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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

#211

Post by Tiktaalik »

trapperkeeper79 wrote: post #98

This article crystalizes a point that was vague in my mind: "megacities have a problem making it affordable to raise large or even medium-size families. How many of us could live in San Francisco, London or New York City and bring up three children in a decent neighborhood with good schools? Only the already well-to-do can manage such a feat.". As a mid-30s person with a new baby, I don't see how the numbers work for…

> An option we are considering is to move to BC and just rent for a few years in Vancouver.

I'm not really sure how moving to Vancouver helps solve any of your problems. If you're priced out of Milton you're likely priced out of the entire Metro Vancouver area.

Is rent in Vancouver that much cheaper than the GTA that you're saving money and it's worth moving? I don't think it is.

Re: Rents in Megacities Can't Go Up Forever

#212

Post by davidf18 »

nosuchthing wrote: post #169
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…

Tokyo is a good case study for how effective selective deregulation and zoning policy can lead to more efficient housing construction. In Minato ward — a desirable 20 sq km slice of central Tokyo — the population is up 66 per cent over the past 20 years, from 145,000 to 241,000, an increase of about 100,000 residents. In the 121 sq km of San Francisco, the population grew by about the same number over 20 years, from…

Thank you. This is a great read and this is the suggestion Economist Cowan should have offered.

"Harding wrote in the article, the city had 142,417 housing starts in 2014, which was “more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m)." Compare this, also, with the roughly 20,000 new residential units approved annually in New York City, the 23,500 units started in Los Angeles County, and the measly 5,000 homes constructed in 2015 throughout the entire Bay Area."

And the true solution is to pass a law using Japan as an example: "The [Japanese] federal government recognized that these regulations were the problem, so in 2002, it passed the Urban Renaissance Law. The law stripped municipalities of the ability to control private property."

Here is another interesting article from the same author, Scott Beyer pointed to by this article. https://www.forbes.com/sites/scottbeyer/2016/05/25/modern-zo...

Re: Rents in Megacities Can't Go Up Forever

#213

Post by humanrebar »

xienze wrote: post #11
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. Startups are built on young talent. Young people are obsessed with living in "the big city" and to hear them tell it, living in a suburb and driving a car is about the worst thing imaginable. So if you want young talent, you better set up shop in SF.

Why young talent? Isn't that just ageism?

Re: Rents in Megacities Can't Go Up Forever

#214

Post by cletus »

I've said it many times: this is one area where NYC is so much better off than, say, the Bay Area.

In NYC you have an ultra-wealthy enclave around Central Park and pretty much the rest of Manhattan really requires winning an affordable housing lottery, being an incumbent or being in the top 10%.

That might seem like a problem but it's not. Or at least not a huge one. Why? Because there are affordable options within reasonable distance with public transit (eg NJ, Queens, the Bronx).

Compare this to the Bay Area where there's really nowhere affordable to live.

So rents here are a proxy for property values. The author is right that property values have a natural ceiling but that's in the macro sense. There can be (and are) enclaves that are only the domain of the rich (eg lower CPW, CPS, 5th on the Park).

This sort of thing tends to have a flow on effect which is why gentrification tends to radiate outwards.

So you end up with a situation where you can buy an apartment on 57th for $100m and 30 minutes away you can buy one in Queens for $150k.

That's actually a pretty healthy situation (IMHO). It also means that property values in Manhattan, for example, still potentially have a huge amount of upside.

Re: Rents in Megacities Can't Go Up Forever

#215

Post by Tiktaalik »

trapperkeeper79 wrote: post #108
brilliantcode wrote: post #37

The article title is spot on. Vancouver is not a megacity, therefore our rent will go up forever. It's unbelievable how relatively expensive rent is to income. I'm beginning to wonder why I'm putting up with Vancouver. I'm thinking I will take the first train out of here but that doesn't seem to be coming.

From Toronto. We have it worse. We are actually thinking of moving to Vancouver and renting :-p The rents in both places seem the same, except Toronto has shitty traffic, very limited tech opportunities, bad weather, and bugs. I looked around at jobs in Vancouver and it seemed a bit surprising how many tech employers there were. Can you shed light on why you are fed up with V? Where else are you considering?

>Can you shed light on why you are fed up with V? Where else are you considering?

- Very expensive with relatively low wages (Vancouver has the lowest median income for someone with a bachelor degree among major Canadian cities)

- Near zero possibility to afford to buy anything other than an extremely overpriced shoebox condo.

Re: Rents in Megacities Can't Go Up Forever

#216

Post by QuantumGravy »

pavel_lishin wrote: post #168
ryandrake wrote: post #110

Earlier quoted context omitted.

> People want to live in trendy cities. There's a lot to consider besides rent - culture, nightlife, etc. San Francisco sure does have some of the best food in the country We're talking about tech workers though. I don't know about you, but my whole life as a tech worker, I've gotten up at the crack of dawn, worked all day, come home late at night exhausted and passed out sleeping until the next day. I don't even kno…

> It doesn't make sense that tech workers would care about these things because we never get to take advantage of them. Not all tech workers are 12-hour-a-day workaholics. Why are you killing yourself at work?

Why would you get paid six figures as a tech worker unless you're a workaholic? If you're not putting those hours in at work, surely you're putting in those hours in for both fun and personal growth at home, right? You're passionate about code, aren't you?

...no, I'm not honestly asking that, but those are the questions I'd expect to fend off.

Re: Rents in Megacities Can't Go Up Forever

#217

Post by differentView »

davidf18 wrote: post #156
frebord wrote: post #86

Earlier quoted context omitted.

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

I love how many of the very people who claim to be critical of Trump and his wealth are the very people who help support zoning density restrictions that have made him far, far wealthier than he would otherwise be. If they started caring for regular people instead of wealthy people like President Trump then there would be more, affordable housing, and President Trump would not benefit from "rent-seeking".

It's one thing to support laws and regulations that happen to benefit Trump, it's another to want him to be the leader of your country.

Re: Rents in Megacities Can't Go Up Forever

#218

Post by QuantumGravy »

humanrebar wrote: post #213
xienze wrote: post #11

Earlier quoted context omitted.

> Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. Startups are built on young talent. Young people are obsessed with living in "the big city" and to hear them tell it, living in a suburb and driving a car is about the worst thing imaginable. So if you want young talent, you better set up shop in SF.

Why young talent? Isn't that just ageism?

Yes, it's ageism, and some among us in our profession have decided it's justified.

Re: Rents in Megacities Can't Go Up Forever

#219

Post by amyjess »

robterrin wrote: post #60
reverend_gonzo wrote: post #33

Earlier quoted context omitted.

I live in Chicago. I love it here because of everything else it has to offer. I have everything almost everything I need available to me within walking distance from home. That includes grocery store, dive bars, cheap restaurants, high end restaurants, clubs. For anything else I may want to do (concerts, sports games, plays, comedy), there are dozens of world class options within a ten minute cab drive / 30 minutes o…

I've heard this pitch for Chicago many times, and it seems reasonable if you are in the one of the industries, Tyler mentions, that are more diffuse. The main problem with Chicago is it lacks an anchor industry. Is it the best place to be for finance? No, that's NYC. Is it healthcare? Boston, Baltimore, Cleveland or Rochester. Energy? Houston. Technology? SF. Entertainment? LA or NYC. Politics? DC. What exactly is Ch…

IIRC, Chicago is the main national hub for agribusiness.

Re: Rents in Megacities Can't Go Up Forever

#220

Post by davidf18 »

nwah1 wrote: post #206
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…

Ricardo's law of rent shows that indeed, even without artificial scarcities imposed by regulation, rent can go up forever as long as productivity is rising. While we want housing to be affordable, arbitrarily trying to reduce rental costs is futile. Rent exists. It is a reflection of the intrinsic desirability of the location. The only way to reduce the rent is if the location becomes less desirable and less producti…

> "Ricardo's law of rent shows that indeed, even without artificial scarcities imposed by regulation, rent can go up forever as long as productivity is rising."

The rent-seeking that he established states that political regulation can artificially create a situation of scarcity thus resulting in high lands costs that benefit landowners.

Specifically, he illustrated this regarding the "Corn Laws" of Britain which were a politically induced import duty on grains of all sorts making the cost of bread more expensive for consumers. Famers could charge more for the grain they grew because of less competition but the landowners would simply charge the famers more money. Thus, the import duties raised the cost of food for consumers while indirectly directing that wealth to landowners.

The "Corn Laws" created the market inefficiency, market failure which interfered with wealth creation and David Ricardo even joined British Parliament to combat the "Corn Laws." He eventually succeeded in the repeal.

While the values might continue to increase with rising productivity, the overriding factor at least for today's environment is the "rent-seeking" and we need to reverse the local control of land which benefits wealthy landowners like President Trump over normal working people.

Rising prices are due to scarcity. The scarcity is politically induced in order to in this case benefit landowners. Reverse the scarcity, politically induced or otherwise, and prices fall.

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