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This is unsurprising. Take a step back and squint enough and you can see any wide-scale fiscal stimulus will be absorbed by land rent. This is the inverse of th

This is unsurprising. Take a step back and squint enough and you can see any wide-scale fiscal stimulus will be absorbed by land rent. This is the inverse of the Georgist observation that "all taxes come out of rent." All stimulus is absorbed by rent. Winston Churchill on the topic: http://www.andywightman.com/docs/churchill.pdf http://www.andywightman.com/docs/churchill.pdf > Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work. The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public conscience, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed. All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week, or the amount of the toll which had been remitted! > And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher in the parish! > All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit

irrational 5y ago
This is one of the benefits of owning (or having a mortgage) since your monthly housing costs are fixed, so your stimulus doesn’t go to rent.
- thrower123 5y ago
  In most jurisdictions, your property taxes and insurance costs always go up year-over-year. Once in a great while, you might get a reduction, but it's really rare
  - irrational 5y ago
    My insurance rates have never risen (I was in my last house for 17 years). You might need to look into a different insurance company. Property taxes do go up, but they haven’t gone up too much. Again, in my last house they went from $2500 to $3750 over 17 years.
tablespoon 5y ago
> This is unsurprising. Take a step back and squint enough and you can see any wide-scale fiscal stimulus will be absorbed by land rent. This is the inverse of the Georgist observation that "all taxes come out of rent." All stimulus is absorbed by rent. So fiscal stimulus should be paired with some kind of rent control/regulation, then?
- R0b0t1 5y ago
  Multiple options: 1. Stimulus given faster than it can be absorbed into rents. 2. Progressive taxes on dwellings that are not primary residence. 3. Decrease the cost of new housing. Of those, I think the last is the most realistic. It is the only one that does not lead to a housing shortage.
  - sooheon 5y ago
    Option 4, which is unrealistic due to entrenched interests, but economically and socially ideal: a higher tax on the unimproved value of land, a.k.a. ground rent, in return for a lower tax on improvements, labor, capital gains, sales, and everything else.
    - CalPointBreak 5y ago
      Something you guys are all ignoring: Taxes on primary residences. Constantly adjusting property tax has already lead to many people losing their property over the years. A better compromise might be that primary residences be either exempted from this new land value tax, or have it fixed to the time of purchase, not unlike Prop 12 used to (still does?) cover in California. The reason for this is that many people wish to settle down in one place. Some even take pride in living in the same location generation after generation. While many modern digital age people either forget, or don't understand that, variable property values could easily lose someone on fixed, little, or no income their property, livelihood, etc. As far as commercial, corporate owned, and high density residential, along with non-homesteaded agriculture properties go, this might not be the worst idea. But at the same time it is just as likely to favor corporations and venture capital over individual owner/operators and their scrimp and save. Efficiency only matters if the rewards of said efficiency lift up the collective populace of society. If they simply consolidate an every larger slice of the pie into fewer hands, they will inevitably return us to de-facto feudalism and effective serfdom. As a further consideration: How many of you liked those old hole in the wall comic shops, or newspaper stands, or record shops? Most of them are gone now, but there are/were a few surviving in little corners of the world, often because the store owner had been prudent enough to buy the property. Those owners could very well also find themselves priced out of their hard earned and fought properties, even if them being a cornerstone of that area or community is what was responsible for the increase in unimproved land valuation, since culture and niche businesses can have just as much effect as 'high income' businesses on an area's desirability. Consider Petaluma for an example, and while I don't have a counterexample I am sure someone here can show a region that depressed in value when iconic neighborhood commerce closed, whether due to being priced out of the area, or having eminent domain proceedings to give the property to a more worthy developer (see Jo Sun formerly down the street from the county jail in Sacramento California for an example.)
onlyrealcuzzo 5y ago
It should be especially unsurprising when you pair this with dramatically reducing inventory at the same time housing demand is at an all-time high. Almost 1% of renters get evicted per year in normal times. Almost 0.5% of homes get foreclosed in normal times. ^ This makes up a decent percentage of overall new leases / purchases. It's not like 100% of renters move every year. We have a lot of markets with restricted housing measures that should make it obvious that reducing supply even a little, can cause prices to go up a lot. You give people the largest transfer of money in history - increasing personal income by the largest margin in decades, lower interest rates dramatically, AND reduce supply - at the same time everyone is going bat-shit insane trying to "WFH" with kids and there's no where else for them to spend money... I will be surprised if there is not some really bad unintended consequences from this. But I'm far from surprised that prices are going up in the middle of a "recession". There's 30% more M2, personal income is up 10%, and payments are ~15% cheaper due to interest rates. Why should anyone be surprised that rents are up? Las Vegas had the highest increase in rents. It had the highest unemployment rate. People on unemployment were making > median wage. Why should anyone be surprised rents went up?
hn_throwaway_99 5y ago
The issue, though, is that if you look at most causes of significant inflation, while people like to blame "money printing", it is actually almost always a big supply shock that is the root cause. With rental housing, there are 2 major supply shocks: 1. Much new housing was put on hold during the pandemic. 2. Critically, the eviction ban over the past 18 months has absolutely killed many small time landlords. Any prospective small-time landlord would certainly think twice about getting into the business now, and many existing small-time landlords are doing everything they can get out. It doesn't help that landlords are basically demonized by a large section of the political class. The end result is this: https://www.reuters.com/business/finance/selling-out-americas-local-landlords-moving-big-investors-2021-07-29/ https://www.reuters.com/business/finance/selling-out-america... So, at the end of it, it comes down to basic supply-and-demand, and the supply side got crushed.
- xxpor 5y ago
  I don't see why small landlords are relevant to a supply shock here. If supply has been effectively destroyed by people not paying rent but also not being evicted, that should affect everyone right? In other words, it'd only matter if the bottleneck is the amount of capital buying houses to rent coming from small landlords. We all know that's not the case though, the bottleneck is the actual supply of housing.
  - gbronner 5y ago
    The pandemic made it relatively cheaper to use rather than rent space. So some units are off the market and are in use as guest units/ extra bedroom/whatever
  - hn_throwaway_99 5y ago
    Small landlords are relevant to the supply shock because, after seeing the effect of the eviction moratorium, many will opt to either (a) not rent out existing space they own at all, or certainly find less risky ways to rent it out, like STRs, or (b) find something else to invest their money into in the first place. Also, there is evidence that small time landlords are much less aggressive when it comes to evictions (see https://www.atlantafed.org/-/media/documents/community-development/publications/discussion-papers/2016/04-corporate-landlords-institutional-investors-and-displacement-2016-12-21.pdf https://www.atlantafed.org/-/media/documents/community-devel... from the Atlanta Fed). This means that small-time landlords provide a greater percentage of the supply for "marginal renters", i.e. renters who are more likely to miss payments. When that supply goes away it means there will be more competition among these marginal renters to find a place to live.
ZoomerCretin 5y ago
This is a very reductionist look at rents. There are more factors at play, the most important of which is the vacancy rate. https://smcorridornews.com/steady-as-she-goes-texas-apartment-markets-recovering/ https://smcorridornews.com/steady-as-she-goes-texas-apartmen... San Francisco: https://twitter.com/AlecStapp/status/1331832907003015168 https://twitter.com/AlecStapp/status/1331832907003015168 Blackstone: "We believe we will continue to experience below-average levels of new housing supply in our markets which will support future rental rate growth and home price appreciation." https://twitter.com/AlexFischCC/status/1402770234730160132 https://twitter.com/AlexFischCC/status/1402770234730160132 Does putting more money into people's pockets make rents increase? All else equal, this does occur in the short-term. In the long-term, housing developers want to build more housing to get a cut, which increases the supply of housing and slows rent growth. This hasn't been happening because of segregation-era zoning laws which outlaws denser housing in areas where they are needed.
- sooheon 5y ago
  Absolutely. Outdated zoning laws are public enemy #2 for livable cities, just a hair after outdated tax laws. The root of both issues is misalignment of incentives.
- Supermancho 5y ago
  > This is a very reductionist look at rents. The fact that there is a belief "the invisible hand" will lower it back down, is separate from the increase due to the general welfare (stimulus). Availability/a market supply increase, is another factor for pricing, not part of the same change. Less so, since it simultaneously exists only in the mythical future. > All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit Seems like an accurate look to me.
deleted 5y ago
[deleted]

irrational 5y ago

This is one of the benefits of owning (or having a mortgage) since your monthly housing costs are fixed, so your stimulus doesn’t go to rent.

thrower123 5y ago
In most jurisdictions, your property taxes and insurance costs always go up year-over-year. Once in a great while, you might get a reduction, but it's really rare
- irrational 5y ago
  My insurance rates have never risen (I was in my last house for 17 years). You might need to look into a different insurance company. Property taxes do go up, but they haven’t gone up too much. Again, in my last house they went from $2500 to $3750 over 17 years.

tablespoon 5y ago

> This is unsurprising. Take a step back and squint enough and you can see any wide-scale fiscal stimulus will be absorbed by land rent. This is the inverse of the Georgist observation that "all taxes come out of rent." All stimulus is absorbed by rent. So fiscal stimulus should be paired with some kind of rent control/regulation, then?

R0b0t1 5y ago
Multiple options: 1. Stimulus given faster than it can be absorbed into rents. 2. Progressive taxes on dwellings that are not primary residence. 3. Decrease the cost of new housing. Of those, I think the last is the most realistic. It is the only one that does not lead to a housing shortage.
- sooheon 5y ago
  Option 4, which is unrealistic due to entrenched interests, but economically and socially ideal: a higher tax on the unimproved value of land, a.k.a. ground rent, in return for a lower tax on improvements, labor, capital gains, sales, and everything else.
  - CalPointBreak 5y ago
    Something you guys are all ignoring: Taxes on primary residences. Constantly adjusting property tax has already lead to many people losing their property over the years. A better compromise might be that primary residences be either exempted from this new land value tax, or have it fixed to the time of purchase, not unlike Prop 12 used to (still does?) cover in California. The reason for this is that many people wish to settle down in one place. Some even take pride in living in the same location generation after generation. While many modern digital age people either forget, or don't understand that, variable property values could easily lose someone on fixed, little, or no income their property, livelihood, etc. As far as commercial, corporate owned, and high density residential, along with non-homesteaded agriculture properties go, this might not be the worst idea. But at the same time it is just as likely to favor corporations and venture capital over individual owner/operators and their scrimp and save. Efficiency only matters if the rewards of said efficiency lift up the collective populace of society. If they simply consolidate an every larger slice of the pie into fewer hands, they will inevitably return us to de-facto feudalism and effective serfdom. As a further consideration: How many of you liked those old hole in the wall comic shops, or newspaper stands, or record shops? Most of them are gone now, but there are/were a few surviving in little corners of the world, often because the store owner had been prudent enough to buy the property. Those owners could very well also find themselves priced out of their hard earned and fought properties, even if them being a cornerstone of that area or community is what was responsible for the increase in unimproved land valuation, since culture and niche businesses can have just as much effect as 'high income' businesses on an area's desirability. Consider Petaluma for an example, and while I don't have a counterexample I am sure someone here can show a region that depressed in value when iconic neighborhood commerce closed, whether due to being priced out of the area, or having eminent domain proceedings to give the property to a more worthy developer (see Jo Sun formerly down the street from the county jail in Sacramento California for an example.)

onlyrealcuzzo 5y ago

It should be especially unsurprising when you pair this with dramatically reducing inventory at the same time housing demand is at an all-time high. Almost 1% of renters get evicted per year in normal times. Almost 0.5% of homes get foreclosed in normal times. ^ This makes up a decent percentage of overall new leases / purchases. It's not like 100% of renters move every year. We have a lot of markets with restricted housing measures that should make it obvious that reducing supply even a little, can cause prices to go up a lot. You give people the largest transfer of money in history - increasing personal income by the largest margin in decades, lower interest rates dramatically, AND reduce supply - at the same time everyone is going bat-shit insane trying to "WFH" with kids and there's no where else for them to spend money... I will be surprised if there is not some really bad unintended consequences from this. But I'm far from surprised that prices are going up in the middle of a "recession". There's 30% more M2, personal income is up 10%, and payments are ~15% cheaper due to interest rates. Why should anyone be surprised that rents are up? Las Vegas had the highest increase in rents. It had the highest unemployment rate. People on unemployment were making > median wage. Why should anyone be surprised rents went up?

hn_throwaway_99 5y ago

The issue, though, is that if you look at most causes of significant inflation, while people like to blame "money printing", it is actually almost always a big supply shock that is the root cause. With rental housing, there are 2 major supply shocks: 1. Much new housing was put on hold during the pandemic. 2. Critically, the eviction ban over the past 18 months has absolutely killed many small time landlords. Any prospective small-time landlord would certainly think twice about getting into the business now, and many existing small-time landlords are doing everything they can get out. It doesn't help that landlords are basically demonized by a large section of the political class. The end result is this: https://www.reuters.com/business/finance/selling-out-americas-local-landlords-moving-big-investors-2021-07-29/ https://www.reuters.com/business/finance/selling-out-america... So, at the end of it, it comes down to basic supply-and-demand, and the supply side got crushed.

xxpor 5y ago
I don't see why small landlords are relevant to a supply shock here. If supply has been effectively destroyed by people not paying rent but also not being evicted, that should affect everyone right? In other words, it'd only matter if the bottleneck is the amount of capital buying houses to rent coming from small landlords. We all know that's not the case though, the bottleneck is the actual supply of housing.
- gbronner 5y ago
  The pandemic made it relatively cheaper to use rather than rent space. So some units are off the market and are in use as guest units/ extra bedroom/whatever
- hn_throwaway_99 5y ago
  Small landlords are relevant to the supply shock because, after seeing the effect of the eviction moratorium, many will opt to either (a) not rent out existing space they own at all, or certainly find less risky ways to rent it out, like STRs, or (b) find something else to invest their money into in the first place. Also, there is evidence that small time landlords are much less aggressive when it comes to evictions (see https://www.atlantafed.org/-/media/documents/community-development/publications/discussion-papers/2016/04-corporate-landlords-institutional-investors-and-displacement-2016-12-21.pdf https://www.atlantafed.org/-/media/documents/community-devel... from the Atlanta Fed). This means that small-time landlords provide a greater percentage of the supply for "marginal renters", i.e. renters who are more likely to miss payments. When that supply goes away it means there will be more competition among these marginal renters to find a place to live.

ZoomerCretin 5y ago

This is a very reductionist look at rents. There are more factors at play, the most important of which is the vacancy rate. https://smcorridornews.com/steady-as-she-goes-texas-apartment-markets-recovering/ https://smcorridornews.com/steady-as-she-goes-texas-apartmen... San Francisco: https://twitter.com/AlecStapp/status/1331832907003015168 https://twitter.com/AlecStapp/status/1331832907003015168 Blackstone: "We believe we will continue to experience below-average levels of new housing supply in our markets which will support future rental rate growth and home price appreciation." https://twitter.com/AlexFischCC/status/1402770234730160132 https://twitter.com/AlexFischCC/status/1402770234730160132 Does putting more money into people's pockets make rents increase? All else equal, this does occur in the short-term. In the long-term, housing developers want to build more housing to get a cut, which increases the supply of housing and slows rent growth. This hasn't been happening because of segregation-era zoning laws which outlaws denser housing in areas where they are needed.

sooheon 5y ago
Absolutely. Outdated zoning laws are public enemy #2 for livable cities, just a hair after outdated tax laws. The root of both issues is misalignment of incentives.
Supermancho 5y ago
> This is a very reductionist look at rents. The fact that there is a belief "the invisible hand" will lower it back down, is separate from the increase due to the general welfare (stimulus). Availability/a market supply increase, is another factor for pricing, not part of the same change. Less so, since it simultaneously exists only in the mythical future. > All goes back to the land, and the land owner is able to absorb to himself a share of almost every public and every private benefit Seems like an accurate look to me.

deleted 5y ago

[deleted]