36 ms·

The problem is all down to the basic human need of a home. In the 70s and 80s even 90s someone on a teacher's salary could own their own home in a major world c

The problem is all down to the basic human need of a home. In the 70s and 80s even 90s someone on a teacher's salary could own their own home in a major world city - say London. Now, literally zero chance. Because homes have become an asset class and the rich can outbid regular people so they are pushed out. That's the problem. I couldn't care less how many billionaires there are if regular people can afford a decent home

missedthecue 6y ago
Homes in the US today are much larger than they were in the 1970s. About 2x as large! Per square foot, the average home is actually cheaper today than it was then, inflation adjusted, and this isn't even factoring in the modern 2.2% mortgage rates vs the 13% mortgage rates of those days.
- dv_dt 6y ago
  Housing built small in the 1960's is still going for unaffordable for most rates in my area ...
  - saddlerustle 6y ago
    Not to mention illegal to build.
  - refurb 6y ago
    At least in Canada (massive housing bubble now), if you look at median income and average house payment (not house price as payment decrease with decreasing interest rates), thy aren’t that different - it takes about the same amount of median income to own a house.
- neonological 6y ago
  Looks like the housing problem comes from the fact that average incomes have not been adjusted for inflation... which means the income of the rich have been over adjusted.
- wing-_-nuts 6y ago
  Square footage is more a function of what builders are willing to build than what people actually want. Try getting a 1200 sq ft 2bd/2ba built today. Builders will laugh at you. All they want to build are large mcMansions and 'luxury' apartments, because that's where the profit margins are. There are in fact, lots of people out there who are perfectly willing to live in smaller, cheaper homes, but they simply aren't built anymore. Anyone who wants this has to go buy a little house from the 50's or 60's.
iancmceachern 6y ago
This. 100% agree
runarberg 6y ago
There was a house for sale close to where I live. It was at a fairly comfortable price, a normal family could have potentially gotten a normal mortgage for it and paid it over time, eventually owning it. It was a modestly sized house, perhaps around 70-80m² enough for a couple with one kid and a dog. It needed some repairs, not anything serious, but some work over time; and the homeowners could live in it, perhaps get some savings over the next 5-10 years before starting the costly repairs. I was hopeful. I did consider it, but I thought if I didn’t get it some other nice working class family could move into it. Alas, no mortgage agency would loan for this property, there was no central heating system, and the roof was suboptimal. Only people that had $200k at hand could possibly consider it. And off course a cash offer came from a rich family who lived there for a week, did some renovations and sold it again for more then double the price, more then anything that a normal family could afford, even with a mortgage. Things are bad indeed.
ac29 6y ago
World population crossed 4B in the 1970s and 5B in the 1980s, now we are about to cross 8B in the next few years. I agree with your point about real estate becoming more heavily securitized, as well as being used as a method to escape capital controls. But, you cant ignore the fact that there are a lot more people both rich and working class competing for those major world city houses than there were 40 or 50 years ago.
- adrianN 6y ago
  Population in Germany has been pretty much constant since 1970. I'm relatively sure that this is true in many other developed nations too. A more important factor than total population is the fraction of people who want to live in a big city. Urbanization has been ongoing, because jobs have increasingly moved to urban centers. Real estate in small villages is quite cheap.
  - omnimus 6y ago
    Its very similar in many european coutries. The problem is that cities are owned by someone else than people living in it. Many flats are empty because development cartels can wait long time before they rent it. This way they push the price and cost perception more and more. They will do so to infinity because they have monopoly.
    - crummy 6y ago
      I've heard this a lot, but is it true? I know some flats are empty because they're between tenants or being renovated, but how many are actually empty for years at a time? The idea that not earning any rental now (and paying tax on the place) in the hope that you'll bump up prices years down the line seems risky to me.
      - omnimus 6y ago
        I am not sure. I know how is it in my city. It got bought out by few foreign companies. The property tax is not very significant compared to having much higher rent in a year for foresable future. Don't forget if nobody is renting then nobody is "destroying" the property. That's other tactic. You reconstruct everything so its "too good" to be rented cheap. This way you lower the pool of "normal" flats so their prices go up to a point where the "too good" is the only option. It's apparent from the increasingly huge differences between rent prices. Often times the longtime landlords who own maybe one building are renting so it makes them enough money to take care of the property + good profit on side and they are happy. They don't check market prices often and are 30%+ cheaper. The rent prices are completely fabricated with no relation to running costs or price of the property.
saddlerustle 6y ago
Pretty much every mainstream economist put the blame for this squarely on the massively increased regulation of the housing market since the 70s causing a massive decrease in the amount of new construction, not wealth itself.
- teraku 6y ago
  Hahahahahahahahahahahahahahahahahahahaha What? Seriously?
  - zachkatz 6y ago
    https://www.strongtowns.org/journal/2019/7/3/making-normal-neighborhoods-legal-again https://www.strongtowns.org/journal/2019/7/3/making-normal-n...
    - teraku 6y ago
      But there is nothing about pricing in there. I mean, I'll be honest and share that I didn't know the housing regulations are so f-ed up in the US, but they are pretty complicated everywhere. What drives housing prices is a deflation of living goods coupled with an inflation of luxury goods which makes finding safe investments for large sums of money with relatively high yields hard to find. This is driven by an increasing inequality gap, which makes rich people desperately trying to find more things to invest their money into. And they have found housing in urban areas is the safest bet right now. So houses are bought and sold for the millions in hopes somebody else buys it for higher prices or the area justifies the rent.
      - comp_throw7 6y ago
        Many things driving housing pricing (nothing is monocausal!), but the main thing driving housing pricing in the locations where people constantly talk about housing pricing (SFBA, NYC, London, etc) are restrictions on building. That's basically it. Housing is a relatively poor investment vehicle compared to broad equity market indices; the only reason you'd want exposure as a "rich person" to it is for diversification, and for that you wouldn't really care to buy in overinflated markets with significant political risks.
refurb 6y ago
You’re going to provide a source for a teacher owning a home in London in the 70’s, unless you mean far flung suburbs. US cities like LA, SF, NYC have been very expensive for a long time.
sbacic 6y ago
> In the 70s and 80s even 90s someone on a teacher's salary could own their own home in a major world city - say London. You can still have that. All you need is a real estate tax. But nobody wants that. People don't want cheaper homes, they want to become part of the home-owner elite and get their own appreciating asset.
- bouncycastle 6y ago
  No, tax won't help. The reason is because the population grew and the amount of land available stayed the same. (Google London population growth charts).
  - sbacic 6y ago
    How much of the increased housing costs is due to growth and how much due to lack of real-estate taxes? Real estate prices are going up everywhere - including places with negative demographic trends.
    - bouncycastle 6y ago
      Again, Google the population growth charts for London. It's been increasing since the 90's. Yet, there's still the same amount of space. Taxes will probably have unintended consequences, ripple down the whole economy. Another post-Brexit blow.
- bluedino 6y ago
  Property taxes in certain areas of the US (most of the East Coast, for example) are already ridiculous. You could buy a house in the midwest for you what you pay in property tax alone in New Jersey.
  - sbacic 6y ago
    Is the property tax higher than the yearly increase in value of that real estate?
herbst 6y ago
I think its more than just that. I think less people are interested in actually owning their housing. For me housing is the least thing i want to worry about, so i gladly rent and simply can fix any problems by calling my landlord who is by law obliged to keep the house in a liveable condition. Also flexibility, i can move whenever i want without worrying about the value of my house (which in reality likely only looses value)
- Err_Eek 6y ago
  > I think less people are interested in actually owning their housing. How do you reconcile this impression of yours with the fact that housing prices are shooting up in all major cities, and have been so for decades? Why is this happening if fewer people are actually interested in owning their own housing? As a sidenote: in my own personal experience housing is the single major issue of all my close friends and family, but it's only an option for a small minority of them. In fact, I have never met a single person who was in the financial position to buy a house/apartment and didn't do so.
  - herbst 6y ago
    Simple, rich people looking for stable assets. I mean sure its not as simple as that but this is generally what is happening in my city. Old space with smaller houses is bought and built on by big housing companies. More and more space in the city is owned by a few big (some stock traded) companies. I live in Switzerland and a lot of my social circle is in tech, so i know quite some people who have the financial means to own their housing but only few do. Most in the high income spectrum even use the flexibility of moving regularly. I personally don't consider buying a house anytime soon either. I could prolly afford the house i rent, however i dont live near a city, i highly doubt the value would ever rise, more the opposite as the house is old and needs regular repairs. Buying the house would be like 350 times the rent, at least. Plus all the repairs are suddenly my problem.
- chii 6y ago
  But you lose the ability to continue to rent if the landlord doesn't want to continue, aka you can get kicked out. And any costs to maintain a livable condition is going to just be added to the cost of the rent anyway, so it's not like you're actually saving money. Buying as its own costs of course, and sometimes it's more cost effective to rent. The most unuseful answer, hence, is that it depends on the specifics.
McScroogy 6y ago
The rich outbidding poor people is not what is causing a housing shortage. There are only so many houses a rich person can occupy. Even if you assume that every rich person keeps a number of spare houses, there are not enough rich people to cause a housing shortage.
- sanedigital 6y ago
  It’s not just “rich people,” it’s “wealth.” Speculation in there housing market is a widely accepted contributor to rising housing prices: https://www.princeton.edu/~wxiong/papers/Speculation.pdf https://www.princeton.edu/~wxiong/papers/Speculation.pdf
  - McScroogy 6y ago
    It is a leftist, anti-capitalist theory, and there are many leftists. In that sense, it may be widely accepted. Ultimately, speculators only try to guess at future prices. Even when hording occurs to manipulate prices, that is usually temporary, as keeping the asset off the market also has a cost. Maybe prices rose a little faster with speculators than without them. But high prices should lead to more building (like if you have land ready for building, there will usually be a price point that tips you over to "OK let's build"). If it doesn't, odds are something else is going on. I'll take a close look at the paper, but at first glance it also only says "speculation could be a contributor to housing prices".
    - sanedigital 6y ago
      It’s the second sentence on the page: “We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”
- lou1306 6y ago
  The comment was about house owning, though. Owning a house is becoming more and more a thing for the upper classes, it wasn't always like this.
wayanon 6y ago
True - I'm in my late 40s in London and accepted some time ago I will never own a home. If UK renters had the same protections as they do in eg Germany it wouldn't be such a precarious existence.
- ChuckNorris89 6y ago
  What protections are you lacking in the UK that Germans have?
- martinflack 6y ago
  What is your opinion of the "Help to Buy" and "Shared Ownership" schemes in the UK? https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-homebuy-and-other-housing-schemes https://www.moneyadviceservice.org.uk/en/articles/help-to-bu...
juancampa 6y ago
Exhibit A. A-Rod (Baseball player) owns 13k units: https://www.merlynnacquisitions.com/post/a-rod-owns-13-000-units-of-multifamily-real-estate https://www.merlynnacquisitions.com/post/a-rod-owns-13-000-u...
- deleted 6y ago
  [deleted]
snarf21 6y ago
You are right but homes is the only asset regular people can get a fair shake at and the government helps by making interest tax deductible. If you want to stop the rich from cornering the market on housing, you have to switch to a land tax instead of a property tax. Then you need to stop the NIMBY zoning nonsense.
jimbokun 6y ago
In the US at least, I would put healthcare and education costs way above house prices as bigger problems.
- wonderwonder 6y ago
  The cost of healthcare is insane in the US. Recently had to put my family on cobra for a few months as I transitioned to a new job. $1500 a month for a family of 4. That is unsustainable.
literallycancer 6y ago
A gas station attendant being able to afford a newly built house is a historical anomaly. The kind that only happens after half the population dying of plague or after a world war. The current trend is just a return to the normal state of affairs.

missedthecue 6y ago

Homes in the US today are much larger than they were in the 1970s. About 2x as large! Per square foot, the average home is actually cheaper today than it was then, inflation adjusted, and this isn't even factoring in the modern 2.2% mortgage rates vs the 13% mortgage rates of those days.

dv_dt 6y ago
Housing built small in the 1960's is still going for unaffordable for most rates in my area ...
- saddlerustle 6y ago
  Not to mention illegal to build.
- refurb 6y ago
  At least in Canada (massive housing bubble now), if you look at median income and average house payment (not house price as payment decrease with decreasing interest rates), thy aren’t that different - it takes about the same amount of median income to own a house.
neonological 6y ago
Looks like the housing problem comes from the fact that average incomes have not been adjusted for inflation... which means the income of the rich have been over adjusted.
wing-_-nuts 6y ago
Square footage is more a function of what builders are willing to build than what people actually want. Try getting a 1200 sq ft 2bd/2ba built today. Builders will laugh at you. All they want to build are large mcMansions and 'luxury' apartments, because that's where the profit margins are. There are in fact, lots of people out there who are perfectly willing to live in smaller, cheaper homes, but they simply aren't built anymore. Anyone who wants this has to go buy a little house from the 50's or 60's.

iancmceachern 6y ago

This. 100% agree

runarberg 6y ago

There was a house for sale close to where I live. It was at a fairly comfortable price, a normal family could have potentially gotten a normal mortgage for it and paid it over time, eventually owning it. It was a modestly sized house, perhaps around 70-80m² enough for a couple with one kid and a dog. It needed some repairs, not anything serious, but some work over time; and the homeowners could live in it, perhaps get some savings over the next 5-10 years before starting the costly repairs. I was hopeful. I did consider it, but I thought if I didn’t get it some other nice working class family could move into it. Alas, no mortgage agency would loan for this property, there was no central heating system, and the roof was suboptimal. Only people that had $200k at hand could possibly consider it. And off course a cash offer came from a rich family who lived there for a week, did some renovations and sold it again for more then double the price, more then anything that a normal family could afford, even with a mortgage. Things are bad indeed.

ac29 6y ago

World population crossed 4B in the 1970s and 5B in the 1980s, now we are about to cross 8B in the next few years. I agree with your point about real estate becoming more heavily securitized, as well as being used as a method to escape capital controls. But, you cant ignore the fact that there are a lot more people both rich and working class competing for those major world city houses than there were 40 or 50 years ago.

adrianN 6y ago
Population in Germany has been pretty much constant since 1970. I'm relatively sure that this is true in many other developed nations too. A more important factor than total population is the fraction of people who want to live in a big city. Urbanization has been ongoing, because jobs have increasingly moved to urban centers. Real estate in small villages is quite cheap.
- omnimus 6y ago
  Its very similar in many european coutries. The problem is that cities are owned by someone else than people living in it. Many flats are empty because development cartels can wait long time before they rent it. This way they push the price and cost perception more and more. They will do so to infinity because they have monopoly.
  - crummy 6y ago
    I've heard this a lot, but is it true? I know some flats are empty because they're between tenants or being renovated, but how many are actually empty for years at a time? The idea that not earning any rental now (and paying tax on the place) in the hope that you'll bump up prices years down the line seems risky to me.
    - omnimus 6y ago
      I am not sure. I know how is it in my city. It got bought out by few foreign companies. The property tax is not very significant compared to having much higher rent in a year for foresable future. Don't forget if nobody is renting then nobody is "destroying" the property. That's other tactic. You reconstruct everything so its "too good" to be rented cheap. This way you lower the pool of "normal" flats so their prices go up to a point where the "too good" is the only option. It's apparent from the increasingly huge differences between rent prices. Often times the longtime landlords who own maybe one building are renting so it makes them enough money to take care of the property + good profit on side and they are happy. They don't check market prices often and are 30%+ cheaper. The rent prices are completely fabricated with no relation to running costs or price of the property.

saddlerustle 6y ago

Pretty much every mainstream economist put the blame for this squarely on the massively increased regulation of the housing market since the 70s causing a massive decrease in the amount of new construction, not wealth itself.

teraku 6y ago
Hahahahahahahahahahahahahahahahahahahaha What? Seriously?
- zachkatz 6y ago
  https://www.strongtowns.org/journal/2019/7/3/making-normal-neighborhoods-legal-again https://www.strongtowns.org/journal/2019/7/3/making-normal-n...
  - teraku 6y ago
    But there is nothing about pricing in there. I mean, I'll be honest and share that I didn't know the housing regulations are so f-ed up in the US, but they are pretty complicated everywhere. What drives housing prices is a deflation of living goods coupled with an inflation of luxury goods which makes finding safe investments for large sums of money with relatively high yields hard to find. This is driven by an increasing inequality gap, which makes rich people desperately trying to find more things to invest their money into. And they have found housing in urban areas is the safest bet right now. So houses are bought and sold for the millions in hopes somebody else buys it for higher prices or the area justifies the rent.
    - comp_throw7 6y ago
      Many things driving housing pricing (nothing is monocausal!), but the main thing driving housing pricing in the locations where people constantly talk about housing pricing (SFBA, NYC, London, etc) are restrictions on building. That's basically it. Housing is a relatively poor investment vehicle compared to broad equity market indices; the only reason you'd want exposure as a "rich person" to it is for diversification, and for that you wouldn't really care to buy in overinflated markets with significant political risks.

refurb 6y ago

You’re going to provide a source for a teacher owning a home in London in the 70’s, unless you mean far flung suburbs. US cities like LA, SF, NYC have been very expensive for a long time.

sbacic 6y ago

> In the 70s and 80s even 90s someone on a teacher's salary could own their own home in a major world city - say London. You can still have that. All you need is a real estate tax. But nobody wants that. People don't want cheaper homes, they want to become part of the home-owner elite and get their own appreciating asset.

bouncycastle 6y ago
No, tax won't help. The reason is because the population grew and the amount of land available stayed the same. (Google London population growth charts).
- sbacic 6y ago
  How much of the increased housing costs is due to growth and how much due to lack of real-estate taxes? Real estate prices are going up everywhere - including places with negative demographic trends.
  - bouncycastle 6y ago
    Again, Google the population growth charts for London. It's been increasing since the 90's. Yet, there's still the same amount of space. Taxes will probably have unintended consequences, ripple down the whole economy. Another post-Brexit blow.
bluedino 6y ago
Property taxes in certain areas of the US (most of the East Coast, for example) are already ridiculous. You could buy a house in the midwest for you what you pay in property tax alone in New Jersey.
- sbacic 6y ago
  Is the property tax higher than the yearly increase in value of that real estate?

herbst 6y ago

I think its more than just that. I think less people are interested in actually owning their housing. For me housing is the least thing i want to worry about, so i gladly rent and simply can fix any problems by calling my landlord who is by law obliged to keep the house in a liveable condition. Also flexibility, i can move whenever i want without worrying about the value of my house (which in reality likely only looses value)

Err_Eek 6y ago
> I think less people are interested in actually owning their housing. How do you reconcile this impression of yours with the fact that housing prices are shooting up in all major cities, and have been so for decades? Why is this happening if fewer people are actually interested in owning their own housing? As a sidenote: in my own personal experience housing is the single major issue of all my close friends and family, but it's only an option for a small minority of them. In fact, I have never met a single person who was in the financial position to buy a house/apartment and didn't do so.
- herbst 6y ago
  Simple, rich people looking for stable assets. I mean sure its not as simple as that but this is generally what is happening in my city. Old space with smaller houses is bought and built on by big housing companies. More and more space in the city is owned by a few big (some stock traded) companies. I live in Switzerland and a lot of my social circle is in tech, so i know quite some people who have the financial means to own their housing but only few do. Most in the high income spectrum even use the flexibility of moving regularly. I personally don't consider buying a house anytime soon either. I could prolly afford the house i rent, however i dont live near a city, i highly doubt the value would ever rise, more the opposite as the house is old and needs regular repairs. Buying the house would be like 350 times the rent, at least. Plus all the repairs are suddenly my problem.
chii 6y ago
But you lose the ability to continue to rent if the landlord doesn't want to continue, aka you can get kicked out. And any costs to maintain a livable condition is going to just be added to the cost of the rent anyway, so it's not like you're actually saving money. Buying as its own costs of course, and sometimes it's more cost effective to rent. The most unuseful answer, hence, is that it depends on the specifics.

McScroogy 6y ago

The rich outbidding poor people is not what is causing a housing shortage. There are only so many houses a rich person can occupy. Even if you assume that every rich person keeps a number of spare houses, there are not enough rich people to cause a housing shortage.

sanedigital 6y ago
It’s not just “rich people,” it’s “wealth.” Speculation in there housing market is a widely accepted contributor to rising housing prices: https://www.princeton.edu/~wxiong/papers/Speculation.pdf https://www.princeton.edu/~wxiong/papers/Speculation.pdf
- McScroogy 6y ago
  It is a leftist, anti-capitalist theory, and there are many leftists. In that sense, it may be widely accepted. Ultimately, speculators only try to guess at future prices. Even when hording occurs to manipulate prices, that is usually temporary, as keeping the asset off the market also has a cost. Maybe prices rose a little faster with speculators than without them. But high prices should lead to more building (like if you have land ready for building, there will usually be a price point that tips you over to "OK let's build"). If it doesn't, odds are something else is going on. I'll take a close look at the paper, but at first glance it also only says "speculation could be a contributor to housing prices".
  - sanedigital 6y ago
    It’s the second sentence on the page: “We find that housing speculation, anchored, in part, on extrapolation of past housing price changes, led not only to greater price increases and more housing construction during the boom in 2004 to 2006, but also to more severe economic downturns during the subsequent bust in 2007 to 2009.”
lou1306 6y ago
The comment was about house owning, though. Owning a house is becoming more and more a thing for the upper classes, it wasn't always like this.

wayanon 6y ago

True - I'm in my late 40s in London and accepted some time ago I will never own a home. If UK renters had the same protections as they do in eg Germany it wouldn't be such a precarious existence.

ChuckNorris89 6y ago
What protections are you lacking in the UK that Germans have?
martinflack 6y ago
What is your opinion of the "Help to Buy" and "Shared Ownership" schemes in the UK? https://www.moneyadviceservice.org.uk/en/articles/help-to-buy-homebuy-and-other-housing-schemes https://www.moneyadviceservice.org.uk/en/articles/help-to-bu...

juancampa 6y ago

Exhibit A. A-Rod (Baseball player) owns 13k units: https://www.merlynnacquisitions.com/post/a-rod-owns-13-000-units-of-multifamily-real-estate https://www.merlynnacquisitions.com/post/a-rod-owns-13-000-u...

deleted 6y ago
[deleted]

snarf21 6y ago

You are right but homes is the only asset regular people can get a fair shake at and the government helps by making interest tax deductible. If you want to stop the rich from cornering the market on housing, you have to switch to a land tax instead of a property tax. Then you need to stop the NIMBY zoning nonsense.

jimbokun 6y ago

In the US at least, I would put healthcare and education costs way above house prices as bigger problems.

wonderwonder 6y ago
The cost of healthcare is insane in the US. Recently had to put my family on cobra for a few months as I transitioned to a new job. $1500 a month for a family of 4. That is unsustainable.

literallycancer 6y ago

A gas station attendant being able to afford a newly built house is a historical anomaly. The kind that only happens after half the population dying of plague or after a world war. The current trend is just a return to the normal state of affairs.