model? I was under the impression that the average house in all of Switzerland costs over $700/sqft. Los Angeles, for example, is around $500/sqft.

Additionally, my understanding is that median income in Switzerland is like ~70% of what it is in Los Angeles.

Is this not correct? This seems far from ideal.


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