Rents for the rich are going down, rents for the poor are going up. Why? • Hacker News Board

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#91

Post by kelp » Mon, Mar 22, 2021, 10:04 PM UTC

legerdemain wrote: post #68

roguecoder wrote: post #17

While the article is interesting, there is one dynamic it missed: tech debt. Starting around 1975, housing supply stopped keeping up with the growth of housing demand. It picked back up fifteen years later, around 1990: https://www.brookings.edu/research/the-goldilocks-problem-of... (But that is on a national level: in the West, in comparison, housing growth hasn't been sufficient to house the new households formed a…

If cheap housing is expensive housing built 30-100 years ago, we should have had decades and decades of delapidating housing stock left to go before hitting a shortage. Not to mention your example of housing in Boston built at the turn of the 20th century. A laissez faire policy that makes the poor wait 120 years for housing is hardly any policy at all.

At least for San Francisco, the seeds of the current shortage started as early as 1912 with the establishment of the planning commission.

See this amazing twitter thread with images of historical news paper clippings.

https://twitter.com/enf/status/753435745272995840

Later on, in 1978, most of the city was down-zoned, and in the EIR (Environmental Impact Report) written at the time, it was clearly predicted that this would result in a supply shortage and increased prices. Unless the city made a point to increase density and development in the industrial parts of the city. That didn't really happy to the scale the EIR said was needed.

See: https://twitter.com/enf/status/775185946941591553?s=20

So here we are.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#92

Post by nostrademons » Mon, Mar 22, 2021, 10:04 PM UTC

lotsofpulp wrote: post #66

nostrademons wrote: post #45

Earlier quoted context omitted.

Opportunity cost. Housing in the Bay Area goes up an average of about 7%/year, roughly inline with the S&P 500. Google stock has increased 13x in the last 11 years, for an average annualized return of about 25%. If you were at AirBnB or Stripe your return is about 100x, making over 100%/year. With leverage the computation gets a bit more complex, but basically you're paying 4.5% interest on 7% appreciation, and not n…

>but basically you're paying 4.5% interest on 7% appreciation, and not needing to pay rent, so you may get 4-5% real returns. And it's down to 2.5% interest or even lower for 30 year fixed for some people.

I'm comparing it to historical returns over the last decade, though. Mortgage rates were about 4.5% in 2010, so that's the figure I'm using.

I honestly don't know what the next decade will bring. I would personally bet on high inflation, so that 2.5% mortgage rate will likely be a negative real interest rate. (Hence, I bought.) Stock returns may or may not equal the previous decade's, as well.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#93

Post by gnicholas » Mon, Mar 22, 2021, 10:04 PM UTC

offtop5 wrote: post #88

gnicholas wrote: post #72

Earlier quoted context omitted.

Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium. But apparently California tightened the rules aro…

That's horrible to hear, I was only able to get my first apartment in California since I could offer a double deposit. Chicago on the other hand has fantastic housing supply and so many rules on security deposits, most buildings just don't do it. Access to housing permeates every aspect of a culture, people are significantly nicer when they can afford a place to live. Has your friend been able to get out of Californi…

Chicago does have a large supply of housing and land that can be converted into housing. This helps keep the cost of housing closer to the cost required to construct units.

In CA, the cost of a home has almost nothing to do with the input costs other than land. There are areas that could be built up (tons of land just west of 280), but which is protected by environmental laws or restrictions. Full development of this land would lead to traffic nightmares, for sure, but one could imagine that some of it could be developed as we move toward more efficient modes of transport.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#94

Post by silvestrov » Mon, Mar 22, 2021, 10:05 PM UTC

gnicholas wrote: post #72

outside1234 wrote: post #5

It is a huge risk right now to take on someone that is poor as a renter because of the moratorium. It is completely unsurprising to me that landlords have priced this risk factor in.

Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium. But apparently California tightened the rules aro…

wow, that's not much in case the apartment is damaged.

Denmark allows for 3 months deposit plus 3 months rents upfront, so you have to be able to come up with 6 months rent total to get an apartment.

(market here is very hot, so rental apartments have no problem getting 6 months rent)

When you "quit" living in the apartment, you can use the 3 months prepaid rent, so you don't have to pay rent the last 3 months.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#95

Post by totalZero » Mon, Mar 22, 2021, 10:09 PM UTC

frongpik wrote: post #70

roguecoder wrote: post #17

While the article is interesting, there is one dynamic it missed: tech debt. Starting around 1975, housing supply stopped keeping up with the growth of housing demand. It picked back up fifteen years later, around 1990: https://www.brookings.edu/research/the-goldilocks-problem-of... (But that is on a national level: in the West, in comparison, housing growth hasn't been sufficient to house the new households formed a…

Insufficient housing creates competition among workers and they do more work for less pay, as nobody wants to be an outsider. The number of building permits is set by city councils and those listen to the capital as the latter can choose where to create jobs.

> the latter can choose where to create jobs

Jobs such as "city councilman," for example.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#96

Post by quickthrowman » Mon, Mar 22, 2021, 10:25 PM UTC

lotsofpulp wrote: post #66

nostrademons wrote: post #45

Earlier quoted context omitted.

Opportunity cost. Housing in the Bay Area goes up an average of about 7%/year, roughly inline with the S&P 500. Google stock has increased 13x in the last 11 years, for an average annualized return of about 25%. If you were at AirBnB or Stripe your return is about 100x, making over 100%/year. With leverage the computation gets a bit more complex, but basically you're paying 4.5% interest on 7% appreciation, and not n…

>but basically you're paying 4.5% interest on 7% appreciation, and not needing to pay rent, so you may get 4-5% real returns. And it's down to 2.5% interest or even lower for 30 year fixed for some people.

Low rates just mean you pay more to the seller for the asset, and financing costs less. If rates were 5%, you’d pay less for the asset but more in financing costs. The monthly payment probably wouldn’t change substantially. You’d have substantially higher price risk buying at low interest rates.

Sort of how a bond’s value moves inverse to yields.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#97

Post by gnicholas » Mon, Mar 22, 2021, 10:29 PM UTC

silvestrov wrote: post #94

gnicholas wrote: post #72

Earlier quoted context omitted.

Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium. But apparently California tightened the rules aro…

wow, that's not much in case the apartment is damaged. Denmark allows for 3 months deposit plus 3 months rents upfront, so you have to be able to come up with 6 months rent total to get an apartment. (market here is very hot, so rental apartments have no problem getting 6 months rent) When you "quit" living in the apartment, you can use the 3 months prepaid rent, so you don't have to pay rent the last 3 months.

For sure. Think about the damage that can be done to hardwood floors during move-out, for example. That's one easy way that a unit can be accidentally damaged, even by a tenant who is generally very careful.

Of course, you can still recover payment by suing, but that's obviously more difficult (especially if the former tenant has moved to another city/state).

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#98

Post by insert_coin » Mon, Mar 22, 2021, 10:30 PM UTC

Frost1x wrote: post #83

outside1234 wrote: post #5

It is a huge risk right now to take on someone that is poor as a renter because of the moratorium. It is completely unsurprising to me that landlords have priced this risk factor in.

The more modern trend of businesses passing risk sort of flies in the face of the old rationale of business ownership taking on risk which justified the rewards of doing business. Now you're just doing business wrong if you don't minimize risk or figure out how to shift and transfer risk away from yourself.

You try to minimize all risks, not only in business but in all aspects of life. That has always been the case. The caricature you presented has never existed.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#99

Post by airhead969 » Mon, Mar 22, 2021, 10:35 PM UTC

As a point of reference: where I'm at is rapidly gentrifying with phony, corporate clone office workers while hundreds of homeless people are living in tents visible outside next to the highway. There isn't enough affordable housing and the % set-asides are a joke because they're so few and far between.

Re: Rents for the rich are going down, rents for the poor are going up. Why?

#100

Post by insert_coin » Mon, Mar 22, 2021, 10:35 PM UTC

asdff wrote: post #12

m463 wrote: post #6

I think affordable-level housing will always be competitive, and super-luxury stuff will be white elephant stuff that's subject to compromises. It's kind of amazing that they raised the rent. Is it because people stopped paying rent and they tried to get it from other renters?

Landlords in big cities always raise rent because they can. They'd rather push a current tenant out than work with them, because with the high turnover they are sure to get a new tenant pretty soon at the higher price anyway. Its this sort of unscrupulous taking, of maximizing profit because its 'leaving money on the table' to not do so, is why we have rent control ordinances which work by capping the maximum yearly…

> Its this sort of unscrupulous taking, of maximizing profit because its 'leaving money on the table' to not do so, is why we have rent control ordinances which work by capping the maximum yearly % increase in many of our big cities

No, the reason is because cities don't want to build more houses.