Why Rent Is So High and Pay So Low • Hacker News Board

Re: Why Rent Is So High and Pay So Low

#61

Post by ArkyBeagle » Fri, Aug 07, 2015, 10:43 PM UTC

patmcguire wrote: post #57

Worth noting the decline in how much is spent on food: in 1950 it was a third of household income, now it's 13%. So part of the cost of living has drastically decreased.

Almost all sectors of the economy have delivered much improved value since 1950. In many cases at reduced cost.

Real estate, education and medical care are subsidized. When you subsidize something, they cost more and you get more of it. So we constrain residential real estate development by regulation - zoning, permitting.

Re: Why Rent Is So High and Pay So Low

#62

Post by sytelus » Fri, Aug 07, 2015, 10:43 PM UTC

TL;DR

We vote and so politicians listen to our desires. Falling house prices would be a boon for renters and first-time buyers (and probably for society at large), but their political clout is less than that of middle-aged, middle-class property owners.

Link baity article with no real "answer". Rents and house prices follow simple supply and demand over long term. Cities are either already saturated or don't allow new constructions limiting the supply however people never stop flocking to them year over year. Even the medium size cities see net inflow of 50K-100K people every year - which means you need that many more new housing units each year. So ultimately only a few % of people gets to live in city and everyone else are forced to suffer commute. This % keeps declining because population total keeps growing and so the rent keeps rising.

Rent control etc can distort the economics for a while but not over long run. They are just "pain killers" when what you need is real medicine. The real medicine is simply policies that diversifies the areas. For example, encourage businesses to move in surrounding towns by offering tax benefits, build solid transportation network, open new public schools, encourage more constructions outside popular area, build communities with attractive facilities, build venues for cultural and sports events outside of cities and so on.

Re: Why Rent Is So High and Pay So Low

#63

Post by MaysonL » Fri, Aug 07, 2015, 10:44 PM UTC

tomp wrote: post #46

The money quotes: "If house prices fall, the middle aged and middle class will be in an uproar. [...] Perhaps even more critically, banks need house prices to rise, or at least not collapse." "More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks. Thus it is not likely to happen…

Of course, that's only nominal house prices that shouldn't fall. If inflation-adjusted real house prices fall, not really a problem. Perhaps a little more inflation than we currently have would be a good idea (4-5%).

Re: Why Rent Is So High and Pay So Low

#64

Post by maxerickson » Fri, Aug 07, 2015, 10:45 PM UTC

natrius wrote: post #17

narrator wrote: post #12

Earlier quoted context omitted.

The reason asset prices rise first in a fed led recovery is because new money enters the system through bank loans. Naturally, banks want to lend against hard assets, so the first thing that new money buys is property, stocks and other income producing assets.

This time is different. The new money enters the system via central bank asset purchases, which lower the returns on those assets. These purchases push investors into asset classes with higher returns, raising the prices of all assets as a result.

An additional buyer shouldn't have the effect of lowering the rate of return on an asset.

Re: Why Rent Is So High and Pay So Low

#65

Post by timr » Fri, Aug 07, 2015, 10:46 PM UTC

happytrails wrote: post #11

How many people died during WW2? It all seems like supply and demand to me. If we want lower housing prices in major cities we need more supply. Anecdotal, L.A. is built to the max horizontally. If L.A. would allow more vertical space to be used prices would drop.

About 400,000 US citizens were killed in WW2, or about .0003% of the entire US population in 1945 (140M).

It didn't have a huge downward impact on real estate prices.

Re: Why Rent Is So High and Pay So Low

#66

Post by MaysonL » Fri, Aug 07, 2015, 10:46 PM UTC

danieltillett wrote: post #52

khuey wrote: post #41

Earlier quoted context omitted.

If you banish any of the smart/clever/etc to the underclass they might just start a revolution. Much easier to invite them to join the party.

Exactly right. The rich found this out early last century with the rise of communism. What they did was very clever; they basically introduced socialism in the 1930s by shifting the majority share of production to the masses to keep them quiet, introduced mass higher education with an emphasis on identifying the very smart (troublemakers if excluded) and brought them into the ruling class. Once this "decapitation of…

Democracy is the insurance premium the rich pay against the threat of pitchforks and guillotines.

Re: Why Rent Is So High and Pay So Low

#67

Post by happytrails » Fri, Aug 07, 2015, 10:50 PM UTC

AnimalMuppet wrote: post #45

happytrails wrote: post #21

Labor has been on the decline for years. The union corruption and bashing seems never ending. The ignorance in the general populace allows this to happen, as people will vote against their own best interests. I would assume that the populace movement that is gaining steam with sanders and warren will start to expand if the inequality continues.

If the unions are corrupt, why do you assume that it's in my best interest to join one?

Why do you assume I said that?

Re: Why Rent Is So High and Pay So Low

#68

Post by timr » Fri, Aug 07, 2015, 10:54 PM UTC

jsn117 wrote: post #32

curiousjorge wrote: post #9

you dont know high cost of living with low salary if you haven't lived in vancouver, bc. https://docs.google.com/spreadsheets/u/1/d/18UwaThgGikSXzinn... You can see based on that the average is around $45~50k CAD (if the salary field is blank assume $50k or less as these are less well known, smaller companies with tighter budgets) rent for studio or 1 bedroom apartment in downtown area where lot of jobs are located i…

rent for studio or 1 bedroom apartment in downtown area where lot of jobs are located is around $1300/month + utility and other costs. I would kill for that, just moved into a studio in SF for 2300 plus utilities. A studio.

Why would you do that to yourself? If you think the prices are ridiculous, then don't move here. If you think they're worth paying, then you can't really complain, can you?

I'm saying this not to troll (I wouldn't move here today!), but to point out that until people come to their senses and say enough is enough, this insanity won't end.

Re: Why Rent Is So High and Pay So Low

#69

Post by ryandrake » Fri, Aug 07, 2015, 10:54 PM UTC

tomp wrote: post #46

The money quotes: "If house prices fall, the middle aged and middle class will be in an uproar. [...] Perhaps even more critically, banks need house prices to rise, or at least not collapse." "More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks. Thus it is not likely to happen…

> I couldn't agree more. I'm young and capital-poor, so this fact is a huge problem for me. I don't see a solution.

Vote for politicians not obsessed with propping up the business and real-estate portfolios of wealthy middle-aged people? (assuming you can find such politicians)

Re: Why Rent Is So High and Pay So Low

#70

Post by morgante » Fri, Aug 07, 2015, 10:55 PM UTC

It's a great question. I wish the article had answered it.

> If they wanted to drive down rents, government could fund the construction of public housing, as they did during the Golden Age.

In housing, government is very clearly the problem, not the solution. It's government zoning regulations which keep demand far below supply: if we'd just lift the ridiculous restrictions, supply would rapidly rise to meet demand. Similarly with the rent control: all it does is impose higher rents on newcomers and the young while providing a great entitlement to the middle-aged and aging.

> you and I could quite easily have gone to the ATM, slipped in our card, and been told the money we thought was safe in our accounts was gone.

It's almost like he's never heard of the FDIC.