3 ms·

Rents higher than 30% of income seem pretty normal to me (living in Germany). Makes me wonder: aren't rents prone to rise to the level that people can bear? If

Rents higher than 30% of income seem pretty normal to me (living in Germany). Makes me wonder: aren't rents prone to rise to the level that people can bear? If people can bear 30%, rents will rise to that level in attractive locations. That's part of what makes the game rigged against common people.

deleted 13y ago
[deleted]
_delirium 13y ago
Afaict, the 30% rule of thumb has been quoted for a long time, but originated in an era when the main household costs were considerably different in other respects as well. The classic mid-20th-century rule in the U.S. was 60% of your expenses on housing+food, split about half and half. Nowadays the split is nowhere near half-and-half between those, in part because food has gotten much cheaper. It's sort of interesting to see the historical consumer spending breakdowns: http://www.bls.gov/opub/uscs/home.htm http://www.bls.gov/opub/uscs/home.htm
ceras 13y ago
> Makes me wonder: aren't rents prone to rise to the level that people can bear? If people can bear 30%, rents will rise to that level in attractive locations. In econ this reasoning is related to the diamond-water paradox: http://en.wikipedia.org/wiki/Paradox_of_value http://en.wikipedia.org/wiki/Paradox_of_value The gist of it is that it's only accurate to assume so when supply is very low. But like water, despite being crucial if housing supply is high enough it should decrease in price until it approaches the marginal cost of production. In this case, it's almost always laws and regulation that prevent he supply from increasing; this in part because (a) most voters (in the US) are home owners who have a vested interest in increasing home value, and (b) people are resistant to change and don't want new housing developments in their towns.

3 ms·

Rents higher than 30% of income seem pretty normal to me (living in Germany). Makes me wonder: aren't rents prone to rise to the level that people can bear? If

by facepalm 13y ago

deleted 13y ago
[deleted]
_delirium 13y ago
Afaict, the 30% rule of thumb has been quoted for a long time, but originated in an era when the main household costs were considerably different in other respects as well. The classic mid-20th-century rule in the U.S. was 60% of your expenses on housing+food, split about half and half. Nowadays the split is nowhere near half-and-half between those, in part because food has gotten much cheaper. It's sort of interesting to see the historical consumer spending breakdowns: http://www.bls.gov/opub/uscs/home.htm http://www.bls.gov/opub/uscs/home.htm
ceras 13y ago
> Makes me wonder: aren't rents prone to rise to the level that people can bear? If people can bear 30%, rents will rise to that level in attractive locations. In econ this reasoning is related to the diamond-water paradox: http://en.wikipedia.org/wiki/Paradox_of_value http://en.wikipedia.org/wiki/Paradox_of_value The gist of it is that it's only accurate to assume so when supply is very low. But like water, despite being crucial if housing supply is high enough it should decrease in price until it approaches the marginal cost of production. In this case, it's almost always laws and regulation that prevent he supply from increasing; this in part because (a) most voters (in the US) are home owners who have a vested interest in increasing home value, and (b) people are resistant to change and don't want new housing developments in their towns.