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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

#81

Post by antisthenes »

startupdiscuss wrote: post #62
CPLX wrote: post #47

Earlier quoted context omitted.

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 o…

The problem is, as often in economics, defining the terms and building a model that approximates life. It's not as trivial as a sorting algorithm or a simple 1 parameter regression.

How do you define wealth concentration, for example? If your definition is flawed, you can throw out the entire model.

Re: Rents in Megacities Can't Go Up Forever

#82

Post by refurb »

jandrese wrote: post #69
dcosson wrote: post #61

Earlier quoted context omitted.

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?

When the choice is between getting $0 in rent a month and getting 10% less than last month, most will take the later option.

Occupancy is a make-or-break issue in real estate. Dropping your rent by 7% is better than having a single month of non-occupancy.

Re: Rents in Megacities Can't Go Up Forever

#83

Post by lordCarbonFiber »

eli_gottlieb wrote: post #13
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…

>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…

While there's certainly some true to that statement, I think you're being overly cynical. People congregate in cities to be near _people_. For sure with a good internet connection I could do all my work from small town america living in a mcmansion at a quarter of my rent; instead I live in nyc. Access to artistic communities, robust public transit, diverse food and culture, and a fluid job market makes the value add for me a no brainer. Im sure for different people the economics don't work out so cleanly, but online I feel like discussions on rent and technology tend to gloss over the things you're actually paying for.

A successful startup isn't going to be in the cities you mentioned because you have to convince people that they find the non-work related amenities they've gone to SF, Seattle, NYC, etc to find. Or go full remote, which has its own set of challenges (though I'd posit a full remote company really isn't in any one city so it doesn't really matter where the founders live).

Re: Rents in Megacities Can't Go Up Forever

#84

Post by mcguire »

crispyambulance wrote: post #32
zimzam wrote: post #25

Earlier quoted context omitted.

See, here's the thing about coastal types: they are obsessed with getting the "top" talent, as if every project or startup requires it. What if most startups only need "good" developers to develop their mostly CRUD apps and don't need "the best" developers?

What they say they're getting ("the top talent") and what they actually get are two separate things.

Hey, the worst graduate from Stanford is better than the best graduate of Ohio State, right?

Re: Rents in Megacities Can't Go Up Forever

#85

Post by ntdef »

acchow wrote: post #74
ntdef wrote: post #71

Earlier quoted context omitted.

I think you're a bit misinformed. Chicago has two large keystone industries that serve the global economy: (1) Industrial large scale manufacturing (Boeing, John Deere, Caterpillar), (2) Insurance (all of them); not to mention a ton of Food and Agriculture HQs are based there as well.

Isn't Boeing in Washington? Also, not too many people aspire to be in insurance. I don't think you can put it on the same level as finance, arts, software, fashion, film, etc.

Boeing planes are assembled in Seattle; their HQ is in Chicago.

Do people aspire to work in health, energy or finance, or even software aside from the money? If so, what difference does it make?

Re: Rents in Megacities Can't Go Up Forever

#86

Post by frebord »

davidf18 wrote: post #77

The author of the article is a professor of economics but doesn't state the true cause of rising housing costs: Market inefficiencies (or market failures) caused by politically induced market scarcity restrictions called "rent-seeking" which benefits landowners such as President Trump over people who rent or are purchasing housing. Rent-seeking was first illustrated by David Ricardo in the mid-19th century (IIRC) and…

I like how you managed to throw in a blow on Trump there, nice!

Re: Rents in Megacities Can't Go Up Forever

#87

Post by refurb »

maxxxxx wrote: post #5
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.

In 2008 rents didn't drop much. I think landlords will leave places empty before they will drop rents too much.

That wasn't my experience. I knew several renters who renegotiated their rent down around 2008. We're taking knocking off 10%+. With rent control in SF that's locked in inperpetuity.

Re: Rents in Megacities Can't Go Up Forever

#88

Post by friedman23 »

davidf18 wrote: post #77

The author of the article is a professor of economics but doesn't state the true cause of rising housing costs: Market inefficiencies (or market failures) caused by politically induced market scarcity restrictions called "rent-seeking" which benefits landowners such as President Trump over people who rent or are purchasing housing. Rent-seeking was first illustrated by David Ricardo in the mid-19th century (IIRC) and…

It isn't a market failure if it is a result of regulation

Re: Rents in Megacities Can't Go Up Forever

#89

Post by acchow »

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.

No, college tuition will rise with middle-class incomes.

This is a cultural phenomenon. We're "supposed" to get our children the best education we can possibly afford, otherwise we are bad parents. Since colleges don't have price discrimination, this essentially means tuition is set at the absolute maximum that the middle class can afford - squeeze every penny out of them. This is why aid won't reduce the burden of tuition on the middle class (tuition will just rise to meet the aid amount). It's also why tax breaks won't help the middle class either (same idea), although the tax breaks can help those above the middle class (since they have a higher tax rate, and the tuition rises to match exactly the effective aid for the middle class).

Re: Rents in Megacities Can't Go Up Forever

#90

Post by ozim »

Finnucane wrote: post #6

To put it another way, the cost of real estate in a given area is proportional to the rate of money flowing through that area. Will ever larger flows go through New York and San Francisco, increasing without end? History suggests that is unlikely.

Market growth is showing that you are not correct. Market is going up all time, S&P 500 even if bubble burst around 2008 and 2000, now we have prices almost twice as high. So it is true that more and more money will flow to those places.
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