6 ms·

Increasing wages will not help as they will be captured by rising rents. I hate to get all Georgist here, but landowners are not creating economic value. In fac

Increasing wages will not help as they will be captured by rising rents. I hate to get all Georgist here, but landowners are not creating economic value. In fact, by supporting zoning laws they are vastly worse than landowners historically. They are leaching off the productivity of the city. The moustache-twirling villains are not the business owners nor even the corporations, it is the land owners who created nothing yet receive most the value these workers generate. Just because this is a tyranny of a majority who owns, this does not make their yoke any less evil. From a policy perspective, I like federal land-value taxes that tax based on the counterfactual value of the land absent zoning restrictions, which would internalize the costs of zoning on landowners. But almost no common law jurisdiction has escaped the zoning-law trap, save for Texas. So I don't see it getting better any time soon.

bartread 7y ago
> landowners are not creating economic value. ... They are leaching off the productivity of the city. I think this is the nub of it. Whilst increasing rents might look good in the context of an economist's "perfect" model, the reality sucks ass for actual human beings trying to make a living and have a decent quality of life. And I cannot overstate the importance of the latter. I don't pretend to know what the answer is here, particularly not in the context of a US economic and legal milieu (I'm from the UK), but it certainly seems like there's a strong disparity in power between landlords and tenants (possibly fostered by the legislative environment) that needs to be addressed.
- javagram 7y ago
  In an economist’s perfect model, land owners could sell their land to developers or build apartments on it themselves. Supply and demand would keep prices from rising. In practice, regulations and zoning stifle the operation of the “perfect” economic model and you get what we see now.
api 7y ago
A reference to back this up: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent At this point I fully support the "nuclear option" against NIMBYs: the state needs to step in and override local zoning. Local zoning boards have proven themselves to be self-interested obstructionists who are only interested in bleeding cities dry by restricting supply to profit off real estate inflation. My ears are pretty much closed to any appeal otherwise. NIMBYs can go to hell.
jressey 7y ago
"It is those other rich people's fault." While the specifics of what you wrote are certainly true, it's the capitalists that are the problem. It is a class of people. High earners, for example executives of corporations, are oftentimes the same people as the property owners.
- wutbrodo 7y ago
  Yeesh, what an ugly, simple-minded way to look at the world. Why on earth would you intentionally switch the blame to a more general, less accurate group? "Let's not blame criminals for crime when we can just blame the residents of this neighborhood, which oftentimes are the same people as the criminals".
ihm 7y ago
Increasing wages obviously would help. The other workers at Facebook (i.e., these people’s coworkers) who make six figures are able to live comfortably. I agree with you that our economic model for housing and land ownership needs to change though.
- methehack 7y ago
  It might help short term, but I don't think its obvious it would work long term. The idea is that it wouldn't solve the structural problem. The structural problem is that nothing prevents landowners from charging whatever the market will tolerate and so sucking all plausible value out of the people paying the rents -- even to the degree that renters are forced to work so much they do nothing else and should expect a shorter life. Since there's no structural impediment to doing so, if you pay the renters more, the landowners will take the value...at least eventually.
  - agent008t 7y ago
    But it's supply and demand at work. Limit rents, and people will have to queue for housing.
    - methehack 7y ago
      Markets are a brilliant tool. We have to decide on the society we want, and use markets to shape it. Very few scenarios that make any sense would allow markets to function w/o purposeful shape. I think managing a queue might be a better way to preserve everyone's dignity than letting raw market forces work it out. Either that or I think you'll end up paying engineers to make $50 sandwiches, which doesn't seem like it would generate maximal economic value for the parties involved.
    - eli_gottlieb 7y ago
      It's "supply and demand" where the suppliers lobby city government to increase demand (by allowing new office space) while decreasing supply (by banning new housing development). Any idiot can make money if the government will literally let him walk into a town meeting and say, "Yes I'd like you to increase the value of my particular asset portfolio by force of law kthanxbye."
sandino 7y ago
Increasing wages will not help as they will be captured by rising rents. Easy enough to say, from where you sit. Your salary is again -- what multiple of theirs, exactly?
- draw_down 7y ago
  Come on
fortran77 7y ago
It's not the land owners at all. It's the legislators who restrict zoning. You may argue that the land owners "push" for legislation, but ultimately it's the choices of our Elected Officials.
usefulcat 7y ago
> But almost no common law jurisdiction has escaped the zoning-law trap, save for Texas If by 'Texas' you mean 'Houston', then yes. AFAIK most if not all other major TX cities have more traditional zoning laws.
whatshisface 7y ago
If I were to buy a house there I would probably make no money renting for efficient market reasons. The bank would probably absorb all the money I could make into interest, after all why wouldn't they? The only people who are benefitting are the previous landowners, who saw the appreciation.
anm89 7y ago
This whole worldview is totally baffling to me. A) So what should these landowners be doing according to you besides jumping off of a bridge? Are you against private property. Or did just exactly the set of evil people happen to be also be exactly the set of people who wanted to buy property B) So what should we do, a Mao style repossession from everyone who bought land totally fairly according to the legal system they bought it in? C) You honestly believe they are mustache twirling villains don't you?
- ZhuanXia 7y ago
  A) We are in an incentive trap. It sucks for property owners, but government subsidizing them with zoning laws needs to stop. If they are leveraged and lose all their money I don't care. They used the state to steal their rents and capital appreciation from the productive people, workers and business owners. From a Georgist prospective, aside from removing the indirect subsidization from zoning laws, I think land value should be taxed: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax B) See this portion of my comment: From a policy perspective, I like federal land-value taxes that tax based on the counterfactual value of the land absent zoning restrictions, which would internalize the costs of zoning on landowners. C) Not really. Just responding to incentives. Like all of us.
- roenxi 7y ago
  > So what should these landowners be doing according to you besides jumping off of a bridge? The landowners should be powerless to stop other landowners building high(er) density housing. This is how most of the economy works - all industrial activities face grumpy opposition from someone, so the legal system takes a fairly protective stance on behalf of industry. Most economic activity happens to the annoyance of someone who is suffering minor negative externalities (very minor, eg, the view isn't as good because there is a factory in it now). The issue that is being gone to is that landlords band together to form a sort-of guild that restricts what other landlords can do. GP was quite clear that zoning laws were the core issue. If one or two landlords were allowed to band together to build an ultra-dense block of units in a high demand suburb then housing would become plentiful. This sort of thing is the most effective way of solving a housing problem. So basically, in answer to your (A), landlords could support laws that allow landlords to more easily (and, critically, unilaterally in the face of opposition from other landlords) build the sort of housing people want.
agent008t 7y ago
The real problem is that there is not enough housing that people want. I do not see how taxes, rent controls, minimum wage laws and other measures that do not address the fundamental problem of there not being enough quality housing can solve the problem. You either: 1. Build more housing. But where? Ask about any specific project, and people are usually against it. 2. Redistribute existing housing. E.g. does everyone that lives in London really need to be in London? By definition, it will be a painful solution for some and require the use of force. Making existing neighborhoods nicer to make them more attractive for a particular demographic also fall into this category. 3. Spread people/jobs/businesses around more. This includes encouraging remote working practices where possible (but this will not help the kitchen staff). Perhaps turn currently depressed areas into some forms of free(r) economic zones, where taxes are lower and there is no requirement for planning permission? 4. Get better transport links. If trains were fast, went on time, were reliable and comfortable, more people would take the option of commuting and they would commute further out.
- chung411 7y ago
  I have a theory that as we build more apartments vs condos and home ownership goes down we will have more of these issues. Home ownership seems like a hedge to live in a city you enjoy long term. I could see in the future a Comcast of the world coming in and consolidating apartments under one banner for efficiency and rent becoming a much worse problem. What I cannot tell is how much of this is me just being pessimistic. I know it would take a long time and a lot of capital to own enough to make a large dent in housing.
- bryanlarsen 7y ago
  2-4 may help some but #1 is the real answer. The "people usually against it" should not have so much power to prevent building more housing.
  - agent008t 7y ago
    But it's not just NIMBYs that are against the building, it is "the general public" to the point where new housing developments are nearly political suicide. People both want new housing, but don't want highrise buildings changing the skyline (or don't want to live in them), want to preserve the look of the city (which includes keeping some awful looking buildings), do not want to build on any green spaces, etc.
seanmcdirmid 7y ago
> Increasing wages will not help as they will be captured by rising rents. That isn't as true at the low end. When there are a bunch of people making $200k-$300k, and a bunch of people making $20k-$30k, increasing wages for the former isn't going to cause as much rent competition since the latter already dwarfs buying power in the market. Reducing income disparity is effective in the longer term by just making everyone a bit more equal in their buying power.
- agent008t 7y ago
  You are assuming they are competing for the same housing, which is likely not the case.
  - seanmcdirmid 7y ago
    There are knock down effects, so even if they aren't exactly competing for the same housing, pressure at the top easily works its way to the bottom. The low and high end markets are very much intertwined.
spikels 7y ago
This is a simplistic analysis of the situation with some misconceptions. Landowners supply land, one of the key inputs to the economy. It is part of the capital behind almost all economic activity. Trying running a business - or even living - without using at least some real estate. This is a very fundamental economic misconception. Landowners don’t support zoning restrictions on their own land. And while many support zoning restrictions generally so do non-landowners (see surveys on the issue). Plus landowners are a minority of voters in the areas with the most restrictive zoning like SF and NYC. Taxing landowners as if they control their own zoning would distort incentives in bizarre ways. They are already bearing the costs of not being able to fully develop their property. (A negative tax might make more sense!?) IMHO the core problem is granting local politicians strong powers over zoning because they can gain both support and contributions (legal & illegal) by manipulation zoning. Their powers need to be limited by strong property rights (like in some parts of TX). A secondary issue in economic and financial illiteracy. There are so many misconceptions about this issue that people often act against their own interests. Unfortunately I have to agree it is unlikely to get better soon but there are some hopeful developments.
- pmoriarty 7y ago
  "Landowners supply land, one of the key inputs to the economy." Landowners don't supply land. That land is there whether these owners exist or not, and regardless of what they do or don't do. Now, there is a system built up around denying access to land to anyone who doesn't own it or has the owner's permission, but that's a far cry from actually supplying land. Contrast this to a baker who bakes bread. Without him that bread would not exist, so he actually does provide a service of supplying bread. Not so with the landowner, who creates nothing and whose ownership is a legal fiction.
  - spikels 7y ago
    Physics dictate that only one factory/office/home/bakery can occupy a particular location. So without the particular land for that particular bakery the bread wouldn’t exist either. People get all confused about basic economics, particularly real estate economics. In most ways land is no different than other physical inputs in that they are “exclusive”. You can’t use the same wheat in two different loaves of bread are the same time either. And the same baker can’t work in two different bakeries at the same time. The key thing that makes land different from other economic inputs is that it is immobile. This has many interesting implications but doesn’t make land useless or require a particular ownership system. Sure you could imagine a different world with different legal system but that wouldn’t change the fact that land is needed for almost every economic activity and is thus valuable. So whoever decides who get to use (i.e. supplies) that land - let’s call them the landowner - is adding value to that economic activity. Similar discussions around intangible assets are even more confusing.

bartread 7y ago

> landowners are not creating economic value. ... They are leaching off the productivity of the city. I think this is the nub of it. Whilst increasing rents might look good in the context of an economist's "perfect" model, the reality sucks ass for actual human beings trying to make a living and have a decent quality of life. And I cannot overstate the importance of the latter. I don't pretend to know what the answer is here, particularly not in the context of a US economic and legal milieu (I'm from the UK), but it certainly seems like there's a strong disparity in power between landlords and tenants (possibly fostered by the legislative environment) that needs to be addressed.

javagram 7y ago
In an economist’s perfect model, land owners could sell their land to developers or build apartments on it themselves. Supply and demand would keep prices from rising. In practice, regulations and zoning stifle the operation of the “perfect” economic model and you get what we see now.

api 7y ago

A reference to back this up: https://en.wikipedia.org/wiki/Law_of_rent https://en.wikipedia.org/wiki/Law_of_rent At this point I fully support the "nuclear option" against NIMBYs: the state needs to step in and override local zoning. Local zoning boards have proven themselves to be self-interested obstructionists who are only interested in bleeding cities dry by restricting supply to profit off real estate inflation. My ears are pretty much closed to any appeal otherwise. NIMBYs can go to hell.

jressey 7y ago

"It is those other rich people's fault." While the specifics of what you wrote are certainly true, it's the capitalists that are the problem. It is a class of people. High earners, for example executives of corporations, are oftentimes the same people as the property owners.

wutbrodo 7y ago
Yeesh, what an ugly, simple-minded way to look at the world. Why on earth would you intentionally switch the blame to a more general, less accurate group? "Let's not blame criminals for crime when we can just blame the residents of this neighborhood, which oftentimes are the same people as the criminals".

ihm 7y ago

Increasing wages obviously would help. The other workers at Facebook (i.e., these people’s coworkers) who make six figures are able to live comfortably. I agree with you that our economic model for housing and land ownership needs to change though.

methehack 7y ago
It might help short term, but I don't think its obvious it would work long term. The idea is that it wouldn't solve the structural problem. The structural problem is that nothing prevents landowners from charging whatever the market will tolerate and so sucking all plausible value out of the people paying the rents -- even to the degree that renters are forced to work so much they do nothing else and should expect a shorter life. Since there's no structural impediment to doing so, if you pay the renters more, the landowners will take the value...at least eventually.
- agent008t 7y ago
  But it's supply and demand at work. Limit rents, and people will have to queue for housing.
  - methehack 7y ago
    Markets are a brilliant tool. We have to decide on the society we want, and use markets to shape it. Very few scenarios that make any sense would allow markets to function w/o purposeful shape. I think managing a queue might be a better way to preserve everyone's dignity than letting raw market forces work it out. Either that or I think you'll end up paying engineers to make $50 sandwiches, which doesn't seem like it would generate maximal economic value for the parties involved.
  - eli_gottlieb 7y ago
    It's "supply and demand" where the suppliers lobby city government to increase demand (by allowing new office space) while decreasing supply (by banning new housing development). Any idiot can make money if the government will literally let him walk into a town meeting and say, "Yes I'd like you to increase the value of my particular asset portfolio by force of law kthanxbye."

sandino 7y ago

Increasing wages will not help as they will be captured by rising rents. Easy enough to say, from where you sit. Your salary is again -- what multiple of theirs, exactly?

draw_down 7y ago
Come on

fortran77 7y ago

It's not the land owners at all. It's the legislators who restrict zoning. You may argue that the land owners "push" for legislation, but ultimately it's the choices of our Elected Officials.

usefulcat 7y ago

> But almost no common law jurisdiction has escaped the zoning-law trap, save for Texas If by 'Texas' you mean 'Houston', then yes. AFAIK most if not all other major TX cities have more traditional zoning laws.

whatshisface 7y ago

If I were to buy a house there I would probably make no money renting for efficient market reasons. The bank would probably absorb all the money I could make into interest, after all why wouldn't they? The only people who are benefitting are the previous landowners, who saw the appreciation.

anm89 7y ago

This whole worldview is totally baffling to me. A) So what should these landowners be doing according to you besides jumping off of a bridge? Are you against private property. Or did just exactly the set of evil people happen to be also be exactly the set of people who wanted to buy property B) So what should we do, a Mao style repossession from everyone who bought land totally fairly according to the legal system they bought it in? C) You honestly believe they are mustache twirling villains don't you?

ZhuanXia 7y ago
A) We are in an incentive trap. It sucks for property owners, but government subsidizing them with zoning laws needs to stop. If they are leveraged and lose all their money I don't care. They used the state to steal their rents and capital appreciation from the productive people, workers and business owners. From a Georgist prospective, aside from removing the indirect subsidization from zoning laws, I think land value should be taxed: https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax B) See this portion of my comment: From a policy perspective, I like federal land-value taxes that tax based on the counterfactual value of the land absent zoning restrictions, which would internalize the costs of zoning on landowners. C) Not really. Just responding to incentives. Like all of us.
roenxi 7y ago
> So what should these landowners be doing according to you besides jumping off of a bridge? The landowners should be powerless to stop other landowners building high(er) density housing. This is how most of the economy works - all industrial activities face grumpy opposition from someone, so the legal system takes a fairly protective stance on behalf of industry. Most economic activity happens to the annoyance of someone who is suffering minor negative externalities (very minor, eg, the view isn't as good because there is a factory in it now). The issue that is being gone to is that landlords band together to form a sort-of guild that restricts what other landlords can do. GP was quite clear that zoning laws were the core issue. If one or two landlords were allowed to band together to build an ultra-dense block of units in a high demand suburb then housing would become plentiful. This sort of thing is the most effective way of solving a housing problem. So basically, in answer to your (A), landlords could support laws that allow landlords to more easily (and, critically, unilaterally in the face of opposition from other landlords) build the sort of housing people want.

agent008t 7y ago

The real problem is that there is not enough housing that people want. I do not see how taxes, rent controls, minimum wage laws and other measures that do not address the fundamental problem of there not being enough quality housing can solve the problem. You either: 1. Build more housing. But where? Ask about any specific project, and people are usually against it. 2. Redistribute existing housing. E.g. does everyone that lives in London really need to be in London? By definition, it will be a painful solution for some and require the use of force. Making existing neighborhoods nicer to make them more attractive for a particular demographic also fall into this category. 3. Spread people/jobs/businesses around more. This includes encouraging remote working practices where possible (but this will not help the kitchen staff). Perhaps turn currently depressed areas into some forms of free(r) economic zones, where taxes are lower and there is no requirement for planning permission? 4. Get better transport links. If trains were fast, went on time, were reliable and comfortable, more people would take the option of commuting and they would commute further out.

chung411 7y ago
I have a theory that as we build more apartments vs condos and home ownership goes down we will have more of these issues. Home ownership seems like a hedge to live in a city you enjoy long term. I could see in the future a Comcast of the world coming in and consolidating apartments under one banner for efficiency and rent becoming a much worse problem. What I cannot tell is how much of this is me just being pessimistic. I know it would take a long time and a lot of capital to own enough to make a large dent in housing.
bryanlarsen 7y ago
2-4 may help some but #1 is the real answer. The "people usually against it" should not have so much power to prevent building more housing.
- agent008t 7y ago
  But it's not just NIMBYs that are against the building, it is "the general public" to the point where new housing developments are nearly political suicide. People both want new housing, but don't want highrise buildings changing the skyline (or don't want to live in them), want to preserve the look of the city (which includes keeping some awful looking buildings), do not want to build on any green spaces, etc.

seanmcdirmid 7y ago

> Increasing wages will not help as they will be captured by rising rents. That isn't as true at the low end. When there are a bunch of people making $200k-$300k, and a bunch of people making $20k-$30k, increasing wages for the former isn't going to cause as much rent competition since the latter already dwarfs buying power in the market. Reducing income disparity is effective in the longer term by just making everyone a bit more equal in their buying power.

agent008t 7y ago
You are assuming they are competing for the same housing, which is likely not the case.
- seanmcdirmid 7y ago
  There are knock down effects, so even if they aren't exactly competing for the same housing, pressure at the top easily works its way to the bottom. The low and high end markets are very much intertwined.

spikels 7y ago

This is a simplistic analysis of the situation with some misconceptions. Landowners supply land, one of the key inputs to the economy. It is part of the capital behind almost all economic activity. Trying running a business - or even living - without using at least some real estate. This is a very fundamental economic misconception. Landowners don’t support zoning restrictions on their own land. And while many support zoning restrictions generally so do non-landowners (see surveys on the issue). Plus landowners are a minority of voters in the areas with the most restrictive zoning like SF and NYC. Taxing landowners as if they control their own zoning would distort incentives in bizarre ways. They are already bearing the costs of not being able to fully develop their property. (A negative tax might make more sense!?) IMHO the core problem is granting local politicians strong powers over zoning because they can gain both support and contributions (legal & illegal) by manipulation zoning. Their powers need to be limited by strong property rights (like in some parts of TX). A secondary issue in economic and financial illiteracy. There are so many misconceptions about this issue that people often act against their own interests. Unfortunately I have to agree it is unlikely to get better soon but there are some hopeful developments.

pmoriarty 7y ago
"Landowners supply land, one of the key inputs to the economy." Landowners don't supply land. That land is there whether these owners exist or not, and regardless of what they do or don't do. Now, there is a system built up around denying access to land to anyone who doesn't own it or has the owner's permission, but that's a far cry from actually supplying land. Contrast this to a baker who bakes bread. Without him that bread would not exist, so he actually does provide a service of supplying bread. Not so with the landowner, who creates nothing and whose ownership is a legal fiction.
- spikels 7y ago
  Physics dictate that only one factory/office/home/bakery can occupy a particular location. So without the particular land for that particular bakery the bread wouldn’t exist either. People get all confused about basic economics, particularly real estate economics. In most ways land is no different than other physical inputs in that they are “exclusive”. You can’t use the same wheat in two different loaves of bread are the same time either. And the same baker can’t work in two different bakeries at the same time. The key thing that makes land different from other economic inputs is that it is immobile. This has many interesting implications but doesn’t make land useless or require a particular ownership system. Sure you could imagine a different world with different legal system but that wouldn’t change the fact that land is needed for almost every economic activity and is thus valuable. So whoever decides who get to use (i.e. supplies) that land - let’s call them the landowner - is adding value to that economic activity. Similar discussions around intangible assets are even more confusing.