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Rising Rents Are Pushing More Tenants Past the Breaking Point

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Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#71

Post by pjmorris »

billmalarky wrote: post #64
vkou wrote: post #48

Earlier quoted context omitted.

> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and…

Hot housing markets are extremely high risk high reward investments. Buying NYC real estate for example, it is practically impossible to use a traditional "buy and hold" strategy and have the rents cover the cost of investment (typically rent covers more like 50% of operating costs in NYC). You pretty much only make money in NYC REI via speculation (ie the property goes up in value) not from paying down the mortgage…

> The solution to high pricing is to increase supply of housing.

... for a given amount of money. However, money is easier to create than houses.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#72

Post by adwhit »

bmmayer1 wrote: post #63
_wc0m wrote: post #9

Rent is an amazingly effective means of redistributing wealth upwards. I have easily paid over £100k rent in my life, always to people substantially richer than I am. Always enjoyed this Churchill quote - from 1909! Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits s…

This comment doesn't stand up to scrutiny. There aren't a lot of available statistics on how wealthy landlords are, but for instance, according to a San Francisco property owners survey[1], median income for landlords is $90k, only 15% higher than the overall San Francisco median income ($77k). And of course a software engineer's median income in San Francisco is higher ($92k). Either way, there is little evidence th…

The point is that the landlord becomes wealthier through improvements to the area, for which s/he is not responsible. i.e. they are capturing public investment.

Put concretely, my taxes go towards upgrading the Overground Line which improves the area I live in which increases my rent. I have paid for this improvement twice, my landlord, zero times (their get back their taxes through uplift in property value).

Solution - as others have pointed out - is Land Value Tax.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#73

Post by seanmcdirmid »

beebmam wrote: post #36

In large cities across the US (and probably most of the world), there is some very large scale foreign speculation in the housing market going on. This is leading to rising rents and rising home prices. In Seattle, for example, many (newly) wealthy Chinese people are buying houses purely for investment purposes. I know some of them. One of them has purchased 10 houses, and lives in only one of them (when they are in…

We saw this before with Japan, it didn't end well.

If you think the states property markets are crazy, well, the Chinese ones are crazier by an order of magnitude. It's no wonder that many wealthy Chinese see the states (or other countries) as a safer bet. The upside is that rents in china are still reasonable (so that 7 million yuan apartment is only renting for 10k RMB/month).

However, the same was true with Japan, and when their asset bubble crashed, it took many foreign markets with it (taking about a decade to recover, heck, even California, especially California, suffered).

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#74

Post by mistermann »

vkou wrote: post #48
billmalarky wrote: post #40

Earlier quoted context omitted.

> He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. This is why offloading the risk onto creditors (ie purchasing real estate with borrowed money under an LL…

> The value landlords provide is the assumption of risk. The premium you pay to rent is in exchange for vastly limiting your exposure to said risk. In hot housing markets, the value they provide is having access to the capital necessary to own property. A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and…

> A 30 year old hairdresser in Seattle isn't renting because they don't want to deal with risk - they are renting because they can't save up a $XY,000 downpayment, and tie their entire salary into interest payments.

The same applies to a 30 year old doctor in Vancouver, and I would imagine other Canadian cities soon enough.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#75

Post by nerfhammer »

beebmam wrote: post #36

In large cities across the US (and probably most of the world), there is some very large scale foreign speculation in the housing market going on. This is leading to rising rents and rising home prices. In Seattle, for example, many (newly) wealthy Chinese people are buying houses purely for investment purposes. I know some of them. One of them has purchased 10 houses, and lives in only one of them (when they are in…

Build sufficient housing and they won't see it as a sure-thing investment anymore. They're betting that local politics will never allow this to happen.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#76

Post by rm_-rf_slash »

Everybody on this thread should spend the next five minutes reading about Henry George, his historic work "Progress and Poverty" and the Single Tax:

https://en.m.wikipedia.org/wiki/Henry_George

https://en.m.wikipedia.org/wiki/Progress_and_Poverty

An except from his book:

"Take now... some hard-headed business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city—in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will in ten years, interest be any higher?" He will tell you, "No!" "Will the wages of the common labor be any higher...?" He will tell you, "No the wages of common labor will not be any higher..." "What, then, will be higher?" "Rent, the value of land. Go, get yourself a piece of ground, and hold possession." And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon or down a hole in the ground; and without doing one stroke of work, without adding one iota of wealth to the community, in ten years you will be rich! In the new city you may have a luxurious mansion, but among its public buildings will be an almshouse."

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#77

Post by Allower »

underwoodley wrote: post #68
bmmayer1 wrote: post #63

Earlier quoted context omitted.

This comment doesn't stand up to scrutiny. There aren't a lot of available statistics on how wealthy landlords are, but for instance, according to a San Francisco property owners survey[1], median income for landlords is $90k, only 15% higher than the overall San Francisco median income ($77k). And of course a software engineer's median income in San Francisco is higher ($92k). Either way, there is little evidence th…

You didn't challenge the statement to GP made, but one he didn't make. He didn't say that landlords are vastly richer than workers. He said that landlords make little or no contribution to the general welfare. Your own comment points out that in SF, the median landlord makes roughly what the median software developer makes. But a software developer in the Bay Area is one of the most productive workers on the planet,…

Renting is a service, of course they don't produce anything. If they weren't providing a service people found valuable (i.e. improving their general welfare) much fewer people would be renting.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#78

Post by mistermann »

savanaly wrote: post #21
_wc0m wrote: post #9

Rent is an amazingly effective means of redistributing wealth upwards. I have easily paid over £100k rent in my life, always to people substantially richer than I am. Always enjoyed this Churchill quote - from 1909! Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits s…

If this is true, why is the return on owning land not better than the return on the stock market, at least in the estimation of most economists? Unless you have some comparative advantage in owning/administering to land, it's not actually such a sweet deal relative to normal investing. Owning land is "free money" in that you tie up your wealth and in exchange get interest. Same deal with owning stocks. Land isn't spe…

Because this truism is based on a long period of history, whereas real estate blowing most every other investment out of the water especially when you consider you're usually working on 90% leverage, is a relatively recent phenomenon. I continue to be of the opinion that a major driver of this is the rise of China.

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#79

Post by kylestlb »

I really hope the economy shifts toward remote work as the standard (at least in the career tracks where it is possible). The ever increasing share of higher jobs moving to metropolitan regions will continue to make the places on this list worse off. More remote work might also even out the salaries across the US a little bit. One can dream...

Re: Rising Rents Are Pushing More Tenants Past the Breaking Point

#80

Post by jpao79 »

moultano wrote: post #44
mindcrime wrote: post #20

Earlier quoted context omitted.

So what's your point? Do you want to eliminate rent? Should people who either can't afford to purchase a house, or who simply don't want to, be forced into homelessness? Personally I've paid over $115,000 in rent over the past 12 years, but I don't begrudge my landlord their money. I attained utility in exchange for the rent I paid, and have no problem with the arrangement. Not, of course, to say that I'm happy when…

Land Value Tax. https://en.wikipedia.org/wiki/Land_value_tax This is distinct from a property tax in that it only measures the value of the soil it sits on, so doesn't punish the landlord for improvements. The value of the land itself is almost entirely outside of the landlord's control, it's determined by the community around it. As a result, this is one of the least distortive taxes.

In California at least , the property tax bill is already split into two components:

1.) Tax on land value

2.) Tax on improvements (building, landscaping)

http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-1...

Here's a brief description of how the increase in land value is calculated: "Under this system, when real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price, or “acquisition value.” Each year thereafter, the property’s assessed value increases by 2 percent or the rate of inflation, whichever is lower."

I think what the 2% appreciation cap is attempting to mitigate is if all your tech millionaire IPO neighbors decide to remodel their houses at once, you won't be stuck with a huge tax bill and have to move.

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