5 ms·

People's perceived needs grow but that is not the whole story. Many people now are spending almost 50% of their pre-tax income on housing, and most of that is

People's perceived needs grow but that is not the whole story. Many people now are spending almost 50% of their pre-tax income on housing, and most of that is the price of land and goes to landlords. It seems that landlords inevitably capture a big chunk of people's salary increases. Additionally in the US your health insurance is generally tied to your job; even after Obamacare you probably have to work to pay for your monthly insurance. If housing costs went way down and health insurance were universal, I suspect many people would feel much less need to work so many hours.

zimablue 9y ago
I think this is just a very visible specific case of assets becoming worth more relative to wages
dominotw 9y ago
Housing price increase just doesn't go to landlords. It goes to City and state coffers via tax. Chicago had two housing tax hikes in 2017, for example. Edit: Added links > For homeowners in Chicago, the average increase is 10 percent. https://rebootillinois.com/2017/06/13/big-property-tax-hike-chicago-homeowners/ https://rebootillinois.com/2017/06/13/big-property-tax-hike-... > Summary over past couple of decades https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015/12/Screen-Shot-2015-12-16-at-5.46.59-PM.png https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015...
- purple-again 9y ago
  Confused by the downvotes here. In almost all of America (looking at you Cali) the property taxes are reassessed yearly to the value of the home. This is how we want it. The three blocks in every direction surrounding a middle school shouldn’t be populated by 80 year old retirees.
  - dominotw 9y ago
    Property taxes are used to fund all sorts of stuff, like a default cookie jar, so to speak. Chicago used hike this year to fund pensions This graph is a good summary https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015/12/Screen-Shot-2015-12-16-at-5.46.59-PM.png https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015... > Illinoisans’ residential property-tax burden – as a percentage of median household income – has risen 76 percent. https://www.illinoispolicy.org/reports/growing-out-of-control-property-taxes-put-increasing-burden-on-illinois-taxpayers/ https://www.illinoispolicy.org/reports/growing-out-of-contro...
  - krrrh 9y ago
    The increase in city budgets is somewhat independent of the value of houses. If the price of every home in Chicago doubles overnight it doesn’t mean that Chicago would require twice as much revenue to deliver city services. Property taxes are based on assessed values because they are collected relative to other property in the same jurisdiction, not on an absolute basis. Other factors should have a bigger effect. For instance if crime halved overnight, the city could reduce its policing budget and lower property taxes, regardless of property value changes.
- barry-cotter 9y ago
  The fact that this is true and it’s really hard to make more land is the entire basis of Georgism, or Land Value Tax. https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax
lazyjones 9y ago
> If housing costs went way down and health insurance were universal, I suspect many people would feel much less need to work so many hours. Housing costs are directly related to the area per person and the location. If people expect to live in much larger flats or houses compared to e.g. the 19th century and in expensive urban areas, they will have to pay the price.
- etr-strike 9y ago
  That’s a cute theory, but housing costs are much more related to the cost of money. When the federal reserve makes money cheap, asset prices increase. Since mortgage rates are at historic lows, people simply borrow as much as possible until their monthly payment is at some threshold. If you want housing prices to return to historic norms, you need to ask the Fed to first return the cost of money to normal.
  - cjalmeida 9y ago
    Not sure why you are being downvoted. The historically low fed rates and economy growth are the main drivers of increased house prices globally. Buying a house has always been the preferred investment. When you make that easier, it's only natural prices will rise. IMO, the only feasible way to minimize this trend is economic decentralization.
- geezerjay 9y ago
  > If people expect to live in much larger flats or houses compared to e.g. the 19th century and in expensive urban areas, they will have to pay the price. Your comment could only make sense if you believed housing prices were dictated by construction costs. They aren't. Prices are set based on what is the highest price tag sellers are able to force upon the customers. Buyers also wanto to push the value down but sellers, due to the nature of real estate properties and taxes, profit more by simply sitting on their investment and waiting out for someone opening fheir wallet and offering the asking price.
sliverstorm 9y ago
Many people now are spending almost 50% of their pre-tax income on housing, and most of that is the price of land and goes to landlords. 1) That's really not a countrywide thing 2) It's not specifically the landlords, it's whoever was already there. A landlord who bought in just recently is not rolling in dough. The people who capture the gains are the people who got in fifty years ago and sold & moved, or the landlords who got in fifty years ago and are still renting the property. 3) But, yes, from the worker's perspective his salary increases will tend to go towards housing/land. This is a natural state in a competitive housing market. He must compete in the market for the space to live so that he can live near his job. The power of the market will continually optimize for those who make the most money (i.e. hypothetically produce the most economic value) to live in the most desirable housing (e.g. the closest to work)
- Animats 9y ago
  The people who capture the gains are the people who got in fifty years ago and sold & moved, or the landlords who got in fifty years ago and are still renting the property. Yes. Silicon Valley's land baron is John Arrillaga, who bought Silicon Valley farmland in the 1960s. He owns about a square kilometer of office space.
  - jpeery 9y ago
    It's actually a lot more than just 1 sq km, mate. Waaaay more.
- collyw 9y ago
  1) It seems to be a worldwide thing. I see the same in most major cities Europe.
  - cjalmeida 9y ago
    It's due to economic centralisation. The level of wealth in Paris and London is disproportionate to the rest of UK or France. This doesn't happen in Germany for instance. Rent in Berlin and Hamburg (1st and 2nd largest cities) is quite reasonable. Reason is economic activity in Germany is quite decentralized.

zimablue 9y ago

I think this is just a very visible specific case of assets becoming worth more relative to wages

dominotw 9y ago

Housing price increase just doesn't go to landlords. It goes to City and state coffers via tax. Chicago had two housing tax hikes in 2017, for example. Edit: Added links > For homeowners in Chicago, the average increase is 10 percent. https://rebootillinois.com/2017/06/13/big-property-tax-hike-chicago-homeowners/ https://rebootillinois.com/2017/06/13/big-property-tax-hike-... > Summary over past couple of decades https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015/12/Screen-Shot-2015-12-16-at-5.46.59-PM.png https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015...

purple-again 9y ago
Confused by the downvotes here. In almost all of America (looking at you Cali) the property taxes are reassessed yearly to the value of the home. This is how we want it. The three blocks in every direction surrounding a middle school shouldn’t be populated by 80 year old retirees.
- dominotw 9y ago
  Property taxes are used to fund all sorts of stuff, like a default cookie jar, so to speak. Chicago used hike this year to fund pensions This graph is a good summary https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015/12/Screen-Shot-2015-12-16-at-5.46.59-PM.png https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2015... > Illinoisans’ residential property-tax burden – as a percentage of median household income – has risen 76 percent. https://www.illinoispolicy.org/reports/growing-out-of-control-property-taxes-put-increasing-burden-on-illinois-taxpayers/ https://www.illinoispolicy.org/reports/growing-out-of-contro...
- krrrh 9y ago
  The increase in city budgets is somewhat independent of the value of houses. If the price of every home in Chicago doubles overnight it doesn’t mean that Chicago would require twice as much revenue to deliver city services. Property taxes are based on assessed values because they are collected relative to other property in the same jurisdiction, not on an absolute basis. Other factors should have a bigger effect. For instance if crime halved overnight, the city could reduce its policing budget and lower property taxes, regardless of property value changes.
barry-cotter 9y ago
The fact that this is true and it’s really hard to make more land is the entire basis of Georgism, or Land Value Tax. https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax

lazyjones 9y ago

> If housing costs went way down and health insurance were universal, I suspect many people would feel much less need to work so many hours. Housing costs are directly related to the area per person and the location. If people expect to live in much larger flats or houses compared to e.g. the 19th century and in expensive urban areas, they will have to pay the price.

etr-strike 9y ago
That’s a cute theory, but housing costs are much more related to the cost of money. When the federal reserve makes money cheap, asset prices increase. Since mortgage rates are at historic lows, people simply borrow as much as possible until their monthly payment is at some threshold. If you want housing prices to return to historic norms, you need to ask the Fed to first return the cost of money to normal.
- cjalmeida 9y ago
  Not sure why you are being downvoted. The historically low fed rates and economy growth are the main drivers of increased house prices globally. Buying a house has always been the preferred investment. When you make that easier, it's only natural prices will rise. IMO, the only feasible way to minimize this trend is economic decentralization.
geezerjay 9y ago
> If people expect to live in much larger flats or houses compared to e.g. the 19th century and in expensive urban areas, they will have to pay the price. Your comment could only make sense if you believed housing prices were dictated by construction costs. They aren't. Prices are set based on what is the highest price tag sellers are able to force upon the customers. Buyers also wanto to push the value down but sellers, due to the nature of real estate properties and taxes, profit more by simply sitting on their investment and waiting out for someone opening fheir wallet and offering the asking price.

sliverstorm 9y ago

Many people now are spending almost 50% of their pre-tax income on housing, and most of that is the price of land and goes to landlords. 1) That's really not a countrywide thing 2) It's not specifically the landlords, it's whoever was already there. A landlord who bought in just recently is not rolling in dough. The people who capture the gains are the people who got in fifty years ago and sold & moved, or the landlords who got in fifty years ago and are still renting the property. 3) But, yes, from the worker's perspective his salary increases will tend to go towards housing/land. This is a natural state in a competitive housing market. He must compete in the market for the space to live so that he can live near his job. The power of the market will continually optimize for those who make the most money (i.e. hypothetically produce the most economic value) to live in the most desirable housing (e.g. the closest to work)

Animats 9y ago
The people who capture the gains are the people who got in fifty years ago and sold & moved, or the landlords who got in fifty years ago and are still renting the property. Yes. Silicon Valley's land baron is John Arrillaga, who bought Silicon Valley farmland in the 1960s. He owns about a square kilometer of office space.
- jpeery 9y ago
  It's actually a lot more than just 1 sq km, mate. Waaaay more.
collyw 9y ago
1) It seems to be a worldwide thing. I see the same in most major cities Europe.
- cjalmeida 9y ago
  It's due to economic centralisation. The level of wealth in Paris and London is disproportionate to the rest of UK or France. This doesn't happen in Germany for instance. Rent in Berlin and Hamburg (1st and 2nd largest cities) is quite reasonable. Reason is economic activity in Germany is quite decentralized.