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In a lot of America, the scarcity is kind of artificial or unstable though, so it's still a risky investment. Look at California City - land there is anything b

In a lot of America, the scarcity is kind of artificial or unstable though, so it's still a risky investment. Look at California City - land there is anything but scarce. Or Detroit where the seemingly indestructible world-leading industry it depended on for house value shifted out from under it. Or the concepts of white flight and gentrification where neighborhoods can be tipped one way or the other in a self-perpetuating avalanche effect that doesn't necessarily correspond to any fundamental change in their utility. What's scarce isn't property in general, but property near rich people. If the rich people move away, so do the property values. I'd say property investors are chasing after rich people extracting value out of their desire to congregate together. Housing investment doesn't really have the ability to live in it. If you don't rent out your house, you're losing investment returns. Plenty of property investors depend on rents, not just price rises for their profit. As long as you live in a house in the free market, you're paying for that privilege, whether you own it or not. What it does provide over renting is you can't be kicked out so easily. I think that could be the main reason families prefer to buy houses instead of rent.

thorwasdfasdf 8y ago
Yes, but to be more precise, what's scarce is property near jobs. Jobs are ultimately what determine who moves where. That's critical for understanding the problem. CA voters thought they could prevent people from coming here by reducing housing and boy were they ever wrong. It's too bad this lesson took 50 years to play out and awareness is only now slowly starting to arise.
- chaostheory 8y ago
  Palo Alto residents saw this problem and they have opted to limit business growth in their city. https://sanfrancisco.cbslocal.com/2016/08/30/palo-alto-mayor-fed-up-too-much-tech-is-killing-his-citys-economy/ https://sanfrancisco.cbslocal.com/2016/08/30/palo-alto-mayor...
deleted 8y ago
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ralusek 8y ago
> gentrification where neighborhoods can be tipped one way or the other in a self-perpetuating avalanche effect that doesn't necessarily correspond to any fundamental change in their utility No fundamental change in their utility? Gentrification goes hand in hand with reduced crime rates, better education, increase in available public spaces/restaurants/bars. It's a feedback loop based off of people's tolerances. In one common model, for example, it begins with more desperate braver artists starting to congregate in an area because it's what they can afford. Their presence alone will typically change the dynamics of an area to a certain degree that is enough to create a tolerable pocket for the more adventurous that are better off (think software engineers opting to live in Mission/Oakland 5-10 years ago for the cultural element of the neighborhood). More tax money starts coming in, policing goes up and is partly responsible for crime going down, which also goes down due to demographic shift to wealthier people who are less likely to feel as though they must engage in crime. The children of these people can create a large enough community of kids that are culturally primed to take education seriously that the critical mass of a classroom can shift from boisterous and unruly to more manageable, further stabilizing the education situation for those that come after. The point is, very little of this is just some arbitrary decision with no impact on the function of neighborhoods. Over the course of gentrification, neighborhoods change dramatically in ways other than demographic shift.
- dondawest 8y ago
  Probably the best and least emotionally-charged analysis of gentrification I’ve ever read. Thanks for writing this comment. Always suspected a lot of these things to be true.
- dredmorbius 8y ago
  The value changes from gentrification or owner flight (see' most mid-century US cities) come from the community rather than any significant owner-initiated changes to the propety itself. You do nothing, rich people move in around you, value increases. You do nothing, rich people move out around you, value decreases. The direct utility of the property is unchanged. The owner has made, net, an insignificant contribution to the surrounding community. And yet value accrues (or diminishes) all the same. Housing and real estate internalise the net community utility changes. The pathological cases are where the owners or investors are outside the community and strip-mine the resulting wealth. Land value taxes both dampen wild valuation swings and internalise value gains to the community to provide infrastructure, institutions, and services.

thorwasdfasdf 8y ago

Yes, but to be more precise, what's scarce is property near jobs. Jobs are ultimately what determine who moves where. That's critical for understanding the problem. CA voters thought they could prevent people from coming here by reducing housing and boy were they ever wrong. It's too bad this lesson took 50 years to play out and awareness is only now slowly starting to arise.

chaostheory 8y ago
Palo Alto residents saw this problem and they have opted to limit business growth in their city. https://sanfrancisco.cbslocal.com/2016/08/30/palo-alto-mayor-fed-up-too-much-tech-is-killing-his-citys-economy/ https://sanfrancisco.cbslocal.com/2016/08/30/palo-alto-mayor...

deleted 8y ago

[deleted]

ralusek 8y ago

> gentrification where neighborhoods can be tipped one way or the other in a self-perpetuating avalanche effect that doesn't necessarily correspond to any fundamental change in their utility No fundamental change in their utility? Gentrification goes hand in hand with reduced crime rates, better education, increase in available public spaces/restaurants/bars. It's a feedback loop based off of people's tolerances. In one common model, for example, it begins with more desperate braver artists starting to congregate in an area because it's what they can afford. Their presence alone will typically change the dynamics of an area to a certain degree that is enough to create a tolerable pocket for the more adventurous that are better off (think software engineers opting to live in Mission/Oakland 5-10 years ago for the cultural element of the neighborhood). More tax money starts coming in, policing goes up and is partly responsible for crime going down, which also goes down due to demographic shift to wealthier people who are less likely to feel as though they must engage in crime. The children of these people can create a large enough community of kids that are culturally primed to take education seriously that the critical mass of a classroom can shift from boisterous and unruly to more manageable, further stabilizing the education situation for those that come after. The point is, very little of this is just some arbitrary decision with no impact on the function of neighborhoods. Over the course of gentrification, neighborhoods change dramatically in ways other than demographic shift.

dondawest 8y ago
Probably the best and least emotionally-charged analysis of gentrification I’ve ever read. Thanks for writing this comment. Always suspected a lot of these things to be true.
dredmorbius 8y ago
The value changes from gentrification or owner flight (see' most mid-century US cities) come from the community rather than any significant owner-initiated changes to the propety itself. You do nothing, rich people move in around you, value increases. You do nothing, rich people move out around you, value decreases. The direct utility of the property is unchanged. The owner has made, net, an insignificant contribution to the surrounding community. And yet value accrues (or diminishes) all the same. Housing and real estate internalise the net community utility changes. The pathological cases are where the owners or investors are outside the community and strip-mine the resulting wealth. Land value taxes both dampen wild valuation swings and internalise value gains to the community to provide infrastructure, institutions, and services.