13 ms·
Why Rent Is So High and Pay So Low
- Yakimoto 11y agoLong winded article and it doesn't even answer the question. Rent in NYC is high because people are paying it. Your pay is low because you decided it is. Lots of CEOs think their pay is low too as they drive a new Lexus off the dealership lot.
- pierrealexandre 11y agoThe article provides historical context and a framework to think about the question. I think it does a better job answering the question than your last 2 paragraphs.
- oldmanjay 11y agoThe article tries to backdoor an emotionally resonant populist political view in the guise of concern. If you think it does a good job answering the question, that probably just means that you have a converging viewpoint.
- rjurney 11y agoYeah, nothing is persuasive. Everything simply confirms or disconfirms what you already know. There is no learning. I will die knowing what I knew yesterday. Life is shit, eat Arby's. Am I following along?
- zenogais 11y agoAfter finishing it, I'm almost certain the author just produced a shorter more accessible version of the argument from "A Brief History of Neoliberalism" by David Harvey. It's basically a Marxian interpretation of the issue.
- deleted 11y ago[deleted]
- kjdal2001 11y agoThe author looks to be drawing a lot of conclusions from a very limited set of data. His examples about prices are only from Manhattan and London. He also compares median wages in New York to rents in Manhattan, which is just lazy. I don't doubt that the rent/income ratio has gotten worse in New York over time, but an apples to apples comparison would have been nice to see. I don't even disagree with the sentiment expressed in this article. I just think it was woefully under-researched.
- choppaface 11y agoThis is a great point. The author's last graph tries to make the point that that the fraction of income taken from tenants has outpaced tenant wage growth over a period of decades. In present day SV (especially SF), most landlords will require tenants spend no more than 30% of their income on rent as part of the application process-- it's a somewhat fixed rule-of-thumb. As rents have risen, a lot of tenants in non-rent-controlled housing have been effectively priced out and displaced elsewhere. So it's actually not so easy to demonstrate that landlords have been taking a larger fraction of tenant income; one must adjust for the fact that greedy landlords will also drive away poorer tenants. Simpson's Paradox at work.
- nostromo 11y agoThis article doesn't answer the question and seems primary based on nostalgia. My theory: the Fed's zero interest rate policy is very good at inflating asset values: S&P500, housing, you name it. Rising income is a second-order effect: we hope that rising asset values will lead to increased wages. That used to be the case, but no longer is. Why? Because of automation and globalization probably. So, the Fed has the pedal to the metal for seven whole years and we get mediocre job growth, no real wage growth, but screaming high housing costs and stock market. And who owns the most real-estate and stocks? The wealthy do, which is why inequality is growing. Even though I'm critiquing the Fed's policy, I don't have the answers and would probably pursue the same policy. It's a real conundrum. Perhaps basic income, or some other "throw money from helicopters" idea is the solution.
- danieltillett 11y agoThis is not a bug it is a feature. The rich are a lot smarter today than when they were the descendants of feudal landlords - 100 years of meritocracy combined with assortative mating makes for a very clever ruling class. Edit. Spelling.
- withdavidli 11y agoNot exactly true, back in feudal times just being able to read was quite a privilege. They also had a lock on information. We're much more on equal footing in terms of ability to gain information. Whether we act on the information is another issue.
- daveloyall 11y agoAre you kidding? What does a family line which has had uninterrupted, exclusive access to a personal library know? I mean think about it--what is that family like? That family which has held on to the same chunk of physical space, with books and notebooks, for several generations. "Equal footing in terms of ability to gain information", my ass! My own toddler gets confused when he tries to describe his home--probably because he's moved three times in as many years. I remember the encyclopedias I read as a child. But, I don't have them. I can't review them. I can't consult my notes, nor smell them and get connected to the concrete memory of the day I learned about phases of matter or dry cell batteries. Those things are important. They change the slope of the playing field.
- curiousjorge 11y agoyou dont know high cost of living with low salary if you haven't lived in vancouver, bc. https://docs.google.com/spreadsheets/u/1/d/18UwaThgGikSXzinnLNHx7P3_HQSenggWbV262_UmuTk/edit#gid=0 https://docs.google.com/spreadsheets/u/1/d/18UwaThgGikSXzinn... You can see based on that the average is around $45~50k CAD (if the salary field is blank assume $50k or less as these are less well known, smaller companies with tighter budgets) rent for studio or 1 bedroom apartment in downtown area where lot of jobs are located is around $1300/month (nvm, it appears to have gone up in the past 3 years, $1700/month according to another users comment).
- ryanSrich 11y agoPortland, OR is getting pretty bad as well. Average cost to own a home in 2015 is $313,000[1]. I can't find a current house hold income figure but I know it's pretty low. Definitely below the national average IIRC. The thing to note is that many of those houses selling for ~$300k are very small (< 1000sqft). So the average housing cost for a family of 3 is probably much higher. 1. http://www.movingtoportland.net/wp-content/uploads/AverageMedianSalesPrice_May2015.png http://www.movingtoportland.net/wp-content/uploads/AverageMe...
- cpncrunch 11y ago$313k? That's a pittance compared to Vancouver where the average home is over $1M. Even in the shitty east side with drug-dealers and prostitutes hanging out on your street you still pay over $1M for a detached home.
- ryanSrich 11y agoFair enough. Perhaps rental was a better comparison. They are very close, and Portland pays way less than Vancouver (in addition to the US not having healthcare) - I'd say it's more expensive to buy in Vancouver, more expensive to rent in Portland. 1. https://www.rentjungle.com/average-rent-in-vancouver-bc-rent-trends/ https://www.rentjungle.com/average-rent-in-vancouver-bc-rent... 2. https://www.rentjungle.com/average-rent-in-portland-or-rent-trends/ https://www.rentjungle.com/average-rent-in-portland-or-rent-...
- happytrails 11y agoHow many people died during WW2? It all seems like supply and demand to me. If we want lower housing prices in major cities we need more supply. Anecdotal, L.A. is built to the max horizontally. If L.A. would allow more vertical space to be used prices would drop.
- Domenic_S 11y agoDing ding ding! When something that's in limited supply gets popular, it also gets expensive. If someone wants to argue that the limited supply is artificial, be my guest, but I have to point out that it's a lot easier and cheaper to build more humans (or move more humans in) than it is to build more housing for them -- after some inflection point demand will always outstrip supply. So we build Manhattan straight up, to the limits of engineering, and can now fit 8 million people (~5x more than today). Great, what happens to the next million people? They get priced out! It will always happen!
- josephpmay 11y agoBut LA is building vertically. Have you been downtown recently?
- timr 11y agoAbout 400,000 US citizens were killed in WW2, or about .0003% of the entire US population in 1945 (140M). It didn't have a huge downward impact on real estate prices.
- powera 11y ago400k is 0.3% of 140 million, not 0.0003%.
- ipsin 11y agoI was disappointed that I could not actually scroll of down to read the article on mobile Android/chrome.
- runj__ 11y agoIf the viewport is small enough it seems scrolling is disabled. I usually browse the web on the right side of my 15" screen and was confused when I wasn't able to scroll. I find it weird that most people don't plan for people with 900px or so wide browsers.
- charonn0 11y agoIt's trying to display a lightbox advertisement that is too big for the viewport. So, scrolling gets disabled but the lightbox doesn't render until/unless you enlarge the window.
- harryh 11y ago(60 * 12) / 5000 = 14.4% which is about 1/7th not 1/10th. Kinda depressing where there is a glaring math error in the 2nd sentence. Edit: Well I suppose the NY median wage could have been higher than the US median wage that he quotes, but who knows? He doesn't even say.
- gmarx 11y agoFunny, if you look at news and popular media from the 1970s you get the impression is was an awful time economically and pretty much everyone agreed we were doomed. Rents were cheap in NYC in the 1970s? I don't doubt it; ever seen "Taxi Driver"? Yes rent control is great for people in rent controled apartments. The flip side is that as demand rises everyone who hasn't been in NYC for 40 years is SOL...which seems analogous to the complaint the author makes at the end about middle aged home owners vs new renters. As a renter, I agree the current situation is ridiculous but the author doesn't explain it. He just notes who has incentive to favor the current situation and winks
- talos 11y agoUp until loopholes were introduced in the 90s almost every apartment in NYC was rent stabilized, which is a very modest version of rent control. Over half of all non-public apartments for rent are still in this program. Almost no apartments are traditionally rent controlled anymore. Rent laws are often blamed for the city's problems in the 1970s, but there were plenty of other issues (underinvestment, depopulation, municipal bankruptcy).
- BocceBaal 11y agoThe author is either ignorant of economics or intentionally misrepresenting the facts to advance his pro-union agenda. I can't take his piece seriously. He ignores the fact that rent control causes housing not to be built and so raises prices for everyone who doesn't already have a rent controlled apartment. Reagan was elected in no small part because of the high unemployment + inflation under Carter. If the 70's were so great would Carter have lost to Reagan by 10 points? If Reagan was so terrible would he have been reelected in a landslide in 1984?
- happytrails 11y agoLabor has been on the decline for years. The union corruption and bashing seems never ending. The ignorance in the general populace allows this to happen, as people will vote against their own best interests. I would assume that the populace movement that is gaining steam with sanders and warren will start to expand if the inequality continues.
- AnimalMuppet 11y agoIf the unions are corrupt, why do you assume that it's in my best interest to join one?
- happytrails 11y agoWhy do you assume I said that?
- AnimalMuppet 11y ago> Labor has been on the decline for years. The union corruption and bashing seems never ending. The ignorance in the general populace allows this to happen, as people will vote against their own best interests. "The union corruption seems never ending." I agree. Unions are corrupt too much of the time. (Any is too much...) "Labor has been on the decline for years... The ignorance in the general populace allows this to happen, as people will vote against their own best interests." I presume that this is supposed to mean that labor is in the best interest of people. So it looks like you said that unions are corrupt, and that labor unions are in the best interest of people. Hence my question.
- andyl 11y agoGlobalization and participation of women increase the labor supply. Wages fall. Supply and demand.
- PythonicAlpha 11y agoParticipation of women was invented, not because it was needed, but to compensate for (relatively) reduced wages of the workers.
- mrbig4545 11y agoMy rent is low and my pay is high. North England is good for that.
- switch007 11y agoTell me more. High by southern standards? I'm hearing more and more about high paid tech jobs in the north but haven't seen any figures. I'm sick of the south and seriously considering moving north.
- mrbig4545 11y agoI don't know, I haven't worked in the south. But I earn £45k, my rent is £650 for a house with a big garden and a garage, a loaf of bread is 75p and a beer is in the range of £1.30-3, usually around £2.20 When I was in London, I couldn't get a beer for less than a fiver
- switch007 11y agoUseful, thank you. I know people paying that and more for a room in a shared house down here :)
- im3w1l 11y agoSo this article gives an explanation for why people would want to push up rents and property values. Anyone know the how of it? Rising rent compared to wage would normally lead to increased building, so this must be prevented somehow.
- thoward 11y agoI would point the finger at NIMBYism and the fact that new developments in places like San Francisco, London, and New York have to hop through many many hoops to get built (and pass muster with a surprising number of "stakeholders"). Here is just one example... http://www.bizjournals.com/sanfrancisco/blog/real-estate/2015/06/mission-housing-opposed-by-unions-sf-development.html http://www.bizjournals.com/sanfrancisco/blog/real-estate/201... The TL;DR of this article is that a large new apartment block in SF is being held up by a construction union because the developer is refusing to hire union labor for every contractor role in the project. Maybe we should reduce the red tape around building new structures and see how far that gets us before plowing more money into public housing and other government interventions.
- Frondo 11y agoOr maybe the developer could just hire union labor to build the apartment block.
- thoward 11y agoNah, that's what I'm talking about. Makes things too complicated and expensive. How about this... If you have the capital, you can build whatever you want as long as you don't physically endanger other people (building meets earthquake and fire codes, etc.)
- Frondo 11y agoWhy is it "too complicated" to hire union labor? That seems like an easy thing to do, especially since the developer would have ready access to a large labor pool, of which union labor would be one component.
- tomp 11y agoThe money quotes: "If house prices fall, the middle aged and middle class will be in an uproar. [...] Perhaps even more critically, banks need house prices to rise, or at least not collapse." "More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks. Thus it is not likely to happen. Property prices, at an all time high, are not likely to fall, and if they do, expect the government to put a floor under them." I couldn't agree more. I'm young and capital-poor, so this fact is a huge problem for me. I don't see a solution.
- MaysonL 11y agoOf course, that's only nominal house prices that shouldn't fall. If inflation-adjusted real house prices fall, not really a problem. Perhaps a little more inflation than we currently have would be a good idea (4-5%).
- ryandrake 11y ago> I couldn't agree more. I'm young and capital-poor, so this fact is a huge problem for me. I don't see a solution. Vote for politicians not obsessed with propping up the business and real-estate portfolios of wealthy middle-aged people? (assuming you can find such politicians)
- tomp 11y ago
- akamaka 11y agoCan anyone recommend further reading that gives an in-depth analysis of housing costs? There's no end to articles exploring the various political angles, but what good are those without understanding the underlying economic constraints? I'd be most interested in sources that use raw data, introduce mathematical models, and take into account measurable factors such as land availability, construction costs, incentives to invest, transportation, and so forth.
- thaumaturgy 11y agoI too would appreciate this (but don't have any suggestions).
- dougmany 11y agoI read a book on local investment and slow money but I can't remember the name of it. It talked about how the stock market has become divorced from putting money back into business creation. How it is just the sum of the money people have laying around. I want to extrapolate that to housing and blame the high values on investment divorced from construction but now I'm just repeating your question.
- pjmorris 11y agoNot a complete answer, but Bill McBride's Calculated Risk blog is an excellent resource for housing analysis (among other things). Follow for awhile, and you'll pick up much of what is needed. [1] www.calculatedriskblog.com
- PythonicAlpha 11y agoReagan ended the Golden years and turned the US around from worker friendly to money-friendly. The result are low taxes for income generated from pure money, high speculation, bailouts for the big corporations and the decline of the US middle class. Many of the other "western countries" just copy this trend and get the same, just with a few years between.
- bluedino 11y agoThe oil crisis and recession of the 70's happened before Reagan was even on the ballots.
- PythonicAlpha 11y agoThe oil crisis and recession of the 70s has nothing to do with the situation today, at least not directly. More important where the political decisions that where made in this time. Of course they where not all made by Reagan alone, but he was one of the major breaches.
- patmcguire 11y agoWorth noting the decline in how much is spent on food: in 1950 it was a third of household income, now it's 13%. So part of the cost of living has drastically decreased.
- ArkyBeagle 11y agoAlmost all sectors of the economy have delivered much improved value since 1950. In many cases at reduced cost. Real estate, education and medical care are subsidized. When you subsidize something, they cost more and you get more of it. So we constrain residential real estate development by regulation - zoning, permitting.
- brc 11y agoAll the sectors free of excessive regulation and central planning have shown massively reduced costs. Energy and housing - increasingly micro controlled to a fine detail, both spiralling ever upwards way in front of inflation. Healthcare: massively regulated, increased costs. Hiring people : massively regulated, increased costs (for the buyer) result : less buyers meaning less employment. The problem is clearly excessive regulation but any problem is immediately met with calls for more regulation. Until this becomes so incredibly clear that people can no longer deny it - it will just go on and on.
- sytelus 11y agoTL;DR We vote and so politicians listen to our desires. Falling house prices would be a boon for renters and first-time buyers (and probably for society at large), but their political clout is less than that of middle-aged, middle-class property owners. Link baity article with no real "answer". Rents and house prices follow simple supply and demand over long term. Cities are either already saturated or don't allow new constructions limiting the supply however people never stop flocking to them year over year. Even the medium size cities see net inflow of 50K-100K people every year - which means you need that many more new housing units each year. So ultimately only a few % of people gets to live in city and everyone else are forced to suffer commute. This % keeps declining because population total keeps growing and so the rent keeps rising. Rent control etc can distort the economics for a while but not over long run. They are just "pain killers" when what you need is real medicine. The real medicine is simply policies that diversifies the areas. For example, encourage businesses to move in surrounding towns by offering tax benefits, build solid transportation network, open new public schools, encourage more constructions outside popular area, build communities with attractive facilities, build venues for cultural and sports events outside of cities and so on.
- keepkalm 11y agoNot to mention that declining home values weren't good for the economy as a whole. Transportation is a huge factor in available land that is currently dedicated to parking that could be used for housing. Uber and Lyft could change some land use policies but it is going to take a change in policy overall because I believe that it is largely tied to job growth which is essentially desirability. Seattle is expensive to rent or own in and yet Tacoma and Everett seem very affordable by comparison.
- crzwdjk 11y agoCities are only "saturated" if you consider existing zoning. American cities in general are distinguished by having a very large proportion of single family homes, right in the city, generally on relatively large lots. And of course, the homeowners are relatively influential in local politics so they vote for policies that prop up the value of their assets by creating artificial scarcity. Some cities have been building more than others and they have lower rents: this has more to do with local land use policies than with how "saturated" the city is.
- morgante 11y agoIt's a great question. I wish the article had answered it. > If they wanted to drive down rents, government could fund the construction of public housing, as they did during the Golden Age. In housing, government is very clearly the problem, not the solution. It's government zoning regulations which keep demand far below supply: if we'd just lift the ridiculous restrictions, supply would rapidly rise to meet demand. Similarly with the rent control: all it does is impose higher rents on newcomers and the young while providing a great entitlement to the middle-aged and aging. > you and I could quite easily have gone to the ATM, slipped in our card, and been told the money we thought was safe in our accounts was gone. It's almost like he's never heard of the FDIC.
- kuni-toko-tachi 11y agoUtter leftist nonsense. Reagan was responsible for the biggest and longest economic boom since World War 2, he freed millions of people from the miserable tyranny of communism. His tax cuts and deregulation revitalized the American economy. By winning the cold war through strength, he allowed Clinton (forced by strong Republican leaders in Congress) to demilitarize and reap the cost savings which balanced the budget. The decline in wages has nothing to do with him, it has everything with productivity gains through technology and by loss of bargaining power through illegal immigration and by "free" trade agreements like NAFTA - passed by Clinton - which were pure crony capitalism purposely designed to chop the legs out from underneath the American worker. This, combined with out of control government spending - which funnels money printed out of thin air through Wall Street is what caused the conditions described.
- deleted 11y ago[deleted]
- dsr_ 11y agoThe velocity of money is too low. When money flows through many hands quickly, prosperity is the result. When money stagnates and accumulates in deep pools, the economy suffers. Reducing the number of people being employed reduces the speed of money. That's been happening. Increasing wealth disparity reduces the speed of money. That's been happening. Government spending increases the speed of money, but money spent on projects that end up with high concentrations of wealth (stadiums, military) are not as useful as projects that enable further speed increases (transportation, infrastructure, sanitation, urban renewal).
- jrbancel 11y agoWhat is the ideal ratio of rent/net income? Personally, I don't want to spend more than 20% of my net income on rent + utilities. That way, I can save 50% and use the remaining 30% for food and entertainment. I am currently at 16% in Seattle and I leave in a very good apartment, but I got lucky.
- meric 11y agoI rented a 3 room apartment. Sublet out 2.5 rooms. (I'm sharing one room.) Reduced my rental expense to 0%. Paying bills only. Only 15 minutes train to the second most expensive city by property prices relative to income in the world. (Sydney)
- Jacqued 11y agoUnfortunately you have to find a landlord that lets you rent a 3-bedroom AND sublet parts of it, which where I live is completely unheard of (unless you're high net worth and pay premium rent, but then why have flatmates ?). Plus, you'd pay income taxes on the subletting rents and that builds up really quickly.
- meric 11y agoYes, I used some salesmanship I gleaned from working in a startup and paid 5% premium rent. The landlord isn't worried about subletting. They want the place taken care of and to be assured you can make rent payments regularly and on time and don't trouble them too much. Convince them you're a better option than a family of 5 who also applied for the property and you too can sublet the place. The rent I pay is tax deductible from rent I receive. I chose to have flatmates and pay premium rent (paid for by flatmates) to live free in a renovated apartment close to the city. My office doesn't come with a space I can park a camper van.
- jms 11y agoMay I ask where you are roughly? I'm planning to buy a house in a cheap rural location (in NZ), but will still need to spend time in the city for work. I'd love to pick your brains - my email is in my profile, and I'm happy to buy dinner in return.
- dpc_pw 11y agoThe reason is monetary. Private debt increased and has reached it's peak. Previous generations have borrowed their prosperity, and next generations are living in an economy that is already full of debt obligations. Everyone should see one of the few economists that actually does a proper craft: https://www.youtube.com/watch?v=jqzfOQXCwFg https://www.youtube.com/watch?v=jqzfOQXCwFg
- cletus 11y agoI've been thinking about this a lot lately. I live in NYC so I see some of what's happening in the property market here. I've also lived in London, Zurich and Australia. The problem, ultimately, I think is trade agreements. I came across this comic [1] recently that resonated with me. Trade agreements aren't about trade anymore. Tariffs and protection are at all time lows. Really they're about the free movement of capital. The English-speaking world and much of the rest of the developed world has embraced the idea that real estate is a speculative investment. This includes allowing foreign capital to flow in and buy up property. A lot of Manhattan condos are bought by the wealthy, many of them foreign, who don't live here at all (ie it's just a means of parking money) or they visit a few times a year. The NYT has done a piece on this [2]. Luckily, much of Manhattan is still co-ops. For those of you unfamiliar with the history of this, NYC imposed rent control on property owners in the post-war era (up until 1973). Coops were a reform to allow building owners to divest themselves of apartments being rented below cost after the massive inflation of the 1970s. Rent control tenants were offered their apartment at a discounted rate. They became owners and the owners divested themselves of the loss-making asset. Win-win. Co-op residents technically own shares in a corporation. That corporation owns the building. Your shares give you the right to inhabit a certain apartment. You must however abide by the co-op rules. Some are lenient, some very strict. Co-ops can dictate a lot of things like: - Whether or not you can use the apartment as a pied-a-terre; - Whether or not and how much you can sublet your apartment (some note at all, some very lenient, lots in between); - How much financing is allowed. Many require a 20-25% downpayments and significant post-close liquidity. The more aristocratic buildings don't allow financing at all. And so on. The net effect though is that most co-ops tend to be fully or near-fully occupied, at least until you get to the very high end. This is actually good for the building and (IMHO) the city. Without this NYC would be doomed to become a desert of unoccupied condos. There are problems. Property tax is grossly unfair as the system is decided by the state government in Albany and they have heavily skewed it in favour of SFHs (single family homes). Plus for incumbent owners there are Prop 13 like caps on rate increases. Also within apartment buildings there are problems. A $100m condo pays $18k/month in property tax. A $3m condo pays $3k. How does that make sense? It probably dates back to Bloomberg's idea that attracting billionaires who never live here is somehow good for the city. At the same time as all this you need property investment to some degree as that's what provides the rental market. So you can't eliminate it entirely. But this is what I think you need: 1. A higher bracket of capital gains tax paid by non-residents of wherever the property is. This should include any residential property held through corporations or trusts. Now you have to be careful with this because there's also the flipper market. These are people who buy distressed properties, fix them up and sell them. I actually believe these people are providing a useful service in rehabing neighbourhoods. 2. Property taxes that are in line with market values that don't discriminate on property type; 3. Higher property taxes for non-residents (and trusts and corporations); 4. No property transfer taxes like NYC's "mansion" tax. Lastly, I don't have a huge amount of sympathy for the argument that people in entry-level jobs should be able to, say, afford to live in Manhattan. Why? Why is living anywhere a right? You hear the same thing about San Francisco. At least in NYC there are options if you're on a lower income (Queens, NJ, NY, many of which have good transport options). Whatever problems there are in NYC the Bay Area is a mess an order of magnitude worse. Vouncouver is another place that's had property driven up to sky-high levels. In that case it's because of rich Chinese seeking a safe harbour for their money and/or (ab)using the invest-to-immigrate program in Canada (how is buying an expensive house investing in Canada exactly?). Freedom of capital is a problem. It allows companies to avoid paying taxes with transfer pricing. It allows voters to vote themselves huge benefits from the government treasury and then abandon the city, state or country when that debt collapses on itself. [1]: http://economixcomix.com/home/tpp/ http://economixcomix.com/home/tpp/ [2]: http://www.nytimes.com/2015/01/11/realestate/new-york-citys-emptiest-co-ops-and-condos.html http://www.nytimes.com/2015/01/11/realestate/new-york-citys-...
- rubyn00bie 11y agoA couple of corrections as this article is sort of making assumptions based on falsehoods: Real wages stopped going up in 1972, not the 1980s, and real wage are what matter. http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/ http://www.pewresearch.org/fact-tank/2014/10/09/for-most-wor... Unemployment also hit some record highs in the 70s: http://data.bls.gov/timeseries/LNU04000000?years_option=all_years&periods_option=specific_periods&periods=Annual+Data http://data.bls.gov/timeseries/LNU04000000?years_option=all_... So, I think to say that it was bad only for rich people is a very unusual... I think it was probably worse for poor people since they don't have safety nets. It was also the beginning of the end for real wages which have never reached their 1972 peak. Those are some pretty large assumptions to be wrong on, for the rest of the article, so I'm not really sure how to take it...? Maybe the author can clarify for me? Edit: better source for real wage data, and clarity.
- ilaksh 11y agoThe economic systems are over-simplified, poorly automated, and disconnected from real physical and social science and measurements. Money is a very useful technology but the 'economy' really encompasses everything, and expecting some interest rate changes to save a sick economy is like a doctor who is only aware of the existence of the cardiovascular system and has one move -- rapid chest thrusts to get more blood pumping. By harnessing technology we can make our systems much more sophisticated than that.
- bikamonki 11y agoEh, supply and demand? While the good places are ever harder to find for cheap, we the humans are ever easier to replace. The solution will come from the sharing economy, a sort of airbnb for long-term renting mixed with a facebook-dating-like social net that [almost] guarantees one does not move-in with a Freddy Kruger. I even think we will start seeing two or more families sharing a big house. There is also an incentive to property owners to go this way b/c risk is minimized by the multiple sources of income to pay for the hefty rent. In general terms, the world of one of everything for each one is ending, all the uber-like business models that are popping around prove it feasible and profitable.
- thedevil 11y agoThis makes me sad. The title sounds promising, as if the article contained interesting analysis. But it doesn't. The author doesn't understand economics... Or anything. He peppered in a few facts and statistics to sound credible, which he probably looked up after he wrote the article. I would accuse him of click bait, but I don't think he understands what that even means.
- legulere 11y agoReasons why rent is so high not named: - A constant influx of people into the cities especially as inner city new york had a bad reputation - Apartments get bigger. Even if you rent a small one others are causing high rents through making space more scarce
- crimsonalucard 11y agoThe concept that you can "own" property and charge "rent" for it has been an economic drain on the world. When a cash exchange or transfer is made, it is usually for a product, aka GDP. There is no GDP involved with paying rent. A landlord is someone who can sit on his ass and live off of the GDP the tenant generates in the form of "rent" while offering no GDP back to the economy. The landlord is essentially a parasite, offering nothing beneficial to the economy, he simply can suck the life blood out of you through this strange concept of "owning" the habitat in which you live. Life is a bitch, but it is what it is.
- hiou 11y agoI would love it if the person who downvoted this anonymously would chime in as to why. Because this is exactly what a landlord is.
- crimsonalucard 11y agoI can see why. This argument goes beyond simply just landlords and rent into a critique about the dark sides of capitalism itself. In capitalism you can not only own land as an landlord but you can also own labor. Someone who owns the corporation, can sit on the profits, dividends, and growth without producing actual GDP himself. It's very similar to the landlord situation. The owner of the corporation essentially sucks the lifeblood of the work output generated by employees while doing no work himself. Y-Combinator at its very core is a product of this system, hence the possible downvotes. Capitalism is great, but landlords and freeloaders who get richer and richer without producing any GDP themselves is a huge negative attribute that is intrinsic to capitalism. Ironically, it is the hopeful opportunity of becoming a freeloader that drives the risk-taking entrepreneurial qualities which in turn make capitalism so effective.
- hiou 11y agoI would say that investing looking for growth and creation(Y-Combinator), is much different than buying an unchanging asset, doing nothing to it and simply collecting a non-trivial portion of the renter's value created. It's the difference between creating new value and simply gaining control of a static asset to extract rent. EDIT: I should add I appreciate that you took the time to shed some light on what the downvote may have been about.
- dgreensp 11y agoCan someone explain why worker productivity increases would ever enrich the worker? This sounds like a Golden Age fallacy. What forces in a capitalist system lead to paying workers more? Workers are not entitled to the value they create, they are just compensated for their labor. It would have to be competition from other employers who are paying more (because they too are making more money for what they are paying workers, but have strategically decided to apply it to raising salaries). However, if you have an oversupply of workers and a shortage of jobs, this dynamic does not really exist.
- andosa 11y agoUnions for example.
- coldcode 11y agoIf the rich keep getting richer and the poor poorer, eventually either the poor will die of starvation or disease or the rich will die in the guillotine - History.
- tim333 11y agoI think the author is kind of mixing some different effects 1) The switch of bargaining power from workers to capital with Thatcher and Regan. I basically agree with him at least in the UK and US. Less so in places like France. 2) High asset prices - largely due to very low interest rates. 3) Rents to wages. Outside of popular cities like London, NY, SF I'm skeptical it's got much worse. I don't have that much data but here's a graph for NZ for the time period and it kind of goes up a bit and down a bit without much of a trend. http://transportblog.co.nz/wp-content/uploads/2014/07/Rodney-graph-2.jpg http://transportblog.co.nz/wp-content/uploads/2014/07/Rodney... 4) Rent to income in NY, SF, London In the old days where people worked in mostly industry and agriculture it made sense to be where that was happening. Now when a lot of people are information workers it makes sense to go where the smart people are at so everyone piles into the top cities even if it means packing twice as many into an apartment as used to be the case. So if your rents so high relative to your wages it's probably because you are in a popular location with a restricted supply of property.
- touchofevil 11y agoI spent a few minutes posting a comment on this article only to find in the morning that the comments had been disabled. Not a great way to encourage discussion! Anyways, here's my comment that was deleted: I really enjoyed this article, however, I think you have glossed over what really led to the 2008 banking crisis. The banks bundled subprime home loans into securities that were then sold off to investors. As I understand it, what actually put the banks at risk was that banks were selling "Credit Default Swaps" (CDSes) on those bundled mortgage assets. These CDSes were essentially unregulated insurance policies that banks sold to insure the bundled mortgages against losses. Since the CDSes were not technically insurance policies (even though they really were) the banks did not have to keep money put away to cover those insurance policy payouts if the mortgage-backed assets went bad. This resulted in the banks selling many more CDSes than they could actually cover. I'm not an economist or banker, but as I understand it, the unregulated CDS market is what really put the banks at risk in 2008. I highly recommend the book The Big Short by Michael Lewis for anyone interested in the 2008 crash.
- davidf18 11y agoThe author does not cite the true reason for the high cost of housing in NYC (I live in Manhattan), SF, (and I'm told Bombay) which is 1) using politics to create artificial scarcity of housing through zoning density restrictions ("rent seeking"in microeconomics or "green belting") and 2) overuse of historic landmark status. This is well-recognized by economists, but I suggest reading this Op-Ed by Harvard economist Edward Glaeser http://www.nydailynews.com/opinion/build-big-bill-article-1.1913739 http://www.nydailynews.com/opinion/build-big-bill-article-1.... Nobelist and NY Times Columnist Paul Krugman cites Glaeser as well. What I find frustrating is that people write and publish articles without consulting the experts like Glaeser or consulting any economist for that matter. Prices rise because of scarcity. The high cost of housing is from inflated land costs through politically induced scarcity which is done through zoning density restrictions and overuse of historic landmark status. It is really that simple, yet many writers don't seem to understand that concept.