5 ms·

> He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is

> He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. This is why offloading the risk onto creditors (ie purchasing real estate with borrowed money under an LLC) is so lucrative. You reap all of the rewards of property ownership, but none of the downside. In a failure scenario your creditors are on the hook, not you. I should probably add that banks are not stupid and it is very difficult, but not impossible, to get a loan for real estate investment under an LLC.

vkou 9y ago
> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. Mind you, the capital requirements for property ownership are pretty insane, and our low interest rates really don't help matters any (Home prices have ballooned, in part, thanks to them.)
- deleted 9y ago
  [deleted]
- chimeracoder 9y ago
  > A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. If you're talking about cities like Seattle, the reason that a 30-year-old hairdresser would have a difficult time purchasing a place is because prices have been pushed absurdly high due to two factors: a) a housing shortage (primarily in the SF Bay Area, but Seattle has similar problems, and the SF housing problems spill over into other nearby cities) b) speculative purchasing by foreign entities The second point is less relevant Seattle than it is to nearby Vancouver - and nowhere is it more true than in New York City - but it still has a huge inflationary impact on property values in a way that doesn't benefit any local residents at all (the properties are used as places to park money by people who don't live there, and may never even have visited the US).
  - jeffwilcox 9y ago
    I'm starting to think it is less about foreign investments, like a few other comments have noted, and more about changes at the top end of the middle class. Along with the large amounts of growth, wages in the upper middle class have really increased a lot. If you look at tech workers, it was pretty common to see average tech employees pulling in $75k-$150k a decade ago; today employees at a similar level and set of skills are pulling $200-350k. As a result, there's a ton of money in the high end available to purchase housing in the area. Saving for a down payment is a challenge, but less so if it's relatively easy to tuck away an extra $100k a year. This is likely available to a tech earner but not the Seattle hair dresser, unless they have also increased their asking rates for a haircut the last few years.
    - ryuker16 9y ago
      The zoning laws keep it that way. In a truly fair market, the new tech class buys newer, larger homes or apartments while the hair dresser buys their old starter home or bachelor pad.
- billmalarky 9y ago
  Hot housing markets are extremely high risk high reward investments. Buying NYC real estate for example, it is practically impossible to use a traditional "buy and hold" strategy and have the rents cover the cost of investment (typically rent covers more like 50% of operating costs in NYC). You pretty much only make money in NYC REI via speculation (ie the property goes up in value) not from paying down the mortgage with rents. The solution to high pricing is to increase supply of housing. Mind you _this_ is an area where landlords do have high rent-seeking behavior in the political sense. Landlords are incentivized to push for increased regulation that limits new development whenever possible. As much as I hate to use him as an example due to his "lightning rod effect," Trump, for example would see his net worth plummet if NYC development regulations were relaxed.
  - pjmorris 9y ago
    > The solution to high pricing is to increase supply of housing. ... for a given amount of money. However, money is easier to create than houses.
  - makomk 9y ago
    Last I heard, NYC is literally running out of pavement space for pedestrians, let alone vehicles, and increasing the supply of housing still hasn't brought prices down.
    - billmalarky 9y ago
      NYC has tons of regulations that _drastically_ limit the supply of new housing. New supply hasn't even come close to keeping up with new growth. New supply is a drop in the bucket. https://www.nytimes.com/interactive/2016/05/19/upshot/forty-percent-of-manhattans-buildings-could-not-be-built-today.html https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...
    - chimeracoder 9y ago
      > Last I heard, NYC is literally running out of pavement space for pedestrians, let alone vehicles That's news to me, as someone who lives and works in the two busiest and most crowded neighborhoods in the city > and increasing the supply of housing still hasn't brought prices down. Yes, but that's because of the way new housing has been constructed (skewed towards luxury buildings, which are purchased by foreign speculators as ways to park money essentially tax-free). That means that many of these new units that are constructed don't actually increase the supply of housing, because speculative purchasers tend not to rent out the units (it's not worth it, given their goals).
- mistermann 9y ago
  > A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. The same applies to a 30 year old doctor in Vancouver, and I would imagine other Canadian cities soon enough.
- cc439 9y ago
  Were 30 year old hairdressers ever able to afford a home inside a major metro area? I'm sure one could have afforded a home in Seattle 40 years ago, but the Seattle metro area wasn't even among America's top 20 largest metros until the 70's. The problem with the assumption that something is wrong with Seattle's housing market is that people's perceptions of what Seattle "is" haven't changed to reflect the fact that Seattle today is as large as Chicago was in 1930. No one expects a hairdresser to be able to have been able to afford property within Chicago's city center at any point in modern history. That's because everyone alive has always known Chicago to be a massive metropolis whereas many long term residents of Seattle still remember a time when the city was an also-ran in terms of size and economic prosperity. Just think of all the towns that were absorbed into what is now called Chicagoland. People who live as far as 85 miles away from downtown Chicago (Kentland Indiana is part of the Chicago MSA) still consider themselves to live "in" Chicago and they are even included as such in Chicago's Metropolitan Statistical Area. People's perceptions of what constitutes "Seattle" need to change to reflect the current reality of the city's size and influence. Source: http://peakbagger.com/PBGeog/histmetropop.aspx http://peakbagger.com/PBGeog/histmetropop.aspx
  - y_u_no_rust 9y ago
    I know a few hair dressers who decent middle class salaries should they not own houses or something because they aren't stack overflowing their way to crappy apps?
  - tomjakubowski 9y ago
    Sure, probably. The hairdresser who cut my hair when I was a child managed to buy a home in the Chicago metro area about 20 years ago. Maybe she had another source of income but I don't think so.
- gowld 9y ago
  what if the hairdresser wants to move in with a roommate? or gets married? or has kids? Or open a new shop somewhere else? There are many reasons why someone may not want to own their property, and have to deal with transacting it.
mrow84 9y ago
> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. Are there any risks that affect only the landlord, and not the renter, other than the possibility of losing ownership? For example, if you rent a plot of land for farming, what risks does the owner of that land face that you do not?
- busterarm 9y ago
  Personal injury lawsuits.
- marcell 9y ago
  You risk negative returns on the property, or losses compared to your opportunity cost. If you had $1 million in 2007, it would have been more profitable to invest it in Google than to buy a two houses in Mt View and rent them out. That is the risk the landlord is assuming. There are examples where you have a negative return as well.
- jpollock 9y ago
  The owner risks the tenant destroying the capital value of the property. http://www.cbc.ca/news/canada/ottawa/multimedia/rental-unit-overrun-by-maggots-mould-and-feces-after-city-program-fails-landlord-1.4362256 http://www.cbc.ca/news/canada/ottawa/multimedia/rental-unit-... http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11804526 http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o... In the US with civil forfeiture, the police can seize the property. https://www.cannalawblog.com/asset-forfeiture-why-your-marijuana-leasehold-is-key/ https://www.cannalawblog.com/asset-forfeiture-why-your-marij...
  - slededit 9y ago
    Remember that Canada has civil forfeiture too: https://beta.theglobeandmail.com/news/national/civil-forfeiture-often-a-provincial-cash-grab-new-report-finds/article29072771/?ref=http://www.theglobeandmail.com& https://beta.theglobeandmail.com/news/national/civil-forfeit...
- 9y ago
watwut 9y ago
What risk? I bought the flat I live in to make risk lower. If you live on somebody else's property, you are more vulnerable and owner can limit how you treat the property.
- billmalarky 9y ago
  What will happen if the economy collapses and the value of your flat is worth half what you paid for it and you lose your job?
  - undersuit 9y ago
    I guess we should also consider what happens when the economy collapses and the value but not the cost of your rented living space is worth half what the landlord paid for it and you lose your job.
  - watwut 9y ago
    I have a place to live in, while if I would be renting, I would have no more money for rent and had to move. I am not speculating on that flat with intention to sell. I live in it.
    - billmalarky 9y ago
      You've lost your job and were only able to get a job that paid half, how do you make your mortgage payment? If you are renting you are not locked into the property, you have the flexibility to move to a lower cost flat.
      - matt_wulfeck 9y ago
        It’s not uncommon to find fixed-rate mortgages that are significantly cheaper than the corresponding rent for the same home. The risk is only high the first decade, and then it becomes a huge safety net.
      - watwut 9y ago
        The monthly mandatory payment on my mortgage is now a lot lower then typical rent (I have freedom to pay more if I wish to). It was roughly same as rent for few years, but it went down as I paid the debt. If my salary would go down to half and my husband would got unemployed, we would still be able to pay it. You don't have to buy the most expensive flat there is in the city. And if we were not, that would still be not that much different then not being able to pay rent. In really really the worst case, you move to that lower cost flat and have bank take away your flat (since you aint paying mortgage it is theirs). But it is less likely to happen then being unable to pay rent because we got sick simultaneously with economy tanking.

vkou 9y ago

> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. Mind you, the capital requirements for property ownership are pretty insane, and our low interest rates really don't help matters any (Home prices have ballooned, in part, thanks to them.)

deleted 9y ago
[deleted]
chimeracoder 9y ago
> A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. If you're talking about cities like Seattle, the reason that a 30-year-old hairdresser would have a difficult time purchasing a place is because prices have been pushed absurdly high due to two factors: a) a housing shortage (primarily in the SF Bay Area, but Seattle has similar problems, and the SF housing problems spill over into other nearby cities) b) speculative purchasing by foreign entities The second point is less relevant Seattle than it is to nearby Vancouver - and nowhere is it more true than in New York City - but it still has a huge inflationary impact on property values in a way that doesn't benefit any local residents at all (the properties are used as places to park money by people who don't live there, and may never even have visited the US).
- jeffwilcox 9y ago
  I'm starting to think it is less about foreign investments, like a few other comments have noted, and more about changes at the top end of the middle class. Along with the large amounts of growth, wages in the upper middle class have really increased a lot. If you look at tech workers, it was pretty common to see average tech employees pulling in $75k-$150k a decade ago; today employees at a similar level and set of skills are pulling $200-350k. As a result, there's a ton of money in the high end available to purchase housing in the area. Saving for a down payment is a challenge, but less so if it's relatively easy to tuck away an extra $100k a year. This is likely available to a tech earner but not the Seattle hair dresser, unless they have also increased their asking rates for a haircut the last few years.
  - ryuker16 9y ago
    The zoning laws keep it that way. In a truly fair market, the new tech class buys newer, larger homes or apartments while the hair dresser buys their old starter home or bachelor pad.
billmalarky 9y ago
Hot housing markets are extremely high risk high reward investments. Buying NYC real estate for example, it is practically impossible to use a traditional "buy and hold" strategy and have the rents cover the cost of investment (typically rent covers more like 50% of operating costs in NYC). You pretty much only make money in NYC REI via speculation (ie the property goes up in value) not from paying down the mortgage with rents. The solution to high pricing is to increase supply of housing. Mind you _this_ is an area where landlords do have high rent-seeking behavior in the political sense. Landlords are incentivized to push for increased regulation that limits new development whenever possible. As much as I hate to use him as an example due to his "lightning rod effect," Trump, for example would see his net worth plummet if NYC development regulations were relaxed.
- pjmorris 9y ago
  > The solution to high pricing is to increase supply of housing. ... for a given amount of money. However, money is easier to create than houses.
- makomk 9y ago
  Last I heard, NYC is literally running out of pavement space for pedestrians, let alone vehicles, and increasing the supply of housing still hasn't brought prices down.
  - billmalarky 9y ago
    NYC has tons of regulations that _drastically_ limit the supply of new housing. New supply hasn't even come close to keeping up with new growth. New supply is a drop in the bucket. https://www.nytimes.com/interactive/2016/05/19/upshot/forty-percent-of-manhattans-buildings-could-not-be-built-today.html https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...
  - chimeracoder 9y ago
    > Last I heard, NYC is literally running out of pavement space for pedestrians, let alone vehicles That's news to me, as someone who lives and works in the two busiest and most crowded neighborhoods in the city > and increasing the supply of housing still hasn't brought prices down. Yes, but that's because of the way new housing has been constructed (skewed towards luxury buildings, which are purchased by foreign speculators as ways to park money essentially tax-free). That means that many of these new units that are constructed don't actually increase the supply of housing, because speculative purchasers tend not to rent out the units (it's not worth it, given their goals).
mistermann 9y ago
> A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments. The same applies to a 30 year old doctor in Vancouver, and I would imagine other Canadian cities soon enough.
cc439 9y ago
Were 30 year old hairdressers ever able to afford a home inside a major metro area? I'm sure one could have afforded a home in Seattle 40 years ago, but the Seattle metro area wasn't even among America's top 20 largest metros until the 70's. The problem with the assumption that something is wrong with Seattle's housing market is that people's perceptions of what Seattle "is" haven't changed to reflect the fact that Seattle today is as large as Chicago was in 1930. No one expects a hairdresser to be able to have been able to afford property within Chicago's city center at any point in modern history. That's because everyone alive has always known Chicago to be a massive metropolis whereas many long term residents of Seattle still remember a time when the city was an also-ran in terms of size and economic prosperity. Just think of all the towns that were absorbed into what is now called Chicagoland. People who live as far as 85 miles away from downtown Chicago (Kentland Indiana is part of the Chicago MSA) still consider themselves to live "in" Chicago and they are even included as such in Chicago's Metropolitan Statistical Area. People's perceptions of what constitutes "Seattle" need to change to reflect the current reality of the city's size and influence. Source: http://peakbagger.com/PBGeog/histmetropop.aspx http://peakbagger.com/PBGeog/histmetropop.aspx
- y_u_no_rust 9y ago
  I know a few hair dressers who decent middle class salaries should they not own houses or something because they aren't stack overflowing their way to crappy apps?
- tomjakubowski 9y ago
  Sure, probably. The hairdresser who cut my hair when I was a child managed to buy a home in the Chicago metro area about 20 years ago. Maybe she had another source of income but I don't think so.
gowld 9y ago
what if the hairdresser wants to move in with a roommate? or gets married? or has kids? Or open a new shop somewhere else? There are many reasons why someone may not want to own their property, and have to deal with transacting it.

mrow84 9y ago

> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. Are there any risks that affect only the landlord, and not the renter, other than the possibility of losing ownership? For example, if you rent a plot of land for farming, what risks does the owner of that land face that you do not?

busterarm 9y ago
Personal injury lawsuits.
marcell 9y ago
You risk negative returns on the property, or losses compared to your opportunity cost. If you had $1 million in 2007, it would have been more profitable to invest it in Google than to buy a two houses in Mt View and rent them out. That is the risk the landlord is assuming. There are examples where you have a negative return as well.
jpollock 9y ago
The owner risks the tenant destroying the capital value of the property. http://www.cbc.ca/news/canada/ottawa/multimedia/rental-unit-overrun-by-maggots-mould-and-feces-after-city-program-fails-landlord-1.4362256 http://www.cbc.ca/news/canada/ottawa/multimedia/rental-unit-... http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11804526 http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o... In the US with civil forfeiture, the police can seize the property. https://www.cannalawblog.com/asset-forfeiture-why-your-marijuana-leasehold-is-key/ https://www.cannalawblog.com/asset-forfeiture-why-your-marij...
- slededit 9y ago
  Remember that Canada has civil forfeiture too: https://beta.theglobeandmail.com/news/national/civil-forfeiture-often-a-provincial-cash-grab-new-report-finds/article29072771/?ref=http://www.theglobeandmail.com& https://beta.theglobeandmail.com/news/national/civil-forfeit...
9y ago

watwut 9y ago

What risk? I bought the flat I live in to make risk lower. If you live on somebody else's property, you are more vulnerable and owner can limit how you treat the property.

billmalarky 9y ago
What will happen if the economy collapses and the value of your flat is worth half what you paid for it and you lose your job?
- undersuit 9y ago
  I guess we should also consider what happens when the economy collapses and the value but not the cost of your rented living space is worth half what the landlord paid for it and you lose your job.
- watwut 9y ago
  I have a place to live in, while if I would be renting, I would have no more money for rent and had to move. I am not speculating on that flat with intention to sell. I live in it.
  - billmalarky 9y ago
    You've lost your job and were only able to get a job that paid half, how do you make your mortgage payment? If you are renting you are not locked into the property, you have the flexibility to move to a lower cost flat.
    - matt_wulfeck 9y ago
      It’s not uncommon to find fixed-rate mortgages that are significantly cheaper than the corresponding rent for the same home. The risk is only high the first decade, and then it becomes a huge safety net.
    - watwut 9y ago
      The monthly mandatory payment on my mortgage is now a lot lower then typical rent (I have freedom to pay more if I wish to). It was roughly same as rent for few years, but it went down as I paid the debt. If my salary would go down to half and my husband would got unemployed, we would still be able to pay it. You don't have to buy the most expensive flat there is in the city. And if we were not, that would still be not that much different then not being able to pay rent. In really really the worst case, you move to that lower cost flat and have bank take away your flat (since you aint paying mortgage it is theirs). But it is less likely to happen then being unable to pay rent because we got sick simultaneously with economy tanking.