16 ms·

U.S. rent has increased 175% faster than household income over past 20 years

• WarOnPrivacy 6y ago
  Much of this can be laid at the feet of local policies that exclusively nurture wealthy development. ref - my comment: https://news.ycombinator.com/item?id=26594672 https://news.ycombinator.com/item?id=26594672
• aurizon 6y ago
  Of course it has. There is no business tax if you buy a house and rent it, you are taxed on profits, but there is only the normal residential tax = zero business tax. This has caused huge numbers of rent seekers to pile into retail rentals as interest market rates are far lower than rental returns. Tax all rentals with both normal realty taxes PLUS tax each unit with a business tax - same as a shop. The rent seekers will flee, and people who want to live there will buy them. Very sound economic logic.
  • ChrisLomont 6y ago
    >There is no business tax if you buy a house and rent it Rental properties pay property tax whether or not the business is profitable, and if the business is profitable, then the profits are also taxed.
    • aurizon 6y ago
      ChrisLomont. You miss the point. Real Estate taxes to the city PLUS Business taxes to the city PLUS taxes on profits to the IRS and some states. The object is to create a lower tax regime for those that buy and live there, to in time drive out rent seekers. As it is large numbers of properties are bought and banked into short term rentals, BNB etc. City rules are easy to evade via careful client vetting. These people want to defeate the laws of supply demand via such artificial shortages.
• WarOnPrivacy 6y ago
  There has been a lot of recent reporting about falling rental prices, in some historically overpriced areas. These stories ignore the sky-rocketing rents facing most of the nation - foster an unrealistic picture of the rental market.
• maxharris 6y ago
  Solution: eliminate state and local regulations that restrict the building of housing, especially in places where demand is high. As supply rises, prices fall. California's CEQA should be the first to go: https://www.theatlantic.com/ideas/archive/2021/03/signature-environmental-law-hurts-housing/618264/ https://www.theatlantic.com/ideas/archive/2021/03/signature-...
  • patagonia 6y ago
    Solution: Require persons owning 2nd or 3rd homes in high density areas to convert those homes to rentals. Solution: Require neighborhoods of single family homes to be replaced with high density high rises when a certain density is reached. Solution: Force owners of undeveloped lots to sell to developers. I actually don’t agree with any of those. Just like you shouldn’t have the right to take my property to create additional housing, you also don’t have the right to tell a community to change its character or compensation. That’s really what the government is. It’s the community. And if the community doesn’t want new development, that should absolutely be allowed.
    • caeril 6y ago
      Solid take. I don't personally like NIMBYism, and I don't personally like the parasitical nature of landlords or the scheming they engage in to drive their own property values up. But my personal distaste should have absolutely no bearing on the norms a foreign (to me) community chooses for itself.
      • deleted 6y ago
        [deleted]
      • deleted 6y ago
        [deleted]
    • maxharris 6y ago
      Individuals have rights, and communities are nothing more (and nothing less) than collections of individuals. If the entire community wants to violate the rights of a single individual, a just government should stop them. Socrates should not be forced to drink that hemlock.
• TechBro8615 6y ago
  I wonder how much of this is due to supply/demand and the simple fact that more people want to live in about the same number of dwellings. Even if population growth doesn't explain it, urban population growth might. e.g. San Francisco has seen huge growth but constructed basically no new units. So it's not exactly surprising the prices go up. The funny thing is, all the rich people living in these cities would never be able to survive without all the poor people commuting into the city to support them. The more expensive the city gets, the longer those commutes get. It's a horribly regressive system because now the poor people are spending multiple hours a day commuting, which is a huge opportunity cost of time that they could have spent advancing their social mobility. At some point something has to give. You can't just keep filling cities with rich people if nobody is there to keep them running.
  • Ccecil 6y ago
    I see this problem currently coming to a head in my area (Coeur d'Alene, ID) We have long been a destination area for people looking to escape the cities but in the last year we have had 33-50% increase in housing prices (limited inventory seems to be the driving factor coupled with the urban flight). Rental prices are to the point where even apartments are out of range for the average person who lives here. If you rent they want your income to be 3x your rent price. So currently if you are a single individual looking to rent that means you need to earn ~$36k/year to be eligible (also, a clean criminal and financial record as well). Issue is the minimum wage is $7.25/hr still...and if you work foodservice they can pay you ~$3.50/hr because your tips offset it. We have a steady influx of people buying houses at over the already inflated asking cost because it "seems cheap" to them compared to where they live. What they do not realize is that if they lose their remote job (or if their pay is scaled to the region) they will have little/no chance of finding employment locally which will pay the amount they need to simply "live". About 4 years ago University of Idaho released a study saying that 22% of the people living in this town cannot afford to do so...I wonder what that rate is now. I am starting so see more and more people sleeping in cars parked near the recreational areas and parking lots. Tons of multi family houses. Things are going to get bad really soon. I can't speak for every area of the country...but in our case I suspect a large part of this is the waves of real estate investors who came through in the last couple years to buy up homes and are leaving them vacant (or vacation rentals). It seems like inventory is being artificially limited. To the people investing it is a win-win...either the house is vacant and you make a ton of money...or it gets rented as an airbnb for $3k/mo and they make even more. I suspect if they were to impose a 2x property tax on any property vacant for more than 6mos or vacation rentals it would very quickly effect the issues we are facing...but being as this town was structured by the tourism/real estate industry I do not see much hope. https://cdapress.com/news/2021/feb/22/housing-market-heats-north-idaho/ https://cdapress.com/news/2021/feb/22/housing-market-heats-n...
• technofiend 6y ago
  I did attempt to read the paper but it's $400. It would be interesting to see where Houston falls in all this. The city has nearly zero zoning laws and has continually grown at the edges for the last several decades and has also traded single family lots for higher density housing in the inner and near city. In other words for people who say "well just let you develop more" it's happened here.
  • ska 6y ago
    Houston is an interesting data point in all this because (partially due to geographical luck) it does seem to a) be a form of solution to this problem that (b) many people will consider terrible and (c) other people will love. Mostly because even though it is not zoned much, most of the areas are basically interchangeable; you either like it or don't.
  • bob1029 6y ago
    Houston is somewhat of a unicorn in this mix. To say the city has no zoning laws really only implicates a very small portion of the logical geographic area in the urban center. The world-record sprawl (and commute times) of Houston are how the housing prices have historically been kept in check. As someone who is actively working to find a home in this market, I can say for certain that these measures are no longer sufficient. Houston has a few unique hedges to the scalability problem, but it won't hold up to larger forces such as mass migration from other states. Prices in the Houston market are still not within a range that would concern a Google employee, but for everyone who lives in the state and is receiving Texas-style wages, these prices might as well be as unattainable as housing in Manhattan or Silicon Valley.
    • analyte123 6y ago
      Reporting of low house prices in the city limits of Houston is a bit of an illusion, true, because the city limits expand to many low density suburban areas that can have an hour commute to downtown in traffic. And there definitely several neighborhoods where one can participate in California-style bidding wars with other rich folks -- if you want a safe, walkable neighborhood close to the city center next to a good elementary school, expensive salons, and several fine sushi places, you will pay a lot. However, in Houston you always at least have the option of buying a cheaper house farther away. That's not even to mention the rents, which as far as I can tell have barely budged in the past 6+ years.
• chmod600 6y ago
  I'd be interested to see how household size has changed over this period. Household income by itself is weird, because an increase in personal income can lead to a decrease in household income as better employment allows members to move out on their own.
  • arcticbull 6y ago
    Over the last 20 years, it's a little bit smaller (2.53 vs 2.62). It's a lot smaller than it was in the 1960s for instance (3.33) [1] The study focuses on the "50 largest cities" in the US which generally have regressive housing policies. Often, those cities are where the economy is doing well and high-paying jobs are available - but the city councils refuse to permit new construction. This limits supply in the face of increasing demand. Rent in particular too as folks living in big cities skew transient. I tried to find a source for their "median income" figure, because it would make sense that if you compare the increase in rent in big cities to median income nationwide it would be more sensational, as these cities are where the income would have grown the most. This is where I pull out my usual recommendation of Japanese-style nationwide zoning rules. [2] [1] https://www.statista.com/statistics/183648/average-size-of-households-in-the-us/ https://www.statista.com/statistics/183648/average-size-of-h... [2] http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
    • sthnblllII 6y ago
      Fascinating. I would love to know the income distribution of household size. Middle class people have the fewest kids now a days. Wealthy people and low-income people have more children.
    • kube-system 6y ago
      Japan's zoning is interesting but: 1. There are definitely reasons for many of the types of zoning rules in the US beyond what the author recognizes in that article. Zoning isn't just about measuring nuisance level. 2. The US definitely does have mixed use zoning. 3. The foundation of property law in the US is fundamentally incompatible with a standardized system. The US government already did the extent of what they could practically do when they suggested a standardized system in 1920s.
• tempfs 6y ago
  Foreign investment(Chinese) and interest rates are the biggest cause that I see. Shit local building policies are also to blame(California).
  • mjparrott 6y ago
    Is there any analysis of the scale of foreign investment and its impact on pricing and valuations? The every-so-often headline is 'international billionaire has high rise apartment over central park for his/her cat' ... but I don't know the actual data on it
• koolba 6y ago
  And capped tax increases in CA mean that with each year property owners are increasingly disincentivized to never sell.
  • JumpCrisscross 6y ago
    > capped tax increases in CA mean that with each year property owners are increasingly disincentivized to never sell I'm surprised it hasn't become commonplace to buy California properties through an LLC. That way one could sell the SPV while maintaining the tax benefits.
    • koolba 6y ago
      A change in control of the LLC is considered a reassessment event so a single LLC would not be enough. I’m not a CA tax lawyer so not sure if there’s a way to avoid that through two layers of LLC. Having the LLC be out of State or country would probably help too.
      • JumpCrisscross 6y ago
        > change in control of the LLC is considered a reassessment event so a single LLC would not be enough Then don’t change control. For sake of argument, consider putting an entire town’s real estate into an LLC. Ownership is allotted with membership units which correspond to plots. You could have all the same local laws apply to the units instead of to the properties. The managing member could be a town-owned LLC or something; control would never change.
        • lotsofpulp 6y ago
          When the government runs out of money, the semantics aren’t going to matter. Either the rules will get changed, or the town goes bust. The current situation in CA is tenable because the newcomers who are shouldering the disproportionate burden of taxes are high income, and can and are willing to afford it while the older homeowners continue to wield political power.
        • 6y ago
• souprock 6y ago
  Suppose a square city has 100000 rental houses, and they all rent for $1000. The city triples in each direction, causing area to increase by a factor of 9. The original houses now rent for $4000, but there are 800000 new houses that rent for $1000. Is that an increase of 0%, 33%, 300%, or something else? Suppose the original homes then increase to $5000, while the newer homes drop down to $500. Is that an increase or decrease?
  • simonh 6y ago
    Why don’t you just calculate the medians and find out?
    • souprock 6y ago
      The median of what? Do we count the new construction, or do we just look at the rising rent in the original city? We can have a situation in which rent for every home doubles in price, yet the median rent goes down. Do we care about the rent being demanded, including for vacant homes, or just the rent being paid? There are lots of ways to make a "correct" conclusion that is highly misleading. Apparently the study looks only at the 50 largest cities. That would ignore any rent decrease in small cities. One would expect exactly that if people are moving toward the largest cities.
  • letsgoyeti 6y ago
    In your first scenario, the average rent has gone from $1000 -> $1333, so I'd say a 33% increase. In your second scenario, the average rent has not changed. If this supply change happened over a century, a 33% increase would probably be very reasonable, and means the price went down in real terms.
• ripply 6y ago
  Housing cannot both be a good investment and affordable by definition unless new supply outpaces demand. The problem is that for so many Americans, their house constitutes the majority of their net worth which naturally causes them to advocate for policies that increase their property values which among other things, includes zoning limitations that depress new supply.
  • stjohnswarts 6y ago
    As an owner of two homes, I've never lobbied anyone for better zoning laws for me, and actually I've done the opposite. Not everyone is cookie cutter.
    • jopsen 6y ago
      I imagine most home owners don't do any lobbying. But it is true that politicians don't like increasing property taxes and other policies that could draw down the housing market.
      • vidarh 6y ago
        The problem is that though a lot of homeowners would themselves benefit from dropping prices (most would love to trade up, and as long as we don't end in negative equity, dropping prices would help with that), most people don't seem to understand, and see the house as an investment of the "I can afford a more expensive house" kind (ignoring that those more expensive houses are also more expensive because of the price growth). Overcoming the psychology of that is politically hard.
  • xvedejas 6y ago
    If new supply outpaces demand, wouldn't housing also in that case cease to be a good investment? (I think your first sentence has this wrong)
    • missedthecue 6y ago
      Housing is consumption, by definition. A house doesn't produce anything. It shouldn't be a good investment. It's probably optimal for it to rise at the same rate of inflation over time, to ensure that people aren't immediately under water on their mortgages, and so that they become cheaper relative to median incomes over the long term.
• SubiculumCode 6y ago
  Is it the lack of housing supply, or that wage/salary growth has stagnated, or both?
• prepend 6y ago
  My mortgage has decreased from 5.25% to 2.25% in the past 20 years. It’s weird how so many things seem to be geared to help people who don’t need the most help (although I appreciate it). Locking in a mortgage and not having to move is one of the best things to square up a financial situation. Especially hard on friends who rented for 20 years who have been saving to buy but hurt by increasing rents over and over.
  • vp8989 6y ago
    Rent to buy is a good strategy because you can justify to yourself living in a crappier place than you would want to own outright. Over time that allows you to purchase a house at a lower total outlay, including the rent you paid. During that saving period you also had the additional hard to quantify benefit of being able to move quickly and cheaply. If you are doing rent to buy but living in frothy areas where rents are always rising and apartments rent for 4k then obviously it's not going to be a winning strategy for you.
    • freeone3000 6y ago
      Every area is frothy. You live where you have to live to work where you can find work. The assumption of this saving period is also fairly strong. It only makes sense if you're earning $60k a year or more, and actually can afford to spend less than a third of your income on rent.
      • WarOnPrivacy 6y ago
        > Every area is frothy. IKR? What is it with leaving reality out of these equations?
  • deelowe 6y ago
    I know quite a few construction workers who are much better off due to the housing boom...
    • judge2020 6y ago
• jessaustin 6y ago
  It's as if a plutocracy is managed for the benefit of plutocrats...
• subsubzero 6y ago
  A few things: Companies(up till the pandemic) seemed to cluster in all the same spots due to network effect, SF bay area, NY, Chi, Boston, Austin etc, with little to no jobs (that pay well) in midsize or small cities. People now are extremely knowledgeable about great towns and what areas are good, thank instagram/facebook, zillow/redfin, and a multitude of blogs and sites that report on this, there is really no longer the idea of a "secret town" that is perfect, if one is found, people flock to it and drive up housing prices. States/Cities stifling development in favor of incumbent owners. This is a real problem in California, and even when I lived near Boulder it was shocking to see how much they tried to have people stop building in that town.
  • sthnblllII 6y ago
    Before outsourcing picked up steam under Ronald Regan, Bush 41 and Clinton, more jobs were high paying industrial and had to be done in remote places where the natural resources are. Now that Finance, Real Estate and Investment (FIRE) are 1/5 of GDP more jobs are servant jobs catering to wealthy people in big cities. The pandemic, remote work the and return of urban unrest have slowed or possibly reversed this trend as you've pointed out.
  • Apocryphon 6y ago
    What if this goes international? Montréal always seemed like a secret hidden in plain sight, second biggest city in Canada but with a much cheaper housing market than both Toronto and Vancouver.
    • refurb 6y ago
      Jobs. During the separation crisis of the 70’s a lot of companies left. It’s kept Montreal quite affordable as population growth has be 1%/yr or less for the past few decades.
  • swiley 6y ago
    >there is really no longer the idea of a "secret town" that is perfect, if one is found, people flock to it and drive up housing prices. The place I live aggressively builds dense highrise apartments. People are flocking here and it's still awesome. My rent didn't go up this year and if I were willing to move across the street I could have saved money.
• seanalltogether 6y ago
  Is there any existing tax system that encourages new developments? I wonder if that would help with this situation. I understand that communities resist new apartments/high rises that will increase density and traffic etc, but if there was a tax incentive to existing homeowners, that might help people change their minds.
  • psychometry 6y ago
    https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
    • seanalltogether 6y ago
      My understanding is that land value tax would actually increase the taxes paid by existing residents as more people move in. For example, if a town has 1000 families split among 1000 equal parcels of land, each landowner would contribute enough taxes to the city budget to provide services for 1 family. If I then take 100 parcels of land away and put 600 apartments on them, now I have 1500 families among 1000 parcels of land. The city will now require each landowner to cover the budget costs of 1.5 families
      • psychometry 6y ago
        Your math is wrong. Assuming that desired tax revenue should scale linearly with the number of families, the owners of the non-apartment parcels would be paying 1.35 times what they paid before the apartment building was built, not 1.5. However, even ignoring all of the questionable assumptions that go into such an unrealistic scenario, the tax justifies itself since that neighborhood was clearly massively underdeveloped compared to its land value (i.e. housing demand).
  • tryptophan 6y ago
    https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism >Any natural resource which is inherently limited in supply can generate economic rent, but the classical and most significant example of land monopoly involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair and equitable. The main Georgist policy recommendation is a tax assessed on land value
• ping_pong 6y ago
  I'm curious what difference would be if they compared it to the first and second standard deviation above median income, ie. the 68th and 95th percentiles. That would paint a more accurate picture of income inequality, etc.
• arduinomancer 6y ago
  I don't understand the economics here in terms of a rational market. If housing is so inflated in value right now, wouldn't investors be pouring tons of capital into construction? If the cost to build is fixed but the sell price is continually increasing, then isn't that the greatest profit making opportunity you could ask for? So then why isn't the supply side of the market catching up with the increases?
  • Ccecil 6y ago
    Material costs are up right now from my understanding. I assume that is part of the issue. In my area the issue was land to build on. The main undeveloped areas are either national forest or farmland the majority of which is owned by just a couple families who are not in a hurry to sell it off.
  • hinkley 6y ago
    I don’t know about where you live but where I am I know of a project that can’t get built because construction companies are charging at a premium and their intention to provide median housing will instead jack up the averages in the neighborhood so much that several different interests have allied to fight it.
  • AshWolfy 6y ago
    For one there isnt a single housing market, there are a lot of segmented housing markets that only partially overlap. In high demand areas, land is already limited. For another zoning restrictions are severe in the US, with most residential land zoned for single family housing with large lot sizes. With high upfront costs, limited land, and political issues, developers would rather build high end housing, which has led to over supply in the high end market, and under supply in the low end market
  • jjk166 6y ago
    In any given area the amount of land is fixed, you might be able to slightly increase the supply with some land improvements like draining a marsh, but there's nothing that scales. To house more people, you need to build denser housing on the fixed supply of land. Most places have zoning laws that limit density. But beyond that, it's actually less expensive to build higher cost homes - a lot of small apartments require a lot of walls (more material) redundant plumbing and electrical (more labor) and you need to handle the sale or rental to more parties (more overhead). If they do build apartments, it's going to be samll 1 and 2 bedroom apartments because those are lower risk - you'll always find some young people who need a place and can get a parent to cosign a lease and who will let their landlords treat them like crap. 3 or 4 bedroom apartments appropriate for families are harder to move, so even though those tenants might be able to pay proportionally higher, the opportunity cost of vacancies makes them a non-starter.
• splithalf 6y ago
  People talk about the lump of labor fallacy but never the lump of real estate fallacy. It is as though land were a finite resource. I know that’s a deeply unpopular opinion.
  • swiley 6y ago
    It would be a valid opinion if we actually used the land but in most places you barely have medium density housing. We have a room shortage not a land shortage.
  • Wohlf 6y ago
    Land is a finite resource but we still have plenty of that, location of the land is a very finite resource. Housing is very affordable in much of the country, just not in the most desirable cities.
• neogodless 6y ago
  > Across the largest 50 cities Kind of important to note. So what are the desirability ratings of those cities vs. alternate places to live over the same 20 years? Is it that people want night life, a Whole Foods, 20 Starbucks, etc. all really close to wherever they live? Or is there some other driving factor, like living outside the city and buying a home and having a reliable car is something many wealthy citizens enjoy, but if you need to be close to services, even if your income hasn't gone up, you have to rent in a city? And how much is rent outside of those cities?
  • jdavis703 6y ago
    There’s not a single county in the US where a full time minimum wage worker can “afford” an apartment (e.g. paying less than a pre-determined amount of income for rent). Affordability is worse in big cities, but it’s a problem that also plagues suburban and rural counties.
• ctdonath 6y ago
  How much of that is attributable to increased/tightened zoning regulations? Cheap & reasonable options are simply illegal in many cases. How much of that is attributable to reaching/straining/exceeding regional carrying capacity? More people competing to live in the same area raises prices.
• cammikebrown 6y ago
  Remember when San Francisco (and the Bay Area in general) had a bunch of bands and artists? There’s a couple, but not anything like it was 20 years ago. It makes me sad. There’s more market rate housing, and a little bit of very low income housing, but for those not in tech, it’s tough. If you make six figures, you can find a place to live in the Bay. It may be small or run down, but if you make the median personal income, $52k, you’re pretty screwed without spending at least half your take home pay on rent.
• vmception 6y ago
  yeah grandpa, its the participation awards which are the problem, not the hopelessly rising prices with stagnant incomes /s
• ipnon 6y ago
  >Average home tenure is 8 - 10 years, most of the time when people sell a home they are turning around immediately and buying one. Suppose I buy a $100,000 house and it grows 5% per annum in value for 10 years. I sell for $162,889. I turn around and want to buy the house I could not afford initially that started at $200,000; well that costs $325,779. Suppose I collude with other voters and get a 10% annual increase in value through zoning. Okay, my house is now worth $259,374, but the house I want to buy is $518,748. To whit, it costs me $96,485 more to upgrade my house. >Even with the leverage that comes from getting all the value increases for only a fraction of the initial cost, it is a pretty rare market where the average homeowner will be better off by raising home values. >Frankly the only time this sort of argument makes any sense is if people are planning on moving to far less expensive areas (e.g. retiring to the country) or if they plan to never purchase a home again. https://marginalrevolution.com/marginalrevolution/2021/03/housing-and-the-game-of-reverse-musical-chairs.html#comments https://marginalrevolution.com/marginalrevolution/2021/03/ho...
  • alistairSH 6y ago
    Retiring to the country, or massively downsizing their homes, is exactly what most of my peers are planning. That, or stay put, in which case home value is largely irrelevant.
  • whimsicalism 6y ago
    Assuming that the collective sum of human actions will approach a rational, profit-maximizing one, rather than be biased in some systemic, human way (thinking about how legislation will impact your current net worth vs. how it will impact the prices of houses you want to buy in 10 years) Moreover, that assumes that the restrictions you put in place will impact everywhere that people want to move. It seems to me like it's more of a commons problem - people want to add restrictive zoning where they currently live because it benefits their net worth but they are harmed when others do it in places they might want to move.
  • shawabawa3 6y ago
    You are missing the impact of debt here (mortgages) In your same example: I have $10k, and buy that $100k house with a $90k mortgage. For simplicity let's forget mortgage repayments After 10 years I sell for $163000, leaving me $73k for my next down payment I can now "afford" a $700000 house assuming banks are willing to lend 90% LTV
• dcolkitt 6y ago
  This data is not congruous with the national household expenditure survey. In 2019, the average American household earned $71 thousand after taxes. Of that 17% in aggregate was spent on shelter, and 6.2% on rent (this is a little complex because it commingles renters with owners). 36% of households were renters. In 2000, the average American household earned $42 thousand after taxes. Of that 17% was spent on shelter and 5% on rent. 34% of households were renters. Therefore relative to average incomes, the cost paid by the average American renter has only increased by about 17% on a national level since 2000. Since the Consumer Expenditure survey includes the entire country, it seems highly likely that the study in the link is cherry-picking specific metros to get headline results. https://www.bls.gov/cex/tables.htm https://www.bls.gov/cex/tables.htm
  • neogodless 6y ago
    The article actually specifies > Across the largest 50 cities
    • dcolkitt 6y ago
      Even this methodology doesn't add up. About one third of American households are in the 50 largest metro areas. If income-pegged rents increased in that group by 175%, but only 17% nationally, then that would imply that rents outside the largest metros decreased by 60%. That seems highly implausible. Either this study has to be wrong (or highly misrepresented) or the BLS Consumer Expenditure survey is wrong. Consider that the BLS survey is a huge sample size, with carefully controlled data, developed over decades, I'm trusting it.
  • rebelos 6y ago
    No serious person looks at average income numbers when doing this sort of analysis. In fact, in this domain (and many others), any coarse-grained summary statistic misses far too much nuance to have much practical utility.
• comeonseriously 6y ago
  Well, interest rates are low. People have to put their money where it will make money.
• IncRnd 6y ago
  I looked at the actual pdf report that this page indirectly linked. [0] The quoted 175% figure appears to be a case where statistics are selectively reported. The report, in the paragraph preceding the 175% quote contains this, "Annual median rents were on average $324 higher for every $1,000 increase in household median incomes across the 50 cities in 2020." [0] https://www.mba.org/Documents/Research/RIHA/22300_Research_RIHA_March_2021_Report.pdf https://www.mba.org/Documents/Research/RIHA/22300_Research_R...
  • Wohlf 6y ago
    >Annual median rents were on average $324 higher for every $1,000 increase in household median incomes This is in line with the general rule of 30% of income should go to housing, and this is after they limited the selection to just the top 50 cities.
• joshuaheard 6y ago
  One reason housing is expensive is that housing is expensive to build. Every house is handcrafted on location the same way it has been done for hundreds of years. Imagine if you purchased an automobile that was hand assembled in your driveway. It would easily triple the cost. A solution is to manufacture a home that could be built by bolting together mass-produced interchangeable parts. I have seen prefabricated housing, and that is a start. But, something more granular would be more efficient and less expensive.
  • deleted 6y ago
    [deleted]
  • system16 6y ago
    While houses are definitely not cheap to build, the massive increases in housing prices occurring in major cities - and increasingly rural areas - across the world is not fuelled by an increase in development costs.
  • phendrenad2 6y ago
    I think that's outdated information. Most houses are built in big lots, with each house being mostly a copy-paste of the others with some cosmetic tweaks. Hell, they probably have software to mix and match cosmetics too. Then the housing lot is likely a clone of a lot the company has built in dozens if not hundreds of other locations. That said, prefabs would help greatly. It's too bad that prefabs would have to travel over the open roads, which limits the size. If houses could be lifted via helicopter to the destination, we would likely see costs fall greatly, through the power of the assembly line that Henry Ford invented oh thousands of years ago now.
• cletus 6y ago
  I think there are several problems here: 1. While it's important to have private investment in property because this literally creates the housing units people rent, there's simply too much speculation here. I like the Swiss model that is way more restrictive of who can invest (as in, someone can't come in and buy up all the land in Switzerland) and punishing to short term speculation; 2. Foreign "investment". Investment here is a euphemism. "Money laundering" is probably closer to the truth. Example: every US tax resident is required to declare all foreign assets (including being a signatory in a foreign company or trust) but... real estate is specifically excluded. Why? It's well known that in places like London, property is used to hide and park money by, for example, Russian oligarchs; 3. Property owners who are non-residents where they own property should be taxed at a much higher rate. Places are simply way better off if the people who live there own the property there; 4. Incumbents vote themselves massive tax breaks. This applies to both property owners and renters. Case in point: Prop 13 in California (eg Disney still pays 1970s tax rates on Disney Land, for example). Oh and rent control; 5. NIMBYism. People on HN like to paint this as the boogeyman. I think this is somewhat overblown; 6. Subsidies for car ownership. Building out requires more infrastructure (eg roads, schools, utilities). Suburbs are subsidized by the taxpayer; 7. Attacks on public transportation. For example, Santa Monica trying to fight the LA rail extension into Santa Monica (because, you know, that'll bring undesirables into the area). Sometimes this is done for pseudo-political but self-serving reasons ("it'll raise taxes!"). This exacerbates other problems; 8. General opposition to allow and opposition to living in higher density housing. That all being said, I see the pandemic as helping to reverse the trend towards the move to a few urban centers. This is a boon for medium-sized regional centers and ultimately a good thing for a couple of reasons: it increases choices and cities beyond a certain size just... stop working. More cities under 2M people would be better than more cities of 20M people.
  • whimsicalism 6y ago
    The reality on number 2 is that people in the US actually do benefit from elites in other countries viewing the US as a place to exfiltrate the wealth they've acquired in their origin country. We are basically a fence for the plunder of the developing world.
• ahelwer 6y ago
  For housing, a lot of people in tech seem to come down firmly in the "build, baby, build!" camp to increase supply. I think demand should also be suppressed. Specifically, I think there should be a policy barring people from owning more than, say, two housing units. Our society should not support parasitic landlords buying up huge swaths of housing then renting it out to people for the right to half their monthly paycheck. Berlin is headed this direction and I'm very interested to see how it shakes out: https://www.independent.co.uk/news/world/europe/berlin-landlords-ban-germany-private-rent-housing-referendum-vote-a8796471.html https://www.independent.co.uk/news/world/europe/berlin-landl...
  • thehappypm 6y ago
    I think you have this backwards. Landlords increase housing supply, not increase demand. Also they charge what the market bears; they're exactly as parasitic as people are willing for them to be.
    • WarOnPrivacy 6y ago
      > Landlords increase housing supply Housing supplies increase when developers build new housing. Landlords would seem to be a fairly small component in that equation.
      • thehappypm 6y ago
        I own a condo in Boston. Someone new comes to Boston and sees there are 100 rental units on the market. I decide to move and become a landlord. Someone new comes to Boston and now sees 101 rental units on the market. By moving away and becoming a landlord I've put another rental into the supply side.
        • WarOnPrivacy 6y ago
          That's a pretty good example of near negligible impact.
        • deleted 6y ago
• victor106 6y ago
  At least in urban areas covid is a big hit. One of my friends was paying 3600USD per month in a brand new luxury building for a one Ben in the heart of Manhattan. After covid he’s paying $2600 per month in the same building same apartment. The apartment also paid the moving costs for new tenants to move in.
  • ethanbond 6y ago
    Same landlord? Same building? Wow, it’s almost as if people aren’t paying for landlords and their buildings. Almost as if people are paying for access to communal amenities like jobs, public transit, education, restaurants, other cultural centers. Almost as if landlords don’t deserve a massive cut of something they had no hand in producing...
• PragmaticPulp 6y ago
  The average 30-year mortgage rate in 2000 was 8.05%. Given a $2500/month target payment and 20% down, someone could buy a $423,870 house. The average 30-year mortgage rate in 2020 was 3.11%. The same $2500/month payment with 20% down buys a $730,892 house. Ignoring down payments (which differ greatly between the two examples) and other expenses like property taxes, the 2020 mortgage rate allows someone to buy 172% as much house as they could in 2000. This doesn't translate perfectly to rental prices, but property affordability via low mortgage rates is heavily correlated with increasing rent prices. Not a perfect comparison, but it shows how much mortgage rates are driving the housing price boom. Scary to think what's going to happen when (if?) rates start going back up. Source for historic numbers: http://www.freddiemac.com/pmms/pmms30.html http://www.freddiemac.com/pmms/pmms30.html
  • stouset 6y ago
    This is a really important point that more people need to think about. Sticker price and interest rate have an inverse relationship. But the price you paid is set in stone when you buy, though the interest rate can change over time. For those who bought when rates were high and sticker prices were low, declining rates brought higher valuations. Additionally, the ability to refinance at lower rates meant that monthly payments were able to decrease along with total interest paid out on the loan. For those who bought now (me!) at high sticker prices and low interest rates, the mechanics don’t work in our favor. Interest rates are only likely to go up, which doesn’t allow refinancing at a cheaper rate. At the same time, (inflation-adjusted) sticker prices will go down. So while renting gotten ridiculously more expensive, home ownership also looks like an increasingly worse deal.
    • daniel-thompson 6y ago
      Half-facetiously, what about people who bought at (comparatively) low sticker prices _and_ low interest rates? If you had bought a house in (say) Austin 10 years ago, you would have gotten about a 3-4% rate, and the value of your house on the market today would be almost double what it was then.
      • 6y ago
• rsj_hn 6y ago
  This is a poorly executed study that is factually incorrect. Here are the facts: * Median (household) gross rent in 2000 was $602 (1) or $7224 per annum * Median (household) gross rent in 2019 was $1097 (2) or $13164 per annum That is an increase of 182% for rents over the period. * Median household income in 2000 was $42,148 (3) * Median household income in 2019 was $68,703 (4) That is an increase of 163% for incomes over the period. So while its true that rents have increased faster than incomes, saying that rents increased 175% faster than incomes is false. Rents increased roughly 20% faster than incomes over the same period. More importantly, affordability (e.g. median income/median rent) decreased from 5.8 to 5.2, which is a decrease of 10%. (1) https://www2.census.gov/programs-surveys/decennial/tables/time-series/coh-grossrents/grossrents-unadj.txt https://www2.census.gov/programs-surveys/decennial/tables/ti... (2) https://www.deptofnumbers.com/rent/us/#:~:text=Average%20gross%20rent%20was%20%241%2C164%20in%202019.&text=2020%20US%20median%20and%20average,released%20in%20September%20of%202021 https://www.deptofnumbers.com/rent/us/#:~:text=Average%20gro... (3) https://www.census.gov/library/publications/2001/demo/p60-213.html https://www.census.gov/library/publications/2001/demo/p60-21... (4) https://www.census.gov/library/stories/2020/09/was-household-income-the-highest-ever-in-2019.html#:~:text=The%20U.S.%20median%20household%20income,Census%20Bureau%20statistics%20released%20today https://www.census.gov/library/stories/2020/09/was-household.... I've noticed a lot of these poverty-porn pieces that wildly exaggerate how terrible things are, and at this point I'm not at all surprised to see this type of misinformation in Academia, which has long ago crossed into crusading territory. If you want to know what the various tricks are that advocates use to inflate these figures, here is a brief listing: * confusing asking rents with rents paid. Particularly in cities with rent control, there is a huge gap, which is why you need to use census data on rents actually paid. I suspect this is the trick used in the current study. In addition to rent control factors, note that there is always a difference between price paid and asking price when you look at boards like Zillow or craigslist because cheap goods are taken off the board quickly while more expensive goods linger. * Household versus personal income. E.g. look at personal wages and compare that to household rents. * Playing games with boundaries. E.g. is a city the legal limit or is it the MSA? You should always use MSA (that is why they are statistical areas) to get closer to an apple to apple comparison. The 50 largest MSAs would be 180 million people and would not have median affordability ratios much different than the nation as a whole. But looking at craigslist adds for downtown areas would yield a different story. * Making inappropriate comparisons. E.g. comparing a large MSA to a small town. * Games with real and nominal incomes. E.g. I've seen people compare real to nominal incomes, or talk about "real" rates without adjusting for inflation. * mixing average with median. Median should be used in distributions with fat tails or if you are interested in middle class questions. I've seen this abused a lot. * Doing things like taking percentages of percentages when the base is small. E.g. the number of blind people electrocuted in their swimming pools is up by %1000! * Strategically chosen start and end-dates. It's important to use peak-to-peak business cycle comparisons rather than trough to peak. Especially as we know that things like rents and home prices are more volatile than incomes (which are famous for being more downward sticky). Always ask yourself what the economy was doing at the start and end points. * Ambiguously wording statements to get a big number. E.g. the rate of increase of X is %175 faster than Y! What does that mean? That the compounded growth rate of X is 1.75 that of the growth rate of Y? Or that the total increase of X is 1.75 times the total increase of Y? This type of strategic ambiguity is used to make false claims that are hard to pin down.
• davidw 6y ago
  If you want to help improve the situation, there are a lot of groups working on it. https://yimbyaction.org/ https://yimbyaction.org/ is a pretty good place to start.
• asdff 6y ago
  It blows my mind that people can read this headline and not be in favor of rent control, which is a cap of rent increase of say 4% in year in effort to keep rents from running away from inflation. What is anyone to do if the default is that you will be priced out otherwise? Move farther and farther and farther from your job cleaning a downtown office? When is enough? When it's a 4 hour bus ride and you only have time to go immediately to sleep when you get home? It's not sustainable when landlords are only incentivized to take as much as humanely possible from their tenants. The median worker already coughs up 45% of their wages to their landlord in Los Angeles. Eventually there won't be any more to squeeze; the working poor are already living on top of eachother in crampt apartments. Skilled laborers go begging for work in home depot parking lots while infrastructure falls apart and needed homes fail to get built, what a country.
  • IkmoIkmo 6y ago
    If there's a shortage of bread, prices of bread will go up. The price is a symptom, the problem is not the price, it's the scarcity. Prices are simply an expression of scarcity. The worst thing to do if there's a shortage of bread and thereby a shortage of bread bakers, is to put a cap on bread prices and reduce the bakers' incentives. If there's issues of inequity (e.g. the poor being unable to afford bread) then you can tax the general economy progressively (taxing the rich the most), and then redistribute money to the poor, subsidising their purchase of bread. This equalises consumption, but it does not artificially lower prices with a cap, thereby keeping incentives to bake bread high, which is the primary way to addressing the scarcity. Rent subsidies and income redistribution, sure, but rent caps aren't necessarily great instrument.
    • asdff 6y ago
      Except that doesn't happen in a shortage of bread, because the government steps in to protect against price gouging in order to ensure everyone has a chance to eat, not just the rich.
• IkmoIkmo 6y ago
  No link to the study... Also no notes on whether it's been corrected for anything, e.g. better housing, bigger housing, changes in subsidies, smaller households sizes, different demographic makeup, increased disposable income etc, no information on zoning restrictions etc. Not very interesting to be honest as a way to explain the magnitude of the change, the confounders, and the drivers of the changes. We don't need another little-substance 'rent is too damn high' article if we want to have a serious discussion around problems and solutions.
• itronitron 6y ago
  Is there a formal definition for what '175% faster' means? Does '100% faster' mean its the same speed or twice the speed? Is '175% faster' 1.75X, 2.75X, 175X, or something else entirely?
• telaelit 6y ago
  Lots of talk here in the comments about supply and demand, cool, I get it. But how about we worry about that after everyone has access to a stable shelter that they can live in. Housing should be a human right, nobody deserves to live on the streets or have to fork over all their money in order to be housed and have to worry about putting food on the table. The obsession with investments, wealth, and power is leading to people suffering. So how about we stop obsessing about investments, wealth, and power until everyone can live their life with dignity and not have to worry if they'll have to sleep in the gutter or not.
• anm89 6y ago
  I wouldn't worry about it. The CPI says there is barely any inflation!
• rtfartfa 6y ago
  Suggest retitling the article as.. The article is based only on the 55% of households in the top 50 US cities by size. The article wrongly states that rents grew by 175% in excess of household incomes in these cities over this period. But on page 15 of the linked report in the caption to a figure it says that "Median rents increased 93% between 2001 and 2020 while median incomes increased by 58%." Ie so rents indeed compounded by 1% faster than wages over this period in this subset of US housing. But this is nothing like the implied excess compounding of rents over income of 5% per annum or 175% total. Did anyone else stop to think about the intuitively tight linkage between incomes and rents and how these could possibly diverge at such a rate implied by the headline?
• LatteLazy 6y ago
  Is it that rent has risen or than people in the lower/middle all bought and pay mortgages instead?
• bratcomplex 6y ago
  Partially beacuuse the us housing market is a ponzie scream. it cost more money on infrastructure maintenance that the total tax revenue of the building. so we use growth sprawl to cover the cost.. so ya up it goes.