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Rents in Megacities Can't Go Up Forever

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Re: Rents in Megacities Can't Go Up Forever

#61

Post by dcosson »

jandrese wrote: post #2

What does it look like if a rent bubble pops? Can such a thing even happen? Rents tend to be difficult to change without moving. I guess rents can fall if demand considerably outstrips supply and the landlords get desperate, but most landlords I've seen are pretty stubborn and will hold out until the last second before they lower the rent a single penny.

This is a pretty crazy macroeconomic view to take, that you've known some stubborn landlords therefore rents across a city will never come down.

Look at the numbers of how many jobs have been created vs housing units created in a place like SF over the past decade. It's not some mystical force driving up rents, if you build enough housing it will become more affordable. There's no evidence that housing operates outside the principles of supply and demand, despite what some Nimby politicians will try to tell you.

Re: Rents in Megacities Can't Go Up Forever

#62

Post by startupdiscuss »

CPLX wrote: post #47
startupdiscuss wrote: post #38

Earlier quoted context omitted.

That's a very interesting and original way of looking at it. It would also explain clustering in other areas (finance in NYC, Oil and gas in Houston etc). Do you have any links or references exploring that idea in greater detail?

I don't mean to have this come across as snarky, at all, but really the reference for this is the whole of human history. Wealth is basically self-concentrating. Our political systems tend to end up with a few capital (and often Capitol) cities where the spoils from the plundering, both metaphorical and literal, end up. The original article does present some interesting and relevant examples of countervailing forces…

That's not snarky, and you have a point.

But even if things seem "really obvious" and we can tell "just by looking at the facts", I feel better if someone has looked at the data and shown that to be the case.

We aren't living in the feudal era, and a lot of people like to think that the reason people move to the cities is because of (for instance) bars and restaurants, museums and the opera, high-paying jobs and so on.

This proximity to wealth may be a symptom of some third factor or it may be the driving factor.

That's why I appreciate it when smart, hard-working people take their time to figure it out for me.

Re: Rents in Megacities Can't Go Up Forever

#63

Post by Arizhel »

geff82 wrote: post #4

Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines? Talented people already move from one coast to the other, so they could as well move to any other p…

A lot of people don't want to live in boring, conservative places like Amarillo and Des Moines. More importantly, tech company executives and managers really don't want to live there. The workers have to work on-site with managers, so the workers obviously can't live there either. Everyone has to be co-located in the same place.

Re: Rents in Megacities Can't Go Up Forever

#64

Post by protomyth »

startupdiscuss wrote: post #38
eli_gottlieb wrote: post #13

Earlier quoted context omitted.

>Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines? Because the real commodity being sold with the apartments and offices isn't net access or even lan…

That's a very interesting and original way of looking at it. It would also explain clustering in other areas (finance in NYC, Oil and gas in Houston etc). Do you have any links or references exploring that idea in greater detail?

It also provides a place with interesting signals. You could tell shale oil was going to take off when Minot ND suddenly had direct, daily flights from Houston.

Re: Rents in Megacities Can't Go Up Forever

#66

Post by lkrubner »

geff82 wrote: post #4

Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines? Talented people already move from one coast to the other, so they could as well move to any other p…

> Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines?

Some of the burden is on you to prove what has failed so far. If it is possible to build a successful large scale startup in Amarillo, why hasn't it happened?

I'll point out the theory of agglomerative clustering also includes the contrary point: a city that is great at something tends to exclude other activities, for any given amount of population. A city like Amarillo, which plays a role in the oil industry, is less likely to be great at software, because it plays a role in the oil industry. It's population would have to grow before it could be good at both.

Also, if two 20-somethings build a successful startup in Amarillo, they may want to move to San Francisco as soon as they have money. The "this startup can be anywhere" argument works both ways: yes it could be Amarillo, but if it can be anywhere then it doesn't need to stay in Amarillo.

And the startup can also move to Poland, or Romania, or India. If you believe the startup can be anywhere, then you basically believe that a startup would only be in Amarillo by random chance. If there are 100,000 great cities in the world, and all of them equally good for a software startup, then the chance of a startup being in Amarillo is 1 in 100,000.

But in fact, there are good reasons why startups tend to cluster into certain cities. You should read "Why tiny Stockholm has the most stunning startup ecosystem since Tel Aviv" :

https://pando.com/2012/11/20/why-tiny-stockholm-has-the-most...

Re: Rents in Megacities Can't Go Up Forever

#67

Post by Bartweiss »

orangecat wrote: post #41
psyc wrote: post #3

Not literally forever, of course, but I think it's naive to say people's inability to have the lifestyle they want will deter increasing rents. Empirically, society on balance doesn't care one tiny bit how much hardship people endure, and people will endure the hardship. I'm not seeing what mechanism is assumed to counter that.

I'm not seeing what mechanism is assumed to counter that. Increasing supply. Which in this case is difficult due to the alliance of existing property owners and useful idiot "anti-gentrification" protestors.

It's also difficult for the more fundamental reason that space is one of the harder goods to 'manufacture'.

We're not running out of land, obviously, but for standards like "land within 3 miles of the city center and -100 to 500 feet of the surface", that's much tougher. Not full, but crowded and with exponentially-rising development costs (since construction gets more difficult and annoys more people).

Of course, that's a problem I associate with NYC, LA, etc. SF (and probably London?) get blocked politically before they ever reach that point.

Re: Rents in Megacities Can't Go Up Forever

#68

Post by PlaceFan »

yladiz wrote: post #40
supergeek133 wrote: post #21

> Rents in Megacities Can't Go Up Forever Yes it can, College Tuition is a great example. Instead of finding the cause and treating it, we just increase the amount of aid people have access to.

But college is not a necessity, whereas living somewhere is, and you can somewhat easily get money from the government (at least in the US) to support your degree, whereas you can't really get that for your housing.

> But college is not a necessity

Ehhh, that isn't the narrative we've been pushing for the last 20+ years.

> whereas living somewhere is

I think the fact that it's a necessity only benefits the idea of providing people aid for housing.

> you can't really get that for your housing.

I mean, you absolutely can depending on your level of income. It won't make up for being poor, but that's what section 8 housing is.

Even on the more middle-class scale, the government provides tax breaks for home owners (and especially for first-time home buyers) which is basically money from the government.

Re: Rents in Megacities Can't Go Up Forever

#69

Post by jandrese »

dcosson wrote: post #61
jandrese wrote: post #2

What does it look like if a rent bubble pops? Can such a thing even happen? Rents tend to be difficult to change without moving. I guess rents can fall if demand considerably outstrips supply and the landlords get desperate, but most landlords I've seen are pretty stubborn and will hold out until the last second before they lower the rent a single penny.

This is a pretty crazy macroeconomic view to take, that you've known some stubborn landlords therefore rents across a city will never come down. Look at the numbers of how many jobs have been created vs housing units created in a place like SF over the past decade. It's not some mystical force driving up rents, if you build enough housing it will become more affordable. There's no evidence that housing operates outsi…

I guess you're expecting the renters to survey the market every year and aggressively negotiate down their rents if the supply grows too large?

Re: Rents in Megacities Can't Go Up Forever

#70

Post by randomdata »

falsedan wrote: post #52
eli_gottlieb wrote: post #13

Earlier quoted context omitted.

>Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines? Because the real commodity being sold with the apartments and offices isn't net access or even lan…

That's it, although I'd say it's access to capital & advice from wealthy people. You can code and create a product anywhere; you can meet VCs by flying into SFO (VCs might fly to you if you are extremely successful already).

I'd say that capital flows freely and advice can be given anywhere. What's hard to cultivate and maintain at a distance is friendship.
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