A modern Japanese man, working in tech in California, in his late thirties or early forties spoke with his parents back home in Tokyo five years ago about two houses the family owns, which are in desirable areas, well-maintained and currently occupied. The taxes and financing are such that there is no current scenario where the man could own one or both of these homes. It is simply too expensive. None of the people in this vignette are poor, they are all moderately wealthy people, who have fairly substantial income, and some savings.
Move the story to California. A three bedroom home in the San Francisco Bay Area, covered by Proposition 13, purchased by ordinary working people with good financial habits, around the 1970 time frame, and a working late-thirties, early forties person with some savings and good financial habits, cannot afford to take the home under almost any circumstances due to property taxes (cost of ownership) and competition for financing (loans not available in practice due to terms).
There is a lot of emotion on both sides of the Pacific in each of these cases. Individuals are quick to point fingers at the other individuals. It has been decades in the making, and the situation is not new. Many on both sides of the Pacific are renting at high prices (no accumulated capital) and deferring (or avoiding) having children.
> Move the story to California. A three bedroom home in the San Francisco Bay Area, covered by Proposition 13, purchased by ordinary working people with good financial habits, around the 1970 time frame, and a working late-thirties, early forties person with some savings and good financial habits, cannot afford to take the home under almost any circumstances due to property taxes (cost of ownership) and competition for financing (loans not available in practice due to terms).
California actually has ways to inherit not only the home of your parents and grandparents, but also their tax rate.
Which is bad. It's possible it may end up benefiting me since my parents own a home in the bay area, but I still think it's bad.
The entire prop 13 + zoning + property value situation is terrible, it's a total pyramid scheme: older generations get wealthy through wealth transfers from the younger generation from inflating property values. But it can only work once or twice before the property values are so comically high that even high income DINK couples can't afford to buy in.
Where are affordable homes anymore in any big city in the world now? A good apartment in Delhi, India, is 4-6 times the annual income of a high income DINK couple with salaries in excess of $40-50k each (a big amount in India)
I can't think of a single major economic center that has affordable housing now.
When I tell people "I live in Tokyo" they immediately assume it's crazy expensive. I always say, compared to what? London? New York? San Francisco? Tokyo is actually cheaper.
And there is choice! I could live 15 min away from where I live and save 30% of my rent. But I love the place where I live! (and I don't need to travel anywhere, just walk. So worth the money).
One can vary the size / location / age of the building and fight something. Tokyo is so amazing due to mixed-use zoning. Apartments, restaurants, shops, office buildings. All tastefully mixed together.
Also the food is so much cheaper. I can get a great, tasty and healthy (-enough) lunch in Tokyo for $10. Same food/quality would cost me $20 in US.
Bay Area is terrible. Pay through the roof to live in the middle of nowhere and spend hours every day in traffic.
I don't think we all spend hours in traffic every day. Nor does everyone pay through the roof. After all, I am surrounded by people who pay less than $4k/yr in property taxes for a $1-3m home that they bought for bargain prices or inherited.
It's just the newcomers and perpetually poor who suffer the economic effects.
But, hey, the weather is nice and I don't see many "no gaijin" signs here. Would be weird since we're closing in on 40% foreign born after all.
> Bay Area is terrible. Pay through the roof to live in the middle of nowhere and spend hours every day in traffic.
Don't disagree, but it's also true that compensation at least for programmers is vastly higher in the bay area than Tokyo. Like 3x higher, maybe even more than that.
>>I can't think of a single major economic center that has affordable housing now.
That's what makes them major economic centers: real estate prices. The building, renovation, redevelopment, renting and investing of real estate ... that a massive part of the the modern economy. Think Vancouver makes its money on tourism or lumber? Fishing? It is all down to industry that is perpetually-increasing land values.
What makes them major economic centers is that a lot of useful work is done in them.
High real estate prices is just rent-collection by landlords.
Vancouver is an outlier that makes its money as a destination for laundered international money. The other economic centers actually produce, and export useful goods.
So support remote work and the disintermediation of geography from delivering value. Unless you’re twiddling atoms, no need to be somewhere specific in space time. And if you must twiddle atoms, pay a premium for demanding a specific piece of space time that is in high demand.
High rent collection is a symptom of high demand for an asset. If the land wasn’t valuable, the rent wouldn’t be high!
But the argument that “place X is an economic engine but should still be cheap” is wildly unrealistic.
Or married to someone twiddling atoms, or needing to support someone twiddling atoms, or married to someone who needs to support someone twiddling atoms... Or have such level of arrogance and greeds (:gasp:) as to want to be near a family member who needs to twiddle atoms... Or if you're straight up greedy and don't want to live in the middle of nowhere.
> But the argument that “place X is an economic engine but should still be cheap” is wildly unrealistic.
Yes, but they could certainly be made cheap-er. The bay area's weather and economic success guarantee that it'll be at least moderately expensive, but that it's absurdly expensive is because of bad policy.
It's expensive because of property rights, which can't be updated due to owner inertia. To express it as a policy issue does not tell the entire story.
Property taxes can be viewed as a form of feudalism. You never outright own your property, and if you're not productive enough (can't pay your property tax) your feudal lord (the government) will throw you out and find someone else who is more productive.
You can sensibly critique Proposition 13, but calling it "feudalism" is nonsense. It's the opposite, it's basically carving out a limited exemption in a partially feudal system for some citizens over others. Is it dumb? Sure, unequal? Definitely. But it's not "feudal", it's making the system less so.
My understanding of European feudalism (which is sparse, and comes from https://www.amazon.com/dp/B00XTAXZAU/ ) is that it is characterized by the following features:
- The owner of land owns it outright. If you own land, you don't pay taxes on it to anyone. It's yours.
- Ownership of land is inalienable. Your land is yours, and you can't sell it or otherwise transfer ownership (except through inheritance).
- Land generates revenue through the collection of dues from peasants who would like to work it.
- The feudal dues associated with a stretch of land are fixed by tradition and, like the ownership of the land, can't be changed. This is why European peasant reform movements emphasized stable measurement units so heavily -- since lords couldn't change the nominal amount of feudal dues, changes were actually implemented by messing with the size of the units those dues were measured in.
- The king has no tax authority. He gets his revenue from the land he owns, just like every other noble does.
It is a radically decentralized system, even for the rest of the world at the time, and it reflects the very low level of societal development in feudal Europe.
The US property tax system is nothing like this. The government owns ALL the land, and no one else can ever own any. The government has tax authority over the land and many other things.
The proposition 13 system does look like it's trying to move things in the direction of feudalism, as far as I can see. It's even trying to make sure land can't be sold, in that when you sell your land, all the tax benefits are lost.
The owner of land owns it outright. If you own land, you don't pay taxes on it to anyone. It's yours.
Generally, nobles held land under "feudal tenure" and not "allodial tenure" (the latter is "outright" ownership). Under feudal tenure, the noble did not owe taxes but they did owe "service" which they could try to make up with goods and money instead.
The service was onerous. Generally, showing up with a sword and shield and an army fitting your station.
Along with the main service there could be many more specific services. One example of many: in the present day, there is a noble family in England that is required to set out three glasses of Brandy or Cognac or another strong spirit on a certain holiday, so that the reigning monarch may come by and drink them if she so chooses.
> The US property tax system is nothing like this. The government owns ALL the land, and no one else can ever own any. The government has tax authority over the land and many other things.
Just a quibble, but, with the exception of federal lands, it's the individual states that levy property tax in their territory. Allodial title is what it's called when you have no obligations on the property. Nevada allowed limited allodial title, but it only lasts for the life of the owner. The way the implemented it was they computed an estimated total property tax and the owner would buy out the state's interest for his lifetime[1]. It actually provides additional privileges besides property tax exemption. Liens can't be enforced on an allodium, among other privileges.
> The holder of an allodial title can voluntarily relinquish it at any time. The title shall be relinquished if the property is sold, leased or transferred by the allodial title holder; the allodial title holder no longer occupies the dwelling for 150 days; or the home is converted to anything other than a single-family dwelling occupied by the owner.
For having "no obligations on the property", those are some pretty substantial obligations.
It’s feudal because there are a number of people who own land and can extract an unusually high level of revenue from it purely because of who their parents were. That someone can own inherited land, collect rent, and pay a mere pittance in property tax purely because of who their parents were is as close to an aristocracy as we get in America.
It was never a requirement of feudalism that a land owner had 100% control over their land. Most feudal lords had a greater lord that expected tribute and support during war. In this metaphor land owners would be the lesser lords, not the king.
Do inheritance loopholes apply to rental properties?
I've seen the counterpoint sentiment in this thread described as "right to place". Some have a deep instinct to want to stay where they grew up and continue to build it. Maybe we should find a way to support that dream as well as the needs of people moving from outside to take advantage of the growth produced by their predecessors, instead of vilifying anybody who has something we want.
Otherwise you end up with an entirely transient population with little sense of ownership, responsibility, or community.
As someone from the bay area, if you think the setup there leads to 'natives' being able to stick around for the long term, I have some bad news: it's literally the exact opposite of that.
Out of my high school class, people who stuck around are actually somewhat uncommon. I mean, there's obviously still more there than any single other metro, but surprise surprise, most have moved somewhere much cheaper.
With saner density/zoning regulations, rents would be low enough to where more would have been able to stick around. Instead, very few have.
The current setup benefits homeowners who get in early. Their kids may well eventually benefit by inheriting that house, but in the meantime they've probably lived at least a few decades as adults elsewhere.
Property taxes explicitly work against speculation (you can’t just buy property and sit on it, since property tax acts to depreciate its value), but not rent seeking (indeed, it even pushes people to use their property productively so they can lay their property taxes).
The truth is property is worth basically nothing without public infrastructure and services. So taxes pay for the maintenance of the public infrastructure and services that give the land it's value.
Before property taxes you had things like the lord demanding a certain amount of labor per year. Plus some amount of goods. For a minor noble inability to supply that without reason would result in being replaced.
Taxes are less intrusive than say being press ganged to spread asphalt on I80 at 2am for a couple of weeks.
There's nothing feudal about the absence of "allodial title" -- the absence of the possibility to "outright own your property". Empires, after all, never allowed that either; they were not feudal, though, they were empires.
Under feudalism is actually when legal systems began to recognise allodial title as such. To the old fashioned kings, "land to which you have an absolute title" was just "land I haven't conquered yet".
When people talk about feudalism here, what they probably are referencing is the defacto inalienability of property under feudalism, and the consequent emergence of a small landed class who enjoyed revenues from a large labouring class.
The inalienability and concentration was not due to one law or institution, but typically several together. Some wills outright forbade the inheritor to sell any of the property, if they accepted the inheritance. In some parts of Europe, all of the property was inherited by one son -- primogeniture -- tending to concentration.
It was never the case under feudalism that there was no way to move into the landowning class -- some families moved in and some out -- but in practice families with land could very easily retain it. This changed only with the emergence of widespread trade and then industrialism, because these introduced much better ways to generate revenue from labor and led to a situation that might seem bizarre to us: poor gentry with vast landholdings and no money, and no way to generate revenue from the land since they couldn't invest in it, and no way to get outside investors because it was always "heads I win, tails you lose" when it came to collecting on the only asset of value the gentry had, the land.
What California is doing really is feudal, in the sense of encouraging the concentration of landholdings in a semi-permanent group of families.
> What California is doing really is feudal, in the sense of encouraging the concentration of landholdings in a semi-permanent group of families[...]
This history lesson really falls apart when you consider what preceded feudalism for the average person in medieval Europe, or what happened in parallel in other societies outside of Europe that never experienced feudalism.
In both cases it was the norm in agrarian societies that farmsteads would be owned by the same family for generations. Re-establishing that is the main effect of Proposition 13.
For families to hold land, and for them to concentrate it, are two very different things. Individual farmsteads are not what concentrative legislation like Proposition 13 encourages.
What legal situation in Europe or elsewhere are you actually describing? Many agrarian societies were imperial. Pre-feudal Europe involved a mix of Roman institutions and tribal institutions, and tribal societies generally have a vague concept of land ownership. Maybe you’re thinking about the Old West?
You do outright own it, though. It's just that outright ownership doesn't free you from all possible obligations or regulations.
You can own a dog, but that doesn't mean you're allowed to beat your dog. And if you beat your dog, the state may well come in and take it away (and also jail you).
Not quite. A working family living in a city for generations shouldn’t be displaced by taxes on unrealized gains. If the city wants to tax at current prices, they should guarantee that price for 5 years.
All you need is one or two of those generations to have more than one kid and the same dynamic that makes it unaffordable for everyone will make it unaffordable for at least one branch of that generational family.
So why can’t FAANG build offices in Detroit? In the Bay Area the lack of affordability comes from concentration of high paying jobs in a small area. They have the economic clout to push the area to build more, or expand in another part of the country.
Actually no, the lack of affordability is 100% due to political decisionmaking that for the past 30+ years has failed to generate enough housing to match population growth. No supply + extreme demand -> massive increase in prices.
Usually you can bypass the problem by making it a transfer tax thing. When you sell, all your taxes come due through the change in price.
For inheritances, you re-assess and consider it a sale. If the price went up lots, the kids can pay the tax and keep it, or they can sell the property and pay off the taxes.
But governments that try to get between families will end up on the loosing end. What inevitably happens is that the rich get loopholes and the middle class pays. At least in California everyone gets the same deal.
Honestly don't know what you're on about. Grandfathered-in property taxes definitely entrench wealth more than "everyone pays current rate" or "everyone pays past rate".
I'm not trying to explain housing prices here. I'm talking about the innate behaviour of Prop 13.
For the specific situation of "parent currently lives near kids, kids can afford expensive house, parent can't afford a new house near them" I have sympathy. But it's kind of a niche case. If the parent lived anywhere else it would be equally sad, but locking tax rates wouldn't help them the tiniest bit. And anything that stagnates supply makes it harder not only on unlucky parents buying houses near kids, but on all the kids that want to buy houses near the parents.
If we were regularly pushing people out with huge paydays, and then putting in denser housing, they'd be able to afford to move right back in with the only downside being a smaller yard to offset their pile of cash. And people that didn't win the housing lottery would be able to move in too.
Out of curiosity (I dont know Cali's rules well), how does it work in Cali as you own the place (that is, lets take out the inheritance part for a sec).
If your taxes go up like crazy because property value increase, are you out of luck (like most other places), or do you get to keep a lower tax rate? Because I'll admit, being kicked out of the house you bought because rates skyrocketed and all of a sudden you can't afford it anymore kind of sucks. I live on the east coast, and just 2 years after I bought a place, my taxes basically doubled. I'm privileged enough that I was able to absorb it, but most people wouldn't be able to. Coupled with a bunch of heavy repairs I had to do shortly after getting the place, plus realtor fees, most people wouldn't even have been able to afford selling it, either. So bankruptcy they'd have gone.
One could say you should be sure you can absorb these hikes before you buy, but these are spikes that someone somewhere in city hall signed off on, not some kind of unpredictable random bad luck (the tax hike, not the repairs)
Yeah when it was on the ballot I referred to it as the Aristocracy Act. You can inherit the Prop 13 tax advantage. And when you die your heirs also inherit it. Forever.
No, I think there should be some kind of accommodation for long-time homeowners who are actually cost burdened by increasing property taxes. But a regulation that narrow -- only residential, only primary residence, only long-term owners, only when substantially cost burdened by increased property tax rates -- would only overlap with the current Prop 13 by a small sliver. "Grandma might lose her home" only represents a tiny percentage of the beneficiaries of Prop 13.
> It makes a hell of a lot more sense for FAANG to open offices somewhere else.
Network/ecosystem effects are a natural part of economies and businesses. Why don't we leave it more up to businesses to decide where to hire?
Besides, the current setup is manifestly harmful to any non-homeowners and recent homeowners as it is. Why support a system that strains budgets, kicks out the poor and renters, hurts the environment, and forces long commutes?
Neat! This actually sounds too narrow though, especially the income limit (35k is comically low for coastal California homes).
I think a simpler solution would just be: you may choose to lock in a lower/earlier assessed property value for the purposes of property taxes, with the caveat that the state gets right of first refusal at the assessed value when you decide to sell.
Bam! One and done. Grants flexibility, too; each household can decide whether to treat their house as an investment or as a home, but not both.
I think it might even be easier - take the PTP program and relax a few constraints for eligibility (or at least link it to AMI) and you're done! The option to convert deferred taxes to liens is in there, and the interest rate is high enough to make people think twice about using this for financial engineering without being punitive.
At that point the state has the ability to get their money from any future sale without the extra complexity of having to own the property.
Not if you're living in that house (instead of renting it out) and are paying normal level, non-prop 13 property tax rates. Even a property tax rate of just 1% on a 1.5M home would be 15,000/year.
It’s bad because the tax rate you pay on your property should not be tied to how long you’ve owned it.
Right now two different families living in identical properties in CA can be paying vastly different property taxes depending on when they bought (or inherited) their house. This is manifestly unfair.
One could argue that tying it to the value of the property (or owning property AT ALL!!!) is not great either. Why do renters not pay taxes? Sure, they're "property taxes" so from that angle it makes sense, but really they're taxes to run the city. Renters can vote and decide policies just like owners do, but they only indirectly pay for what they get (the landlord pays it from their rent).
My house being more expensive than next door's doesn't mean Im a bigger burden on the city. The only reason it kinds of sortoff make sense is as a proxy to income.
So why not just have everyone pay taxes based on residency (those who get to vote and receives city services), like we do for federal/state taxes? And if someone owns property and don't live there (investment), then their burden should be from it being an investment and be kind of unrelated.
Only (albeit significant) hiccup is maintenance of the property and the responsibility of the owner via the city.
This is true if you're looking at rent prices in a cost model, where the price of rent is basically the cost of providing housing plus a little extra for profit, similar to low-margin commodities like basic groceries.
But in a high demand area with constrained supply, it's more of a supply & demand model: landlords charge what the market will bear, which is mostly based on how many people there are around with decent/high-paying jobs. Prices haven't risen rapidly in recent years because the actual cost of building housing rapidly increased, obviously.
So using the latter model, increased property taxes probably wouldn't have much impact on rent prices.
Thats what I meant when I wrote "but they only indirectly pay for what they get (the landlord pays it from their rent).".
The other poster explained it better than me, but basically it's too indirect. A renter sees rent go up, but not always why it goes up. We had that happened in our city, where people voted for an exceptional tax increase, which immediately got passed down in rent increases, and then people complained about -that-, not making the obvious link.
Paying an increasing tax is not fair too. You don't get more services from higher tax, the city is just extorting more money because it can and because enough people think this is fair.
No, no profit$$$, just throwing money on stuff that is either a way to siphon it or not the purpose for a city. Like you organize people in a city and instead of providing services like clean roads you do politics, social care, welfare etc (most cities in Europe spend more on benefits and welfare than on proper services to tax payers).
That’s an argument for controlling tax rate increases for one home owner, it’s not a great argument for why people should be able to pass on their tax rates to their children.
The cumulative effect of prop 13 has been to create a landed aristocracy in California cities who have millions of dollars in real estate and pay almost nothing on it purely because of who their parents were. This situation is even worse when the real estate is rentable, and the owners can collect 2019 rent and pay 1970 tax rates.
People don't deserve privileges because they fell out of the right vagina. There's already an inherit unfairness to the idea of families, we certainly don't need to be using the government to increase it.
I genuinely don't think that was the idea. Prop 13 was passed in an era when property values were increasingly rapidly and California was a fairly conservative place. The idea was also promoted by Howard Jarvis in an effort to choke state revenues and keep the state government small (oops).
Of course, it quickly became the new normal. Now getting rid of it is the third rail of California politics.
You touch upon a fundamental problem with the tax calculation. There is no reason for the city budget to increase by x% just because the supposed home values (could be a bubble) happen to increase by x%. It's not as if the other costs of running a government increased by x%. (in the long term there is a smaller increase due to salaries, but the city budget isn't normally spent buying up land)
So a real estate bubble hits, home owners are hurt, and the government gets used to what they think is the new normal. The government takes on wasteful obligations, hiring lots of people and failing to push back on pension demands. Once the bubble pops, the city budget is in deep trouble. Something must be cut. It isn't easy to lay off employees and cut back the pensions, so the city increases the tax rate.
Repeat that again with a new bubble, again and again, and the rates only go up. It's a ratchet effect, with rates going up but never down.
Voters chose a simplistic way to put a stop to this problem. Something was needed, but the chosen solution is pretty bad. The fact that people can't trade houses without seeing rate increases means that people commute too far, clogging up the roads. Newcomers also get hit, with cities imposing huge impact fees and generally discouraging housing because the housing doesn't pay for itself due to Prop 13.
What was really needed was a restriction on the total city budget. Instead of setting a tax rate and then calculating the budget, we could set the budget and then calculate the tax rate. Applying the restriction to the total city budget serves the necessary purpose of putting a stop to out-of-control spending.
I'm unconvinced that most cities are all that generous, with one glaring exception: pensions.
Even when they are generous, for current spending (money raised and spent in the same year) it doesn't seem like a long-term problem, because they can cut back later. There's even a sense in which spare capacity in good times makes it easier to find low-priority items to cut back on. If everything is already high-priority, what do you do?
But where the cost is locked in, far in the future, and variable, city governments are clearly not good at planning ahead. I'm in favor of generous retirement benefits, but using a 401k-like plan where all costs to the city are up front. Most newer businesses moved to that long ago.
Defined benefit plans like pensions aren't generous, its merely the workers negotiating with the employer to put money aside pre-tax from their pay and invest it.
This all goes sideways when these funds are mismanaged & underfunded, which organizations have an incentive to do as it can be a nice way to juice profits immediately.
Wage theft is shameful in any color, and what has happened to American Pensions is stealing earned wages from workers retirement.
Colorado limits the total increase in tax revenue to the sum of the population increase and inflation increase. This typically 4% a year.
Property taxes are the assessed value scaled to this total. Its possible for the tax to decrease even if the assessed value increases, if the increase is less than the average increase.
This model of taxation doesnt take into account that government gradually provides more new services, like more healthcare etc.
> It's not as if the other costs of running a government increased by x%.
Isn't it? If those workers want to buy houses, or rent, as most do, then it has gone up. And since that is the majority of what people pay. So these workers costs have gone up significantly, with a raise in house prices.
There is an increase, but it is delayed and diminished.
The city budget is not 100% salary. The city may buy water, textbooks, fire engines, fencing, sod, bleachers, asphalt, diesel, and so many other things.
Rent and mortgage payments don't immediately change for all existing workers. The bubble may turn in to a crash, meaning that these workers never face higher housing costs. Workers will normally be spending about 15% to 45% of their income on housing, meaning that most of their costs are unaffected by a housing bubble. Workers buy so many other things: food, computers, gasoline, cars, etc.
So if housing goes up by 50% now, next year the workers might need an extra 20% to maintain lifestyle, and that might mean the city budget needs to go up by 10% next year or the year after. If housing crashes, it could be less.
I think getting rid of it won’t be that hard. For corporations, just slowly increase property taxes to what they should be over 10 years. For families, let each couple only own one grandfathered property each, and when they pass away, bring the property taxes up to where they should be. That way you don’t actually price any people out of the homes they currently own (which is the whole emotional issue that nominally created prop 13 in the first place)
It's a good idea. I believe there's actually a prop on the next ballot to roll back prop 13 on corporate offices.
For my own part, I've found that people are also emotionally attached to the idea of being able to raise their own children in the family home. Anecdotally, people often have trouble with the idea that the retired teacher next door in their house is a multi-millionaire, leading to some people refusing to regard residences as meaningful property.
I'm afraid I don't understand your question. Can you clarify?
I'm going to assume it's a reference to my comment about corporate offices and Prop 13. The measure I referred to is one that will end Prop 13 protections on corporate offices. As a result, real flesh people will continue to benefit from Prop 13 and non-people people will not.
As for the way it normally goes, both real flesh people and non-people people generally pay taxes on the value of their real property. Which strikes me as, on the whole, reasonably fair and equitable. California has decided that nobody should have to, provided they've had that real property long enough. The change going to voters would leave real flesh people exempt(-ish).
On the one hand, having corporations pay actual taxes will help state and local governments uncouple their budgets from the stock market some. On the other hand, there's already a problem where cities are incentivized to permit offices over housing, and this seems likely to make that worse...
Prop 13 was amended twice - Propositions 58 and 193. Those allowed Prop 13 tax assessments to be inherited with property to children and grandchildren.
What about the people owning homes as investments, or as part of their retirement plans? You can argue that a lake house would be taxed because it's lived in part of the year (weekends), but what if the owners put it on AirBnB after the children go off to university and the family isn't enjoying it together anymore?
Housing is a basic necessity, using it as an investment allocates scarce finite resources to you when you don't need it while consuming limited supply thus reducing the available stock for those that do.
The business of buying and selling houses on the flip isn't particularly bad (though it's often predatory and rent seekish) but hoarding property to either rent or just squat to take advantage of the appreciation said hoarding does to drive up prices is evil. Especially when you consider how the entire perverse and unsustainable economic model of endlessly and perpetually rising property values against inflation causes substantive suffering while governments will bend over to preserve it since the landlords are the wealthy interests they want to appease to stay in power.
There are much less amoral, much more productive, and much less predatory ways to grow wealth. Whenever anyone looks at residential property as an infinite profit machine it is a failure of the society to produce productive & positive investment options for that wealth.
There is loads of cheap housing in USA and Canada - just not in popular places. Anyone moaning about the price of real estate should check to make sure they aren't trying to live in one of the most desirable places to live on the planet.
Let's include pressure to work remotely in the whole equation.
I see no reason why humanity must crowd trample each other in tiny metropolitan areas when there are so many affordable -- and likely more beautiful -- places to live in.
Have basic infrastructure in place, internet excluded, and the problem is solved.
The have been several studies that showed that cities foster innovation and living in larger cities leads to faster increase in income. It's also cheaper for society as a whole to provide good infrastructure in one place rather than spreading it out. Unfortunately we are currently hiding that cost and people living in cities are subsidizing the costs of roads and other infrastructure for people in low density areas.
I would seriously question those studies. You should probably add the increased stress and the lack of leisure time that make people mentally unhealthy.
I am also seriously not okay with the implication that the cities support all other areas. That's extremely questionable.
Lastly, don't forget there have been studies proving fat is bad and sugar is good. Never discount the vested interests that know how to convince people. Apparently you have been influenced by a study.
Not saying you shouldn't believe anything, but maintain a healthy skepticism, please.
I live in the only true big city in my country and truthfully, people are in general happier everywhere else in the country. At least they say so and sound like it.
I don’t think the fact that cities support the surrounding countryside has been very controversial since the 1500’s.
It kind of makes sense. If 10% of the surface area needs 90% of the resources, they are going to be easier to provide than for the remaining 90% of the area (mainly because spreading things like doctors, hospitals and supermarkets around to serve a few hundred people is not easy).
Just utilities and roads alone are a massive cost that makes spread out living enormously costly and I pay as much for it living in a high rise building without owning a car as I do living somewhere in the suburbs or the country side with utilities and roads running very far to reach my lot. strongtowns.com is full of information on how we subsidize suburbs and rural living.
> I see no reason why humanity must crowd trample each other in tiny metropolitan areas when there are so many affordable -- and likely more beautiful -- places to live in.
This is an incredibly disingenuous argument. You use "must" as if the opposing side is the one forcing people to live a certain way, but it's actually your side that pushes for strong regulations limiting population density even when people do want to live in a big city.
Nobody's suggesting banning living in rural areas or small towns. But regulations as they currently exist work to push people from living in big metros where the good jobs are. That's not the market, that's incumbents using government power to dictate lifestyles for their neighbors and potential immigrants.
Well to be fair, I have no "side" in this. I am saying that there are a lot of incentives for people to crowd in metropolitan areas.
As a resident of a country that only has one big city -- the capital -- I see this all the time: people just have no future elsewhere and come here even though they sacrifice quite a lot and the overall gain might not outpace all the negatives.
I mean, there's a reason the good jobs tend to come out of those big metro areas: bigger populations make for stronger ecosystem/network effects. If you push policies deflecting people elsewhere, you're not just spreading out the prosperity, you're also reducing it in total.
And I don't think big cities have to be bad to live in. Vienna gets extremely high livability marks despite being the one big city Austria has. I currently live in Munich, and though our yard here is very small compared to the US standard, having a couple of parks within a block and a half (+ other nearby green space) makes up for it, even with a kid.
Big cities don't have to be bad to live in... but they often are.
Sofia isn't anything special but it has quite beautiful neighborhoods which are of course quite expensive to live in.
Back yard? You only have that if you live in villages with like 2000 people. Our capital is so crowded that the real estate agents feel really proud to advertise 68m2 apartments with two small rooms and a tiny kitchen, it's that bad. Good views? Forget about it.
(I am considering moving out of Bulgaria to Vienna/Austria exactly by the way; but I'm for the moment too scared to do it.)
> Back yard? You only have that if you live in villages with like 2000 people.
Having your own backyard is definitely a luxury in Munich, we have one because we're kind of at the outskirts and Google pays well (and as I said, it's quite small), but it's very common here at least for regular people to live in small apartment buildings (like 8-12 units) with a decent sized shared backyard. Especially if they're in a suburb of Munich, which still lets them access the job market there of course.
> that's incumbents using government power to dictate lifestyles for their neighbors and potential immigrants
As opposed to? People trying to force a change to the lifestyle of people already there in favor of their neighbors and potential newcomer? I mean, if you build a skyscrapper across the street, it will change people's lifestyle quite a bit...
It still seems less than ideal to have people live in places that require long commutes or result in lower income jobs (likely meaning they could be more productive elsewhere) so that someone can accumulate investment properties in the more desirable areas? To me this seems like someone complaining that prices of vegetables and meat going up due to speculation and someone pointing out that rice and bread are still cheap.
Another way of putting this is: there's lots of cheap housing where there's only cheap jobs to match.
It's a pick your poison situation, and it doesn't have to be. Singapore and Vienna are good examples of public housing programs, Tokyo is a good example of the market providing reasonable rent relative to how desirable/big/rich the area is.
Cheap is a relative term. What does the affordability ratio (price vs local available incomes) look like compared to historical norms? Are these places cheap on that basis, or only when compared to the insane prices in desirable places?
This doesn't make sense. Housing that's being rented out is in use by renters. No property is being wasted. Taking properties off the rental market will drive rents up. What do you have against renters?
Vacant property is being wasted. Not too much of that, though.
Morally speaking, a housing market has much in common with a traffic jam or a crowded bus. Everyone takes up space, though some more than others. If you're living somewhere that housing is scarce, you're a small part of the problem, according to the space you take up. The only way to not be part of the problem is to move away.
It doesn't make sense to pick on some of the people in a crowd for making it crowded, assuming they're all taking a similar amount of space.
>>Housing is a basic necessity, using it as an investment allocates scarce finite resources to you when you don't need it while consuming limited supply thus reducing the available stock for those that do.
Using it as an investment doesn't deprive others from using it. Using it as an investment means renting the property out to earn investment income on it.
And investing leads to that scarce resource becoming less scarce, through construction and expansion of housing supply.
Capital leads to abundance. Combating capital investments in housing leads to more housing scarcity. That's exactly what zoning restrictions and rent control do, and why some places have housing scarcity.
A significant percentage of people are not financially stable enough to buy a home and pay a monthly mortgage on time for 15-30 years. But they are able to rent.
You're assuming current prices in a distorted market. Since the distortions of regulation for various reasons can't (and including safety distortions, shouldn't) be removed, they should instead be managed.
There simply isn't enough housing within the economic zone that jobs exist in; this needs to be fixed.
It's such a bizarre state of affairs in modern capitalist societies. These sorts of supply shortfalls are fixed in no time for every other type of product or service. Yet housing is that one thing which has so many vested interests throughout the population.
If any other basic need rose so much above inflation no one would consider it a positive for society.
You’re confusing “contract rent” (an amount paid on a recurring basis for the temporary use of goods, services, or property) with “economic rent” (an amount that is paid on top of the “natural” price due to a distortion in the market). Rent-seeking refers to the latter definition of rent.
Renting property is not rent-seeking. Wielding the power of local government to prevent new housing from being built is rent-seeking.
I think you're misusing the term "Rent Seeking". The important part of its definition is the manipulation of the social or political environment to gain financial advantage. It has nothing to do with collecting rent from a tenant.
An example of rent-seeking would be if I were a steel producer and I ask the government to impose a tariff on imported steel.
1. This hasn't been demonstrated. In fact, when there is a housing shortage in the areas considered that strongly hints that friction in housing purchase is due to other factors than being able to match a buyer with a seller. So the average dollar value of this supposed liquidity is likely to be miniscule compared to the average dollar value of the capital appreciation.
2. I'm not going to get bogged down refuting bad analogies here.
What if I require some leisure time to recharge so I can go back to work and be fully
Productive? I need a lake house to go and relax at. The couple provides use of their lake house for my vacation.
when productivity grows but wages do not, that means the marginal contribution of any new worker is being entirely eaten by various forms of rent within the economy. Those who collect rent have no incentive to do anything but perpetuate their rent collection and most likely if they were to re invest their gains would probably reinvest them in either acquiring more rent or protecting their existing rent... which is why the government should be funded off of monopoly/pigovian taxes like the land value tax, or removing intellectual property deductions from the corp income tax, as opposed to income or consumption taxes - a philosophy known as georgism.
What is usually meant by rent-seeking is more akin to rent-extraction. Here rent doesn't mean the monthly payment (lease) but an 'economic rent'. That is an income which is guaranteed by some distorition of current market conditions. Most often by some kind of monopoly. Eg. rents for pharma industry because potential competitors are not allowed to enter the market due to industry regulation. This allows the current players extract the guaranteed rent - monopoly income.
well, that's also rent seeking. Some concepts in economics are not as straightforward as you would first think especially if not familiar with macro / micro concepts.
Agreed, just most countries in the world don't have any property taxes, so was surprised to see Japan as having them.
edit: I do agree there are some common property taxes globally, but they're just a few hundred or at most 1-2k a year, not like 1-2% in some of the US states (and Japan) https://en.wikipedia.org/wiki/Property_tax
The UK doesn't have a direct property tax. The closest thing is the council tax (which is linked to the notional value of your home in 1991), but that is generally paid by the occupants, not the owner (and may be discounted or increased if a home is left empty depending on the disposition of the local council). It also doesn't update as the market changes, because it's effectively frozen 30 years ago.
1.7% annually does not seem particularly high. That's fairly typical in Chicago and it's suburbs. The 2% registration fee on a sale seems roughly equivalent to a transfer stamp, though that cost varies from town to town.
Subsidized daycare can boost the economy: more people having kids, and more people on the workforce.
(Quebec/Canada has a mix of semi-state-owned daycare, which are great, but few, and subsidized private daycare, which aren't as good, but usually not that bad)
Honestly, very little IMHO. Take a look at the blurb at the top of this page [1]. "Cost of living in Japan is 16.88% higher than in United States (aggregate data for all cities, rent is not taken into account). Rent in Japan is 31.95% lower than in United States (average data for all cities)."
This correlates pretty well with my experience. Even in Tokyo, prices are not that high (compared to London or Sydney, for instance -- and nowhere near SV). Because there is a good train service, it's also very reasonable to live in the countryside and commute to work. Even if you work in Tokyo, it is very easy to live in Chiba , Saitama or Kanagawa. Admittedly I really live in the countryside but my monthly rent is just 66,000 yen ($591 US as of today) per month for a modern 2 bedroom apartment with galley kitchen, living room, balcony and 2 parking spaces. Used 3 bedroom houses routinely go for $100-150K in this area, with fixer-uppers being under $100K. Most of Japan is not expensive for rent.
Cost of living is higher than the US and salaries are lower, but people tend to be more frugal too. Also, children often live with their parents until they get married (late 20's to early 30's).
IMHO, the reason for the low fertility is that young men in Japan have to get their career going and work very hard right out of school. Women, on the other hand tend not to have those kinds of career aspirations (for better or for worse). They usually intend to get married and have kids. Young women tend to view their 20's as their time to be free and they often travel (a lot!).
Usually young women are fairly well off because they live with their parents. Even though they tend to contribute to the family income, the shared cost of living is quite a bit lower than if they lived alone. They work in factories, or in offices and don't really have a lot of responsibilities. They tend to put off getting married as long as possible because after they are married, they often have to quit their jobs and concentrate on running the household.
The average age of marriage in Japan is 30.1 years old, according to Wikipedia. The average age in the US is 28.2. Young people in Japan also don't tend to live together before marriage, while US couples tend to live together for 2-4 years before getting married (I couldn't get good stats, but it seems like 1-2 years before getting engaged and 1-2 years after getting engaged based on various google searches).
Because people in Japan do not live together before marriage, they are less likely to have children before marriage. This resource [3] shows an interesting statistic: The average woman has their first child at 30.7 years old, while the average US woman has their first child at 26.3 years old.
In my mind, this is really the difference in fertility rates. Women in Japan are trying to put off getting married and having a family, while Americans are not.
Funny, the women I know (in Japan) WANT to get married and quit their jobs and just take care of the household, because their jobs are unfulfilling, overtime, etc. They just can't find a man who can do it for them (wages in this part of the country aren't very sustainable)
I'm gonna have to go look up surveys on why women don't marry now
It's always struck me that the story about 'men keeping women off the workplace; rampant sexism' etc . never truly captured the whole story. Sure feminism itself has historically played handmaiden to forces who wanted to see lower wages and higher consumerism, but somehow there is not even an acknowledgement of this today.
The talking points always assume that fundamental human tasks like raising a family is infinitely more despicable than working as a drone in a corporation. I'm amused that the powers that be push the story that doing what is often a pointless chore, often for mere survival in contemporary times, is somehow 'more fulfilling' than the above.
This is not entirely surprising, since family has essentially become nationalized, while state is being privatised. Orwell's world will probably come into existence due more to reasons that far more insipid and glacial in its accumulation, than those 'big bang' events like terrorism. The latter no doubt are setting up crucial infrastructure for these, but the social aspect is has a much larger time constant.
I notice you've used a throwaway account for your opinion, but I'm willing to potentially burn a little karma and say that I agree with you. When I worked in the local high school, I had an American colleague who went absolutely mad when one of the students offered up that she wanted to be a housewife as her career. Comments like, "How can you throw your life away?" drove that student to tears.
This is not to say that I don't understand the risks of giving up an early industrial career in order to run a household, but I've got to say that I think an enlightened society should find a way to make that a viable option: no matter what your gender is.
If you take a sample of all houses across the US and look only at their prices, yes, there's lots of affordable housing.
But that picture ignores demographic shifts and jobs. If you look at the prices of houses relative to jobs available in the area, the picture is much worse.
In small towns and rural areas, there's lots of really cheap houses. In the town I grew up, you can find tolerable houses for sale for $100k. But there are no jobs there. Even at that low price, you're unlikely to be able to afford it at any sort of local wage.
Meanwhile, in the city where I live now, the median home price is $750,000. If you aren't in one of a shrinking number of vital industries like tech, that's also unaffordable. Over the years, I've watched friend after friend get priced out of the city.
The main problem I see is that jobs are moving much faster than physical infrastructure and housing can keep up with.
But if someone is priced out, someone else come in right? Definitely the population of these places does not fall, it rises. What's the problem if some people have to leave?
Certain segments of the economy get priced out of the area. If you want to go to a restaurant, there need to be places for the waiters and cooks to live. If you want someone to pick up the trash, there need to be homes for garbagemen. A hospital needs nurses, janitors, and receptionists as well as doctors.
How technically do people who own their homes outright, get 'priced out'? Just due to the real estate tax? Anyway, they get priced out, but they pocket hundreds of thousands or millions of free money from insane appreciation of their homes. And can start a new life in a cheaper place - probably getting about same money for the same job - but with whole lot of money in the pocket. Why should we feel sorry for them?
I think a few things happen that can cause even people who already own homes to get effectively priced out:
1. Through life circumstances, they need to move. The most common case is when they have kids and need a bigger home, but sometimes they need/want to move closer to a new job elsewhere in the city, neighborhoods change in ways they don't like, kids move out and they want to downsize, etc.
2. Property taxes do go up, yes.
3. When real estate goes up, everything else goes up too. People that can afford more expensive homes also generally have more disposable income. So they influence prices in the market and food, restaurants, services, daycare, etc. all get more expensive.
> And can start a new life in a cheaper place - probably getting about same money for the same job - but with whole lot of money in the pocket.
This is a thing, yes. You see older people move away from the city once their kids move out. When your kids are young, it's good to be in a city and stay put so that they can get a good stable school, long-term friends, and access to lots of learning experiences. Once the kids have left, though, that all matters less.
But there is a cost to that. Uprooting and moving means leaving behind friends and familiar places. Diminished friendship among the elderly is one of the causes of suicide and lower life expectancy. It may mean moving farther from their own children.
For example, I live in Seattle. My mother-in-law used to be a twenty minute drive. We spent a lot of time with her and she spent lots of time with her grandkids. Every year, the rent went up on her apartment until she couldn't afford it. She moved out to the country. It's a beautiful house, but it's an hour away, so we see her much less often, and that's a real loss to all of us.
> Why should we feel sorry for them?
I think that's a shallow way to look at it. We should empathize with them, with both the good and bad parts of their experience.
Overall, I think it probably is a net win to have cities be mostly oriented towards professionals and parents and that it helps balance the demographic distribution of people in the US to have older people move to rural areas. But there are downsides too.
this offhand opinion is not substantiated in "The State of the Nation's Housing" 2017, published by the Joint Center for Housing Studies of Harvard University
You seem to be confusing the fee simple notion of land ownership that we have in the United States with allodial title which doesn't happen anywhere because it's a terrible way to run a society
I doubt there is confusion. Land ownership in the US requires taxes else some level of government claims ownership. This means you do not truly own the land, just merely rent it with a complex social contract.
I agree with some forms of property taxation, for the record, but think that single family owner-occupied homes should be tax free.
Exactly, there is an effective rent for owning a home, even if it's entirely paid off.
The taxes you must pay, the insurance on the property, and the upkeep for maintenance (amortized roofing expenses/AC units etc).
I have family members that are ecstatic when their property value increases, because they love the idea of being people who live in a very valuable home.
But this is the only home that they have. And then their taxes go up. In order to cash out their "investment" they have to move. Which means, if they don't rent, buying back into the same over-inflated market. It's a wash, and the only thing that changes is the amount of money they are paying in taxes.
> Japans as a whole is losing population but Tokyo is increasing.
And even smaller cities are losing population much slower than their rural surroundings e.g. Wakayama mentioned in the article shrank by 10% (population wise) between the 2000 and 2015 census, but Wakayama-chi "only" shrank by 6% while rural Kushimoto-cho shrank by 23%, Susami-cho by 30%.
Exactly. We still have echo effects of the zombification of the economy since the 1990s as well.
This series does a wonderful job explaining what is happening, through story and pictures. Whole towns are disappearing. Schools are opening and closing based on what grade the only child in the district is in. Go to the oldest post and work back if u have time.
https://spikejapan.wordpress.com
> However, akiya owners are taxed more for empty plots of land than for having an empty property, according to real estate expert Toshihiko Yamamoto. This is a deterrent to razing a vacant home.
Weird. We have the opposite issue in the US; I've known several instances of people demolishing an intact structure because they didn't currently have a need for a barn.
There was an earlier post on here about municipalities in Japan offering abandoned houses for practically nothing. And I have to admit, ever since seeing that, the fantasy of building a retreat in "tropical" Kagoshima has been a constant in my mind ;)
From what I've been able to glean by reading, smaller cities and especially villages in Japan have vicious social ostracism, a lack of good jobs, and no remarkable educational institutions.
In 1995 I showed my co-workers in Japan the listing for my Grandma's house: a beautiful house on a double corner lot for $20k in rural Saskatchewan Canada. They were dumb founded. That a similar situation would occur in Japan twenty four years later seems unbelievable.
I always wonder about these pot calling kettle black statistics. This is normal in the US too. Over 11% of US residential property sits unrented and unused.
Most likely an issue with that website/service in particular. Other sites list more properties, but still a limited number. So your point about something not adding up may still be correct.
That's still high for a "healthy" level of vacancy, and it's also assuming those vacancies are in areas where people want to live. In reality, most of this housing stock is in smaller towns people are leaving while available housing in Tokyo is not exactly plentiful.
Most of the old homes are actually not worth living in. Construction is so terrible you are practically living outside in terms of insulation. Earthquake hazards with huge shingle roofs unlike anything in US. Even newer construction that’s not even 10 years old is still shit compared to US standards. There is a lot that can be said about why but it would take up a full essay.
I view it as a positive thing and wish it to happen in many countries.
Governments should stop thinking about population and gdp growth as a necessity. This is harmful when we're dealing with a planet with limited resources.
The problem isn't that they are shrinking, its the after-effects of shrinking and what it entails.
- The population shrinks but density in the cities still increases -> decreased land utilisation/abandoned villages.
- Decreasing birth rate -> inverted population cone/less taxes and more high cost individuals (old people with health problems and no income)
You don't see population shrinkage as necessarily bad, well I don't think population growth as necessarily bad. Overall in the modern West theres been a lot more propaganda against the latter. Risky business really, because I get the feeling decline is going to be a lot harder to combat than growth.
Its not really a matter of size as it is of quality. I personally wouldn't mind a lot more genius rocket scientist supermodels being born. Our best chance to stave off extinction is not to bury our heads in the sand and hope we last on this one rock but to expand. Growth is not in itself the evil, limited resources is and that is what should be tackled. If humanity had limited itself to the size that some people think is sensible from the very beginning you wouldn't be enjoying the comforts like your room and fancy computer that you are now.
Japan's population tripled in the past 100 years, they have no natural resources and live on imported oil, minerals and food. The population density is very high if you consider the geography (many mountains). A slight decrease is not a bad thing in such circumstances.
Scientists are made, not born. They need space to study. If we make them share rooms when they are children, or share houses when they move out, then their potential is squandered.
I had to share a room growing up, so half my time was spent watching TV in the living room. My parents wouldn't let me turn the TV off, as they were watching it or listening to it. Mind-numbing.
I had to share a house at university. My housemates wanted to drink and play games and listen to loud music all day. Also not good.
This, in combination with homeless people (or youth who still live at their parents while wanting to live on their own) is why I am pro squatting. If you don't use it, the land is up for other's use.
...in three or four metropolitan areas. Image search for "japan population density": When oil is super expensive and public transportation is well-developed, property scarcity around public transit centers is the choke point.
I wonder if that would have anything to do with all the issues the city has though? According to wikipedia, GM went from providing 80 thousand, to 8 thousand jobs, high crime rates, they had a financial crisis, and of course the whole water contamination issues since 2014.
Move the story to California. A three bedroom home in the San Francisco Bay Area, covered by Proposition 13, purchased by ordinary working people with good financial habits, around the 1970 time frame, and a working late-thirties, early forties person with some savings and good financial habits, cannot afford to take the home under almost any circumstances due to property taxes (cost of ownership) and competition for financing (loans not available in practice due to terms).
There is a lot of emotion on both sides of the Pacific in each of these cases. Individuals are quick to point fingers at the other individuals. It has been decades in the making, and the situation is not new. Many on both sides of the Pacific are renting at high prices (no accumulated capital) and deferring (or avoiding) having children.