In my neck of the woods (New England), home prices have doubled since March of 2020. I have yet to read a comprehensive overview of how this happened and how we get out of it. Of course, people went nuts offering over the asking price when interest rates were super low so I understand, to some degree, that baselines were reset.
But the current housing market doesn't feel sustainable. I don't understand how a proper middle class family could afford to buy in this environment, unless they are willing to put off any savings indefinitely.
This is at least 80% of the problem. The system is behaving exactly as you'd expect it to with even an Econ 102-level understanding. New supply isn't being built, or is being severely hamstrung, and more people want the supply and are willing to sacrifice (often too much) to get it. Add in rent-seeking behavior, both figuratively and literally, and prices quickly double in even mediocre areas with minimal long-term prospects for growth.
Relaxed zoning requirements for SFH and MFH buildings, relaxed or eliminated height restrictions for high rise density projects in urban areas, eliminating rent control, and a laundry list of other things would help alleviate the upward pressure.
Even if new stock were built, new homes in Houston start around $300k for a 3/2 configuration, but those are bought up nearly instantly because not many are built, and the remaining stock are $400-700k.
I grew up with 6 family members in a 3/2 house that was 1250sqft. Houses today start at 2000+ square feet in the USA. We DON'T need that. On top of that, there is very limited stock of homes for people who no longer have kids.
Every type of manufacturing in the US has gone toward lower throughput, higher price. Luxury apartments, 2500 square foot houses with no yard, $50k for a car. And it is because we are all comparing ourselves to each other and wanting to appear like we can afford this lifestyle, and its finally breaking. But it was allowed to go this way, because it was working. Pricing out the bottom 25% didn't negatively affect the profitability of the companies making these items, in fact, it made them more profit.
The answer is still build more (which you basically admit yourself in your first sentence).
Homes skew larger and more expensive precisely because it's so hard to build them so developers need to make more money from each one. The fixed costs per unit are too high, so the ones that need to be lowered or eliminated should be. That will incentive building more units not just more expensive units. You'd see a lot more 1200sqft new builds if it was more economically viable and developers could make a profit on a $125k home instead of needing $400k.
> You'd see a lot more 1200sqft new builds if it was more economically viable and developers could make a profit on a $125k home instead of needing $400k.
You do see them, but they are factory built. I could have a $75k manufactured home dropped onto a $20k slab, with $15k utility hookup, and have 3 beds and 2 baths and 1200sqft. It is viable outside of HOAs and "master planned communities" but it is hard to find places in the US that allow this in a "desirable" area.
I agree we need more, but we need smaller too. My parents right now have a 3600 sqft house they will die in, and can't maintain because they are in/approaching their 70s. They built it in 2008 for around $190k when there were still 2 kids at home, my grandmother still lived there, and my sister had a baby on the way.
Now their home is valued at $750k according to the county (after fighting and revising it down from $800k), and if it weren't for all the homestead exemptions and senior rates and whatever other tax breaks they were given, their property taxes would be over $25k/yr.
They've actually tried to sell it a number of times, but 0 bites even discounting it down to $500k, because the town they are in has no comps (single level 4 bed, 4bath on 3 acres).
Build Moar seems to be too simplistic. There's just too much demand and too much investment capital seeking profit. No matter how much you build, most of the housing supply is going to get sponged up by investors, landlords, and private equity, and the price isn't going to go down. You'd probably have to 4X to 5X the current housing supply to make a dent in prices.
>You'd probably have to 4X to 5X the current housing supply to make a dent in prices.
Not at all. The important thing here is that price is set on the margin. Relatively modest supply increases can have outsized price effects. As an example, consider rents in Austin - something like 30% housing stock increase led to 16% drop in median rent, all while Austin simultaneously had massive in-migration, i.e., rents fell despite demand surging.
As another example of margin behavior: vacancy rates matter a lot, a modest vacancy rate increase can crater rents, which we see in the CRE market.
When investors buy housing they almost always rent it out, increasing the supply of rentals and decreasing rent prices relative to the alternative universe in which no new housing is built.
It's interesting to say something sounds simplistic when your argument is basically "I feel like __________" and in fact the evidence shows exactly the opposite.
Building new housing stock drives down the price of older, more beat up housing. So new housing being more expensive is fine, expected, and helps a ton still.
> And it is because we are all comparing ourselves to each other and wanting to appear
No. No no no! It's because capitalism rations by price and weights by wealth. Once inequality cooks up enough the whims of the wealthy outweigh the needs of the poor.
It is not the strength of those whims that squishes the poor, it is the strength of those whims multiplied by relative wealth that squishes the poor. The whims did not grow out of control. The multiplier did. Extreme inequality is the problem.
You can sprawl further out and you can build infill in sparsely populated areas, but you run up against the reality that desirable areas are going to be expensive because they're desirable, and the cost of demolishing existing multifamily homes to increase density further becomes infeasible in already dense areas.
I bet you actually can find affordable housing in the middle of nowhere / towns where people are actually leaving.
This is not to say there isn't low hanging fruit that market rate housing can help with, and some areas have more room for improvement that way than others, but there's a limit to where that takes you that reveals a deeper problem: we treat housing as an asset that "should" continue to appreciate indefinitely, and we even subsidize people using extensive leveraging to acquire it.
Not that simple. In Australia over the last 10 years, the number of dwellings increased by 19% while the population increased by a smaller 16% [1]. Yet house prices still doubled. This is the same trend that has continued for decades, growth in number of dwellings has tended to outstrip population growth but house prices shot up since 2001 when the tax settings were changed to massively benefit speculation.
We also have a pretty high number of unoccupied dwellings that are left empty, since some investors see the bother of renting them out as not worth the money, since they’ll make so much when they sell that it doesn’t matter!
We are talking about America. In your case housing would be even higher if it were not built. People continue to make things more complicated than it is.
Build, and keep building until it is cheap. Also, you would need to consider the specific places.
The claim is that if you increase supply the price will drop. The counter-example is a case where supply was increased and the price doubled. The question is why did that happen?
It very much looks like the "just build" model is insufficient to explain what's happened in that case.
Demand for housing increased faster than supply. As people gain wealth they demand more housing, so just looking at population changes doesn’t tell you much about housing demand.
What exactly they build in Australia, livable dwellings? In New Zealand cities they build 5 meters wide, two floor row houses, upstairs and downstairs split into separate apartments 25-30 sqm large. It's an investment token, not a dwelling. Across Europe they build the same housing tokens but buildings have more floors and are from a concrete instead of wood.
The price of homes has drastically gone up even in some communities around the world where no housing is being built because there is no demand for it; the given region is experiencing severe depopulation as everyone leaves for the faraway big city, except for a few elderly holdouts. Yet owners feel some kind of pressure to keep their asking prices high. To me, that means the situation is far from simple.
I think there is another element, private equity (PE) has got involved in the housing market, and like anything that PE gets involved with it burns it to the ground and then exits with it's profit leaving behind a wasteland. PE equity will do anything to get their profit no matter who it hurts
Private equity owns about 500,000 homes nationwide, so like less than a half of a percent.
Anyway they got into the housing market because the margins are so good because everybody refuses to allow new housing to be built. Congratulations, you played yourselves.
I don't think it's that simple. In my town, we're building like mad (thousands of units) and it is possibly slightly impacting pricing in that the rise is not as meteoric as it was 7 years ago. But new buyers are still priced out. Houses are vacant. There must be other factors.
Next question then becomes "is it better to sell 3 houses at $1M each ($600k for the developer) out of 10, or all 10 houses at $300k ($600k for the developer)?"
This also applies to apartments. Do you build 200 "luxury" units? or 200 affordable ones?
This reductionism doesn't seem useful. The population of people who want to buy homes has not grown in any way that is proportional to the cost of a home.
I've yet to hear anyone say why "build more" isn't a valid answer to lowering the cost of housing. Even if new builds stay at exactly the same price they're at today, the price of older homes will decrease as supply increases.
And I don't just mean in this thread, I mean ever. It's always hand-wavey "it doesn't work like that" when the evidence suggests that it does.
The underlying issue is that converting single-family suburbia to medium-density multifamily ‘ruins the neighborhood’, and cities don’t have the courage to eminent domain homes and replace them with apartment buildings themselves, so they outsource the housing function to the Free* Market, which is most definitely not interested in terminating the SFH market. Between the profitless-ness of apartments for the real estate industry and the use of suburbia zoning to discriminate since the early 20th century (nowadays in the guise of HOAs), the problem to solve isn’t in housing or urban planning, it’s in dethroning capitalism and classism. That’s why no explanation presents itself for why more housing isn’t a good idea: it’s a fine idea, but the U.S. ethos of ‘fuck you, got mine’ takes precedence, and it’s uncouth to say that out loud here.
I asked why "build more" isn't a valid answer and your response is that we need to dethrone capitalism and Reddit-tier nonsense about HOAs?
Why is your solution "put 3 families in this single-family home" and not "build more single-family homes?" If the market isn't "interested" in "terminating" single-family homes what makes you think it would be a good thing to do so, other than the fact that it would hurt a cohort of people you seem to hate?
If you got rid of height caps, minimum lot sizes, and loosened zoning capitalist developers you hate so much would jump at the chance to build medium (and even high!) density housing. No need to have the government steal homes from people to do it.
Every amount of new housing will be purchased by competitive investors. You are heavily underestimating the amount of money unsophisticated investors have, and the psychological effect of owning more and more of territory. Most people will never say no to owning more money and territory.
So what, they will rent it out? If there's a lot of new housing being rented out, it drives down the rental prices, drives down the purchase prices, etc. Any investor that sits on vacant housing is losing money. When there's extreme shortage landlords can do this because the rise in value happens from the shortage and maybe the rents aren't worth it.
The only cure to investors buying housing is to build enough housing to keep it from being a good investment.
This never works in real economy with real people. Even in Germany with very rigid address registration laws people invest in real estate like there's no tomorrow.
In other countries with lax address registration laws like Poland, real estate can be the only investment vehicle without capital gains tax. Yes, if you sell real estate in Poland after 5 years you pay zero capital gains tax and anyone can buy (please invest and make that mofo pop). Opposite to every other investment vehicle from bonds to shares to even currencies where the capital gains tax exists.
If you look at the amount of money created since Covid, this explains a lot of this increase in asset prices.
But beyond that, interest rates are a big driver of what people can afford for a monthly mortgage. These rates may come down a little. However, the FED facility that was creating sub 3% rates was likely a once in a lifetime opportunity.
Sale prices begin rising immediately once interest rates dipped to the lowest ever (borrowers could "afford" more principal - sale price - for similar monthly payments).
Combine that with houses making up a significant chunk of balance sheets for the US, and we (collectively) are loathe to let prices fall:
HN, we seem to care about this. We post a lot about it. Maybe we should put together a site to consolidate this sort of information, work on articulating something insightful about what is going on, and then a system/group/accountability(this is important) for pushing this to our politicians. My grandfather used to do that and the US was improving. My dad did nothing other than vote. I've done nothing other than vote. The US stopped improving. It's easy to setup a ghost website and do nothing though, so we would need a way to hold each other accountable, broken out simple to follow actions to take. Basically a 10 step program but with the steps being political action we hold each other accountable to take.
i would love to hear a YIMBY consider the market forces/how capitalism works and not just reduce it to regulation. aka when it costs over $500k to build a single apartment unit and most of those costs are construction with very little of the regulation burden driving up that cost.
If we're talking about home prices why are you talking about apartments? There are a lot of costs associated with apartment buildings that simply don't exist for SFH and MFH builds.
Indeed, there's an entirely separate, far more strict building code for apartments than for single-family detached housing.
This was an explicit goal of the designers of the early building code split: make single family homes as cheap as possible, and apartments as expensive as possible.
Sorry, you think that YIMBYs don't consider this? Perhaps you should follow some YIMBYs!
What does it take to get a more efficient building market? Lots of building, lots of competition in building. Low barriers to new contractors becoming builders, etc.
It's truly only the YIMBYs who ever talk about any of this stuff in my experience.
As in, the cost to build things in ways that completely ignore regulations. Regulations about building materials that won't collapse, and won't catch fire, and won't give everyone living there cancer. Regulations about safe electrification; safe, clean, adequate water; wastewater systems that won't drown the lower floors in raw sewage.
Do you know about the Grenfell Tower disaster?
70 people died, 70 more were injured, and hundreds were left without places to live, because the builders didn't think it was important to follow regulations. So they could make an extra buck.
So tell us about what the "cost to actually build" is. Please. Just remember that cost isn't only denominated in dollars and pounds.
>it costs over $500k to build a single apartment unit and most of those costs are construction with very little of the regulation burden driving up that cost.
What? What?
I dare anyone here who's simping for regulation to try to develop from scratch something that does not benefit from the myriad of exemptions that apply to 1-few family residential development (because there'd be no political will for the racket if the average homeowner was subject to it).
Those $500k costs include $100k of which is engineering for a SWPPP that any sane site planner who doesn't want shit to erode in no time flat would have gotten 95% of the same effect of anyway.
And the dirt work guy's bill includes god knows how many extra hours it takes to get it all spot on to meet the plans. He could've shot from the hip and done the job but there were plans and had to hit them.
And of course the lawyer has to go rounds with the town over what level of maintenance detail needs to be specified in the SWPP.
And of course the rent has to cover the landscaper who comes once a month to mow the ditch grass and stuff because that contract is how they cover their own ass.
The reason every goddamn modern property looks the same with the same shitty corporate bland sidewalks and same planters and same parking lot and entry way with the same five styles of door and the same light level and same everything is because every party involved if formulaically trying to meet the regulations related to their trade as cheaply as possible. And everyone knows this stupid. Every single party in the chain of developing a building from the initial survey to specing the lightbulbs knows they could, without even getting close to underperforming solutions, deliver infinitely more value if they could just exercise their goddamn professional discretion.
The guy delivering a rented trench box to a construction site that's chiseled out of bedrock knows what he's doing is wasteful and stupid just as much as the guy signing the check and the guys wasting their dime dropping it into the trench but hey, the rules are the rules and they're all billing the next guy down the line for it so it all goes on.
Used to be, the contractor would rent a trenchbox at his discretion. But that means "almost never", because the contractor that doesn't has lower prices than one that does, and just has to pay the occasional OSHA fine. But workers keep dying in trenches, so the government has to step in and make a rule "thou must always use a trenchbox".
We can't go back to "contractor's discretion", because then people die in easily preventable ways. The other alternative is MORE regulation, and the contractor has to do a soil study to know if they're required to use a trenchbox for this particular trench.
it most certainly is not going to cost me $100k in engineering to design a SFH in arguably one of the most regulatory burdened states in the US: vermont
>it most certainly is not going to cost me $100k in engineering to design a SFH in arguably one of the most regulatory burdened states in the US: Vermont
I can do that easily. Give me a ~10ac property where what isn't steep is stream or bog. I want to clear ~1ac total for 5-houses on 2ac each and the road to reach them needs to cross a stream and traverse some bog (read: offsets). The houses will have to be on piles because as expensive as that is that's cheaper than cutting flat land and doing walls or offsets.
surveys and delineation $20,000
bridge $25,000
road and driveway $75,000
stormwater $40,000
Wetlands offsetting $25,000
250 Permitting $140,000
the houses themselves (remember, they're on fancypants piles) $100,000
septics (mounds) and wells $75,000
total: $500k, 100k per house.
You could cut some out by DIYing the actual permitting submissions but even if you don't make costly mistakes in wording and/or detail level there's a lot of value in having your shit cross the government's desks on the letterhead of an engineering firm who's stuff they've approved a million times before.
The developer needs to then build the houses rich af on the inside and generally check every box to sell for enough to cover the costs. This kind of stuff is why so much of the development in Vermont is rich assholes from NYC in brand new million dollar homes on the world's shittiest gravel road with the world's shittiest driveways. Granite countertops and picture windows the size of rail cars are damn near free compared to the cost of putting a shovel in the ground.
covid was the largest money printing and wealth transfer event in history. When rich people get money they buy assets. We have had extreme asset inflation since then. Metals, equities, real estate etc. Watch Gary's Economics on youtube.
We get out of it by building more, read Abundance by Ezra Klein and Derek Thompson.
There is one hackish solution though. Unilaterally implode the real estate prices worldwide. People were so busy stealing covid money that they simply dumped the loot into real estate. This will not trickle it down (nothing ever trickles down), but at least would evaporate it.
I used a discount buyer's agent and it worked great! We viewed houses on the internet ourselves, went to open houses ourselves, and arranged showings with seller's agents ourselves. Once we had it narrowed down to two houses, we brought our buyer's agent to look at both houses, offer suggestions, and do all the bidding and purchase paperwork.
The realtor cartel still enforced a 6% commission, with half to the seller's agent and half to the buyer's agent. Our contract with the buyer's agent refunded half of his commission to us. So basically we got a 1.5% home discount. Our buyer's agent still made 1.5% but didn't have to babysit us while traipsing through dozens of potential homes, so it feels like everyone wins.
Yeah even our best realtor, who I actually liked and thought he did a good job (see other comment here) spent probably 1/3 of his total time on our purchase just hanging out or also walking around an open house. Such a waste IMO.
> All three bidders waived inspection and appraisal, and they all had healthy financing
> I was transacting in a thriving market, with no special circumstances
Yeah, a hot real estate market is where a seller is likely to derive the least benefit. Although a talented agent in a hot market can drive a more competitive process, potentially generating higher offers. All of which is, to the author's credit, highlighted in the article.
Agents earn their keep in more normal/weak markets.
YMMV. When we sold in 2021, our realtor connected us with an interest-free lender who put up $76K for repairs and staging. This, and other services, made the difference between our selling for $1.8M and the $2.4M we got. Maybe we could someday get similar service from a realty AI, but in our recent experience, the humans made all the difference.
Realtors are experts in the market. A good realtor pays for themselves by getting you the best selling price or finding the best home for your price range. If you don't understand opportunity cost, then obviously it appears to be a ripoff. But once you understand, it's clear that realtors have value. And realtors are probably going to be the last to be replaced with AI. It's all about value judgement and AI is garbage at judgement.
Also, it's true this article isn't recognizing the root cause, overpriced housing, because realtors in general do better when prices are high. But "realtors in general" is a very different category than "your realtor".
I would disagree. Theres enough information readily available to be able to see what relative home values are, where the good school districts are, etc.
The only reason I’ve ever used a realtor is because I don’t have the time to deal with the contract/legal side of everything. Most would be better served by hiring an attorney and title company if your state allows.
Realtors are indeed market experts (not product experts). Commission pay incentivizes them to close deals quickly, not to maximize sale price. Yes they can educate first time buyers that they cannot simultaneously get the best location, condition of the house, and price. Good realtors will ask their customer which two (or sometimes one) are their real priority and realistically match them to available listings. If you're moving into an area they can provide some local information although they legally cannot comment on schools or crime. If you've done this before, realtors mainly just serve as gatekeepers to a cartel and literally unlock houses for you to view.
Which for probably 70-80% of people, especially young couple with or considering children, are the top two things they care about if not the only two things.
But there is an adverse selection problem. Some realtors are experts in the market. Buyers or sellers have few ways to identify them accurately. Most of those ways amount to they themselves having good knowledge of the market.
It's the same problem as picking active fund managers.
The decade of zirp between like 2013 and 2021 created a lot of shitty realtors because anyone with a pulse could sell or buy a house with ease. The true value of realtors is in bad economic conditions where serious work is needed to market and negotiate.
"We currently have 10 houses renting at $2500 for 15 people who have $2000 to spend on rent. WHAT IF, we gave those 15 people $2500 instead. Housing crisis solved?"
Supply and demand, supply and demand. It’s not that complicated.
I’m not sure how or why this article got published by an organization that should, given its very nature, understand economics. The article doesn’t paint them or their members as people I’d trust in either side of a major financial transaction.
To the extent that an organization can understand anything, this one understands economics just enough to argue for policies that will get its members more money, and argue against policies that won't. Real estate is the quintessential stay-at-home-mom backup job so it's no surprise by and large they are not known for having a nuanced and academic understanding of economic theory.
They want wages to go up so that home prices go up even more, and their members make even more money for doing basically nothing most of the time.
> it's no surprise by and large they are not known for having a nuanced and academic understanding of economic theory
The folks I’ve worked with have been as dedicated to their career path as anyone, and while their expertise and skill varies that isn’t different than any job. I understand your point, but your (mis?)characterization hits me as a little biased and shallow.
They're intentionally focusing on only one half of the equation because the other half is partly their fault, and addressing it hurts their members.
They either don't understand that addressing wages without supply simply increases prices, or they do understand and don't care because it's good for their pocketbook. Which one's worse?
The article does, agreed. But I don’t think it was written by actual realtors. It’s the product of an organization that is representing them poorly, or so it appears.
They can be some great people but as a profession they are known more for their extroversion and soft skills than their high IQ understanding of economics lol
It also depends on how hot the housing market is at any given time. Often time a realtor is just someone who decided everything else was too much work. (My whole family has been in the business for almost 70 years, both commercial and residential.)
I'm sure some do more, but my personal experience on the sales side is that realtors do nothing except serve as gatekeepers to get your house listed in the local MLS. Then they show up at closing to collect their commission.
On the buying side, they do more such as drive prospective buyers around to look at houses, though it's been long enough since I bought a house that I don't know how much virtual tours have replaced this. Either way, it's not what I'd call difficult work.
It is "work" in the sense that you can be busy doing things. Nothing is difficult by any reasonable sense of the word. All the realtors I know who are actually successful are constantly busy, constantly taking phone calls or responding to texts, there's very little downtime. I'm sure there's some nuance to it, and it probably helps to be in the business for a long time, but it's a backup job for 99% of people for a reason.
I've bought and sold a handful of properties in a couple states through my life and have dealt with probably 2 dozen realtors in some professional capacity, and only 1 has been what I would call "good" and that was basically just him giving us insight into the market, being willing to tell us not to buy a house because it wouldn't fit our needs 5 years in the future, etc. Basically just willing to sacrifice a faster or larger commission to get us what we wanted rather than just closing a deal ASAP, which IMO should be the minimum and not the mark of a "good" realtor.
I'd say being a realtor is more about dealing with the psychology of buyers and sellers than the economy. And yes, you are wise to not trust them. Their interests are not yours.
And as the saying goes, it's difficult to get a man to understand something when his salary depends on him not understanding it. I bet most realtors would prefer housing prices to stay high and the average home owner to stay rich. They are not here to solve the housing problem. They are a part of the problem.
Vicious cycle. There was a story yesterday about a couple's rent going up 70% after they told the landlord they were having a baby around the same time the lease was up for renewal.
What's your definition of normal? 300 years ago you'd just set up on a chunk of land and build your own house. I'm not saying that's preferable to today but the actual financial cost was comparatively extremely little.
I bet there is a middle ground where we could relax or eliminate a lot of building restrictions and NIMBY policies to ease the upward pressure or even exert some downward pressure on home prices. We're also fighting against 6-7% interest rates after an extensive period of 2-3%.
increasing wages will fix part of the inequality crisis because as you go up from working class to billionaires you get less income from wages and more from capital gains. if you raise wages that changes the distribution to be more equal and thats a good thing. but i agree it wont solve housing by itself.
for housing we need to replace zoning rules with a neighbor vote, put the community back in control instead of bureaucrats who block new apartments for dumb reasons or take bribes from developers to build luxury investment properties nobody wants. there should also probably be an escape hatch where anyone can build affordable/rent controlled apts without a vote but only if the location has high enough average rent. that would help balance out inequalities and break up exclusive rich neighborhoods, maybe even help against racism.
the other side is lower costs with less paperwork (removing zoning makes a big difference) and enforcing competition in the home building industry. make it easier to start a new business and break up corporate monopolies. create a safe path for undocumented immigrants to legalize themselves so they can have labor rights, make legal immigration cheaper and more predictable.
> for housing we need to replace zoning rules with a neighbor vote, put the community back in control instead of bureaucrats who block new apartments for dumb reasons or take bribes from developers to build luxury investment properties nobody wants.
> there should also probably be an escape hatch where anyone can build affordable/rent controlled apts without a vote but only if the location has high enough average rent.
I don't think you're wrong; however, multiple things can be true at the same time.
In this case, housing prices are ridiculously high, and wages are ridiculously low, if you compare both to the overall cost of living excluding housing.
It’s also a diabolical amount. My friend bought a house in San Jose, and both, the buyers and sellers agent got $50,000 each on a $2M house. They didn’t even help with the house search much.
> not about you being forced to pay a particular commission
It's literally in the first paragraph of the article.
"At trial, a federal jury found that they violated antitrust law by conspiring to force home sellers to pay inflated commissions to real estate agents."
There is a difference between "forced to pay a fee" and "forced to pay an inflated fee." The GP said it's not about being forced to pay a particular commission, which is the first one, which is accurate.
Not usually. But homeowners don't usually set the price themselves. Yes, yes, yes, yes, yes, technically they can. But a _realtor_ is in their ear telling them MORE MORE MORE.
A good realtor should help the seller set a realistic price. Because if the house doesn't appraise for the selling price or more, the deal will fall apart before closing.
Don't live in the US, but we're facing similar problems here in Norway. One main driver is that there's not being built enough new housing. It's a combination of building being too expensive, higher interest rates, etc.
So the second-hand/used market is red hot. Renting has become so expensive, that many landlords have exited - so we're likely heading into a really bad crunch in the near future for the renters. I've read about people spending 50%-60% of their net pay on rent alone.
> One main driver is that there's not being built enough new housing.
I recently entertained the idea of building a new house. Not terribly surprising, but worth mentioning that the time and materials to put up the structure was going cost even more than buying a used house. If nobody can afford to buy a less expensive used house then naturally nobody is going to build the much more expensive new house either.
For builders, they will buy a block of land and build many houses on it. The unit cost of a home drops dramatically when you are building 50 of them at once.
The real killer for them is interest rates, as they finance the whole thing and then can pay it off when all the homes are sold. High rates make the finances much more challenging to work.
For what it is worth, said home entertained was a manufactured home, so it is already pushing economies of scale. I'd hate to see a quote for a custom home. We have not truly figured out how to make housing scale very well, though. Even our most efficient methods are very primitive as compared to virtually all other manufacturing we do. Solve that problem and the price of all homes will plummet.
New things do tend to cost more than old things, that's pretty much always the case!
Where I live, people are blocking the construction of new apartments because the cost of the new ones is a bit higher, 10%-50%, than the average existing apartment.
The idea behind blocking the new apartments is that "new expensive apartments don't help anybody" and people get very upset that the new housing is going to the type of person that can afford to pay slightly more for the newer apartment. Rather they would prefer that new housing is only built if it's cheaper than existing housing.
So when housing does get blocked, the existing landlords demand the higher new rents that those wealthier people pay, driving up the overall costs on old apartments. The poorer people get displaced, the wealthier people have housing but worse housing, and the only people who are better off are the landlords of the older apartments.
You gotta look at the motivations. Rich people and activists can both agree that affordable housing requirements are a good thing. The higher the better. This makes the project not pencil out so everybody is happy - the homeowners who don’t want new neighbors and the activists who think that everything is gentrification. The only people who get screwed are the only people who don’t have a vote, the non-residents. Which is why zoning policy and approvals cannot be locally controlled.
I would argue that the people who get screwed the worst are all the people who can barely afford to pay current rent.
They get displaced when rents rise, having to move away from their friends, family, their kids' schools, etc. All because "activists" convinced them that their enemies are the people able to pay slightly more, rather than the system that says "only the X wealthiest people can live here, oh and we won't change X even though it's trivial."
I’m always a bit confused how this is so difficult for people to understand. If I want to move into your neighborhood, there are two options - I move into new construction or I move into your house. There is no option C where I decide that because the housing stock is garbage, I decide to go somewhere else.
I can't tell you how many times I've been told that "supply and demand doesn't apply to housing," both by super wealthy NIMBY homeowners and by those struggling to get by.
I've heard the same thing about supply and demand many times myself which seemed strange at first, but when I dug deeper I learned they aren't using the traditional definition for supply and demand, so what they were communicating was technically true, if meaningless. They weren't speaking the same language.
When I dug even deeper, I discovered that, pretty consistently, they don't understand the concepts anywhere, but their misconceptions sometimes incidentally fit reality, leaving it to appear as though they have an understanding sometimes. Housing is one of those places where those misconceptions don't usually fit and that is where the breakdown really becomes apparent, hence why they see housing as something unique.
> the type of person that can afford to pay slightly more for the newer apartment.
Relying on that is the root problem. I could technically afford the new house, but in the end I couldn't find a good reason to tie up that much capital for something that does the same thing as what I've already got, only shinier. If the price were more reasonable then I'd make the move and then someone else could move into my much cheaper used house. But, as things sit, I occupy the cheap house instead, leaving the next guy out in the cold. Trouble is that just because I can afford it doesn't mean I am willing to be a buyer. The price still has to make sense.
I am not alone in this. It has been well reported that people are now staying in their "starter homes" instead of upgrading like past generations used to.
There is a lot of cost and effort associated with moving into (or building) a new house. Honestly, where I live isn't huge but it's probably a bit more than I need at this point. But, absent a real shift such as buying an urban condo, it makes more sense to just hold onto the paid-off exurban house for the time being.
And yet, the new "too expensive" housing is 98% occupied, so there are slightly wealthier people who are actually paying to alleviate the housing shortage crisis with their higher rents.
Yet the same people lobbying to block the building of these new apartments are still saying that "nobody lives there" because it doesn't fit their mental model of the world.
Well, occasionally a developer does mess up! So it sits empty for a year or two, then prices fall to the true price, and only that individual developer lost out. The city still got its property tax, an empty new building for a year or two is no worse than an empty lot for anybody, etc. etc. etc.
But people that claim to hate developers find this sort of situation, a developer that built too expensive housing and ends up eating a loss, much worse than the current state of people being displaced all the time.
I live in an apartment in Stockholm but I also own an old forest cabin. It’s perfectly legal for me to live in said cabin permanently, but it would be strictly illegal for me to build a new house to the same simple standard. The building codes are basically making it illegal to be poor.
Similar patterns exist for student housing. The old style of student corridors with small rooms are no longer being built. Instead we are basically getting full apartments with individual huge bathrooms because the building codes mandate that everything is wheelchair accessible even when it’s practically temporary housing and they could get by with making 1/10 apartments accessible.
And that’s not even getting into how NIMBYism is enabled by laws that basically guarantee stagnation anywhere housing is in demand.
A lot of the stricter codes have very real safety benefits though - modern electrical is much safer, fire sprinklers add significant cost but really do help contain fires, etc.
(Not that it's all good, e.g. I don't like Washington's WAC 51-11R which just seems way overcomplicated.)
>A lot of the stricter codes have very real safety benefits though
And it comes at a cost of slowly destroying our society and turning everyone into landless peasants. Is that worth it?
Nevermind that a lot the IBC is ghost written by industry to the benefit of industry. A lot of local addendums are the same but for local interests. A lot of the permitting process is hack garbage to obfuscate how bad it all really is.
And then when you end up with actually accessible version of those it is different again. Which I had for a few years as student. No under sink cabinets. Even more massive bathroom. The bathroom was nearly the size of those small bedrooms.
Similar problems here in Croatia, few reasons for it:
- Boom of AirBNB's and apartment rentals with tourism, with real low tax rates
- Limited liability abuse - company opens up, sells 30 apartments in a new building, build out the building, don't get any permits, just close the company down and open a new one. Legally, they are untouchable, and getting the permits is now on the apartment owners. Multiple friends live in such buildings, and maintenance is a PITA, trying to legalize it is a PITA, getting water/power is a matter of making shady deals with the neighbours, basically even living in it is technically illegal but not much they can do.
- Large influx of illegal money into the housing market (we have no law to investigate source of income), so money could be laundered easily.
- "Legalization procedures" where if you built a house before a certain year, or just started construction, it could be legalised. This caused people to build "fake roofs" and then claim it as a real building later on.
- Recently, immigration joined too - workers from non-EU countries are now allowed to get work visa's, and a lot of landlords are renting out a small 50m2 apartment to 10 people at the same time for ridiculous prices. The poor workers have to share bedroom with 10 other people, which is a terrible living condition, causing accidents like a whole floor collapsing due to 50+ people living in the building. While it's not legal, inspections are rare and the grey market is thriving.
- And my favorite - as a large number of apartments are bought as investments and uninhabited - around 22% in the capital, according to official estimates, with about 500k free total, in a country of 3.5 million people - the government got a great idea:
They will free up more housing, by offering the landlords of the empty apartments to rent thenm out with government guarantees. This means the government will pay them out 60% of the future rent money immediately, so the landlord can buy another apartment as an investment immediately using that money, and just get richer.
Now, we're in an interesting situation:
- Prices have risen quite a lot, like 3x over the last 5-6 years
- Existing landlords will get funding from the government to buy more apartments
- Meanwhile, new loan rules came out, prevent people from getting a loan that is more than 45% of their salary (after subtracting the costs, including your current RENT). 10% of the value has to be provided immediately by the buyer, and after loan payment and living expenses, you need to have at least 900 euros remaining each month from your salary.
In a country with a median salary of 1300 euros, with median rent being about 500-700 euros, this puts a lot of people in a locked position - you can't get a loan to buy, because you are renting. So from the 1300 euros of your salary, the bank subtracts 500 euros of rent as your "living expense", leaving you with 800 euros monthly total, which is under the legal limit for getting a loan, even tho once you buy the apartment you would not pay rent anymore.
So to get a 30 year loan to buy a 50m2 apartment, you need to have about double the median salary.
Now, they are talking about property taxes, which will force people barely making ends meet to sell the inherited land/houses/apartments for cheap to people that can afford it.
In 1970 a $300/month apartment would be ~$2000/month in today dollars. I do think rents are too high as productivity and supply chains are much more efficient. I think in the 70s we were still using black pipe for gas, iron septic lines, and copper pipes for water. But, I don't think new builds or renovations are cheaper inflation adjusted (harder to estimate).
Cost of money (inflation), building, and maintenance is the floor for rents.
The median monthly rent for houses and apartments in the U.S. in 1970 was $108, or around $930 in today's dollars. So, in today's dollars, that would be $11,160/year. Median household income in 1970 was $9,870, or $84,714 in today's dollars.
Median rent in the us today is around $1,750, or around $21,000/year. Today's median income in the us is around $89,000. So, housing cost has nearly doubled, while wages have only risen by about 5%. And that's just housing. I'm sure the math for healthcare and education costs is even more grim.
What we spend on housing has doubled. That doesn't mean the cost has doubled. It means that we buy a lot more housing than we used to.
Real estate cost is local and there are parts of america where the prices have gone nuts. But there's a lot more where it hasn't and housing is affordable.
> But there's a lot more where it hasn't and housing is affordable
In many of those places salaries have been stagnant or work has dried up
So we have a weird situation where someone living in a big city with a large salary is priced out of real estate by high prices, and someone living in a smaller city with more reasonable real estate prices is priced out by a lower income
It's not universal of course, but it's a squeeze that a lot of people are feeling
1. The average house is ~60% larger than in 1970. More house equates to higher costs.
2. In 1970, the typical working-class man would spend time in a public house 5-6 nights a week. Today, third places are nearly nonexistent. Houses, largely driven by the internet opening it up to the world, has become more than a place to eat and sleep. Monetary spending is naturally directed to where one spends their time and energy.
Supply of housing has not kept pace with population since then. So you have more people chasing relatively fewer houses.
Also compare a 1960s or 1970s house to one built today. Today's houses are bigger and much more luxuriously appointed, with gourmet appliances, stone countertops, multi-head showers, walk-in closets, huge bathrooms, etc.
Once the boomer generation dies off or goes into assisted living you'll see a lot of those 1970s houses coming back on the market.
The house I live in has one small bathroom. It was probably built before there was indoor plumbing. (Early 1800s.) A back of the mind concern when the day comes I end up selling but not much I can do about it. The house has had a lot of upgrades over time but some things can't be easily changed.
More supply should make them more affordable. Buying a house was never "easy." Some people seem to think that minimum wage workers were buying houses back in the 1970s and that wasn't the case. At all.
Were apartments $300/month in the deep suburbs of cities though? Because I'm always surprised to hear my parents tell me rents for 1 bedrooms in the place I grew up in outside of Boston are in the $2-2.5k range (confirmed just now, not an affluent suburb). Census data seems to put the equivalent in Massachusetts at $120/month in 1970, which would be roughly $1k/month in 2026. $300/month in 1970 might even be high for what people were paying in Manhattan in 1970.
My parents bought the home we grew up in, which is located middle of Queens/NYC for ~$30k around 1977/8. It sold most recently for $3M. Rents were typically well under $300mo. $150 in not so great areas. That was a high inflation time though.
Today, I live in a small city in a house I bought for about $200k 20 years ago. IIRC, it sold for $80k around 1992. Worth about $450k today. A decent 2BR apartment rents for like $2k here, a nice one >$2700.
Listening to NPR yesterday, they mentioned it’s a renters’ market in the Sunbelt [1]. Lots of new supply here in Texas and I just signed a lease recently with 2 months free in DFW. Bringing me down to ~$1550/month. Lots of places are offering 2-3 months for free.
That’s a sort of interesting question. On one hand, landlords are easy to resent, they extract a lot of income primarily by owning something rather than doing anything productive.
On the other hand, wages haven’t kept up with inflation and the super-wealthy are constantly capturing more of the value. At least in the case of small-scale landlords, maybe they are just the only lower-to-middle class people who’ve managed to defend the deal they had in the 90’s, proportionally speaking…
Are you saying that you blame apartment prices on landlords? If you build more apartments then market rent goes down and landlords can't charge more if people can just find cheaper apartments. It's not like landlords just choose whatever price they want - it's significantly bound by the demand.
I guess I'm just confused why your entire comment is about landlords and the super-wealthy when the article and message you are responding to don't mention either.
The line of thought that links super-wealthy people and wages is described in my first post. If you want to argue against it that’s fine, it isn’t a perfect link. But I’m not sure what to do with general confusion.
are you referring to NIMBY homeowners? because yes, people who own houses are the most likely to prevent more housing from being built (although not the only reason more housing isn't being built)
Landlords don't care. You put a 5/1 beside their slum and they're ecstatic because that means the land under their slum is now worth "build a 5/1 here" money.
it's a component but not central afaict. of course it's localized and depends on housing market concentration, major metros see a large share of units held by relatively few entities like Greystar.
“I have seen people technically meet the 30% rule and still feel financially strained,” shares Linda Grizely, a certified financial planner and financial wellness speaker. “The pressure isn’t the rent alone; it’s the combination of rent plus everything else in their financial life."
>I know people living pretty well on that in New York City.
median asking rent in 2026 for NYC is $3616/mo ($43,392/yr) meaning rent alone would be 60% of that income, assuming that the $72.5k figure is after taxes (which it probably isnt).
if you take taxes off, you're probably at like 55-60k. that means rent alone is 70%-77% of income!
Yes, because you really don't have to pay that much. Those expensive apartments go to people who aren't very price sensitive (either because they actually have the money, or because they want to live it up in their 20s/30s and are spending beyond their means) or who are willing to live with enough roommates to make it affordable. If all you can find is a $3.5k unit, you'll need to get a roommate. But you can find better if you put in the work and look beyond StreetEasy.
The median household income in New York City is only $81,000 per year! People make it work!
The poster above was quoting the median for all apartments in New York City, the (second-?)most expensive market in the country. Nationally it’s about $1,600 for a 1br: https://www.apartments.com/rent-market-trends/us/
I think SRO's are very different from "One bedrooms" and even from studios? a studio or a one bedroom has a kitchen, a bathroom, and some living space... I think SRO's typically have a bed, a chair, and sometimes a desk. Bathrooms were shared, I'm not sure how kitchen/cooking space worked?
Actually the US is a first-world country because it's allied with the US. Russia is a second-world country because it's allied with Russia, and Switzerland is a third-world country because it's allied with neither.
Look at real, median household income. It's been going up and up. The things that have gone up in relative cost are housing (because we heavily regulate building it) and premium services like healthcare and education because of Baumol.
Probably also doesn't help that to many people want/need to live in the same few areas. If you could take your office job (which in most cases would work perfectly fine) and move to a less popular area, 30% might be rather high.
That's the thing or at least one thing. These discussions aren't about most small towns and cities in the Midwest. They're about prime areas on the coasts for the most part. Heck where I live about an hour west of Boston/Cambridge is a lot cheaper than the metro itself for the most part.
I'm paying 28% of my net income for rent and utilities on a one bedroom apartment. I could find a cheaper place too and it would be just as nice, just not in as desirable part of town. Not sure I'll ever be able to afford a house though.
Well, it doesn't help but that's where the money is and as a society we should want people to move where they are most productive. Geoffrey West shows in Scale that social outcomes like GDP, patents, etc. but also crime grow with a factor of 1.15 while infrastructure needs like pipes, wires, heating cost, gas stations, etc only shake with a factor of 0.85. So it should be highly desirable to have larger, denser cities. Unfortunately, it seems that once the boomers had stepped into adult hood and bought there first homes, we decided that cities are complete now and existing neighborhoods shall not change anymore.
It depends on the distribution. The reason it is often used is when there are extremes in the distribution like a handful of people paying $1B per year on a property pulls the mean upwards.
Also depends whether you can about the middle more than the 10-20% of the people most struggling who can earn much less than the mean or median
The median alone doesn't paint the whole picture. We need to compare the spread as well. The median doesn't care if you make just under the median, or $1 a month.
When it comes to income and wealth, I don't think so. There aren't enough people in the middle ground between rich and poor for that to be a meaningful stat for most things.
If there are very few people in the middle ground, and more people are poor, then wouldn't the median be a poor person and therefore somewhat representative? I'm not sure I'm following your logic here...
so many projects got nerfed by NIMBYs during good economic times and now are infeasible. there's more political will for change now but i'm still skeptical things will change much given the cost of construction in major metros.
People who are able to restrict housing development (e.g. existing home owners) have too much political power on a topic that shouldn’t be up for a vote.
> The common factor: the capital class screwing over the working class.
This thought terminating cliche is getting real old. What are your solutions? and what evidence do you have that those solutions will solve the problems? Shaking your fists at "the elites" and regurgitating populist slop is not going to
It's the opposite of a thought-terminating cliche. It refers to an entire world and body of work, which include solutions.
You could start by reading Marx, who laid a lot of the groundwork.
> Shaking your fists at "the elites" and regurgitating populist slop is not going to
I like the way you trailed off halfway through your knee-jerk reaction, underscoring just how much your response is an automated result of indoctrination.
> It's the opposite of a thought-terminating cliche
> You could start by reading Marx, who laid a lot of the groundwork.
Are you aware that you just responded with another? You did the "read theory" meme lol
> I like the way you trailed off halfway through your knee-jerk reaction, underscoring just how much your response is an automated result of indoctrination
so you don't have solutions or evidence is what I'm gathering? just another lefty populist spouting tired platitudes?
Yes, of course, but consider the source. Who do you think this article, about literal rent seeking behavior is representing? Certainly not the working class...
Aside from less than a quarter point (0.24) from Covid, wages have in fact risen with inflation and that small difference is also likely to disppear soon.
Frankly the statistics do not feel right - I remember jobs that were easily found at $15 per hour in 2012 and cost of everything was insanely low. One bedroom / 750, McDonald burger, $1, McDonald soda $1, a pack of beer $7. Now eveything is easily double or triple and the basic jobs are still at $15.
I bang on this drum a lot. We need Land Value Taxes to incentivize productive use of land, and we need to eliminate (or greatly reduce the burden of) Zoning (Japan has zoning but a great model that really allows building housing efficiently). When it costs $50k in permits and takes 2 years just to put a shovel in the ground, to build a single family home, and millions to build an apartment building, of course homes are expensive.
Inefficiently taxed land, and artificial scarcity via laws, turned housing into an asset class. This problem will not go away, in any country, as long as those two things are not resolved.
No amount of money will help jurisdictions that still refuse to permit new buildings in face of a constant influx of people.
You cannot live in Musk's banking account. You have to have the actual physical structure, and current laws in hotspots like San Francisco and New York do their utmost to prevent new development.
Places like Austin, which are less restrictive, don't have this problem.
>You cannot live in Musk's banking account. You have to have the actual physical structure, and current laws in hotspots like San Francisco and New York do their utmost to prevent new development.
>Places like Austin, which are less restrictive, don't have this problem.
Not really fair to compare 2 cities on the waterfront with no obvious space to build over to a city in the middle of Texas. San Francisco is even worse than New York(IMO) because of the hills.
We don't even need skyscrapers to relieve the housing shortage. Legalizing duplexes, townhome, quadplexes, condos, or three story buildings that contain six units would add a lot of supply.
What about subjecting this theory to a practical experiment?
In many places of the world, the skyscrapers are full, and the people who move there leave behind another apartment for those who don't want to live in a skyscraper.
Housing in SF and NYC are on some level substitute goods. Many of the people living there are mobile and the ones deciding prices on the margin. If SF rent was $10k and NYC was $3k, many are going to leave SF to get a similar type of lifestyle in NYC for cheaper, raising demand for NYC housing. If SF zoning laws allowed building an incredible amount of housing, lowering rents to $2k, while NYC is at $4k, many people would leave NYC, lower housing demand and thus rents, to get a similar urban lifestyle in SF.
This is the whole crux of why NIMBY is such a collective problem. When NYC doesn't build because SF should, when SF doesn't build because the Bay Area should, when the Bay Area shouldn't build because Texas should, everyone collectively pays higher prices because overall housing supply is reduced and many people move between them.
But even if/when the law finally allows more building, you will have to compete with a richer, and richer, and richer upper-upper-upper class - both people and firms - who will price you out.
Its close to a pigeon hole problem. If there are 10 houses and 11 people, the homes are going to go up in price until the 11th is homeless (or moving away to somewhere cheaper). If there are 100 people, its the same issue except magnified, this is what happened in the bay area. Significantly more people than homes. But if there are 100 homes and 10 people, it doesn't matter how rich they are, the prices will drop because there is less demand. It will also be less attractive as an investment vehicle, because they will demand less rent.
Oh, don't worry, they also buy land to build luxury condos for the upper-upper class - that can't buy but can still pay rent.
>But if there are 100 homes and 10 people, it doesn't matter how rich they are, the prices will drop because there is less demand
No, the price won't drop. The market is extremely inelastic. These homes are collateral for other investments of the super-super-super rich (people or organisations). It is better to keep them vacant rather than drop their value by lowering the rent, which would cascade to their leveraged investment.
This is why:
- rents only go down when there is a big generalized financial crisis, otherwise they never go down. The best that used to happen was that rent stayed stagnant while wages rise, but that isn't happening...
- you see so many empty appartements and retail spaces everywhere.
I mean, there a a HN front-page story about vacant spaces a day ago. You should read it.
it can't be those 8 guys with >50% of the wealth! no sir, it must be all those poor people taking up the poor people's space they were alotted in 1995.
These trillions that go to SpaceX and whatnot are trillions that aren't going to building more homes, nor increasing wages. Not even as a second-order effect.
There is no "trillions that go into SpaceX". You and others seem to have a massive misunderstanding about how the stock market works... they could have sold 10 shares at $50 and still have a valuation in the trillions... Market cap does not mean they have that money in hand or even that it is being taken from someone else...
They literally sold less than 5% of the total shares in the ipo by the way...
Always has been. You have to suck the money out of inefficient real estate to compress their margins and make it a commodity (=Georgism) or you let real estate bleed your economy dry (=what every Western country is doing today).
Yet if I open X, I'm being told constantly that my European mind can't comprehend how poor we are and the richest European country is poorer than the poorest US state.
> Although this rule isn’t necessarily wrong, the reality is that modern budgets are much more complicated than they used to be, so you can’t take the 30% rent rule as a hard-and-fast guideline.
Modern budgets are not much more complicated. The rent is too damn high!
In my state (Idaho) they can (and do) pay less than minimum wage if you are a tipped employee. [1]
"Most" who are in those positions tend to make at least minimum wage, if not more, but that is not a guarantee, and it is harder to claim tips as "stable income" when trying to get credit/housing.
Median wage/rent is hard to apply. Totally different results if you look at what the typical renter makes (at least in my area).
Minimum wage is one thing...but when it takes 3-4x minimum wage to stay at 0 every month things get difficult.
I'm not in NC, but Walmart starts associates at $14/hr and will (almost) hire anyone. A quick check shows they have tons of open positions throughout the state, full time with benefits.
That's a good slight of hand you pulled there. Most of the demographics here won't have taken a path through college that equips them with the specific knowledge to catch it.
(I'm not gonna spoil it, I wanna see if anyone else can figure it out)
I'm making zero. I have been in IT, a developer (but out of date mostly VB and SQL), managed dev teams, managed IT departments. Unfortunately I have a record and it's hard to get someone to give me a second chance plus now I'm over 50 and too old/overqualified for the minimum wage jobs. Would love to hear your ideas.
Shit, people don't even make minimum wage in states with tipped minimum. Bartenders be getting less than that, and people aren't drinking like they use to.
I'm very interested in hearing the opportunity you can give someone who's willing to work for $14.50/hr though.
"Go tell that to the middle school travel team in my neighborhood."
Why are you even making this comment? The comment you responded to was obviously talking about median wages of the entire US population. Real Wages are near all-time highs - it's just a fact, you can look up the data yourself.
Havent you got states that haven't increased the minimum wage, just for inflation, in decades? Don't most people live in cheap wooden houses on top of all this? Isnt all your livestock full of chemicals to counteract the unsanitary factory conditions they must be processed in so the average American can even afford it in the first place? Doesnt half your country still hate blacks?
And finally, why do so many people kill themselves in America? Can't be that great. Don't know of many hunter gatherers offing themselves
For the ones that didn't read the article, it says there. The problem is that the state takes more and more away from the workers wages:
"The biggest flaw: It uses gross income, not take-home pay
One of the biggest issues with the 30% rent rule is that it’s based on your gross income—not the amount of money that actually lands in your bank account on payday.
To illustrate this flaw, let’s use some real-world numbers. According to the latest FRED data, the median household income in the U.S. is about $84,000 per year, or roughly $7,000 per month before taxes.
Under the 30% rule, you could theoretically spend about $2,100 per month on rent if this is your income.
But let’s take a look at what your take-home pay could be with this salary. "
It may say the problem is taxes take too much money so you can't pay landlords, but how do we know the real problem isn't that landlords take too much money so you can't pay taxes? Or Comcast takes too much money so you can't pay landlords and taxes?
We know it, because during the last 50 years, already adjusted to inflation the USA government budget increased by 2.48× per capita.
And unless your argument is that public services are 2.48x better now, then yes, I know that the problem is, as usual, that the government is taking workers money away to do as they please.
It's worth being precise about this because it's a really important point. Most people who we call "landlords" are simultaneously a landlord and a property manager. Property management is an important and productive job. But the vast majority of such people's financial outcome is actually from being a landlord, that is doing literally nothing except holding a piece of paper granting them monopoly on a plot of land. That plot of land's value (separated from the buildings on top of it) is generated, by definition, by the community surrounding the plot.
So when you say landlords are the least productive class in society, it is that they are totally unproductive by their nature. There is literally nothing to be produced! The land is there regardless! Then the fact that they collect a tax on consumption of a good they did not create makes them a negative-productivity component.
If you remove landlords (but keep property managers, developers, etc, which are all different jobs sometimes played by the same people), it would be a strict improvement to everything about our economy.
I'm going to assume ignorance and try to explain why landlords exist. Of course you could already understand this and have this as an ideological stance, in which case my effort is likely wasted.
Landlords assume a similar role in economy that banks do, they assume risk on your belalf. We have quantified this to an extent that you can reliably put a dollar amount on how much risk there is.
When you are renting and there is a job change or war or natural disaster or really, anything inconvenient at all, you can more or less walk away without losing much.
Landlords do not assume risk in their role as landlords.
The land is there regardless of whether anyone "takes on the risk."
Landlords often take on risk in their role as property managers or developers. They should be rewarded more for that, and not at all for their simple ownership of land, which again: would be there regardless of whether someone else or no one at all owned it.
We need to draw a box around the property owner, the previous owner, the owner before that, etc, because the current property owner does take price risk, but only by virtue of the payment they made to the previous property owner and so on. The intra-chain P&L distribution is not a legitimizing factor if you believe the entire ownership structure is an exercise in rent seeking (in the economic sense -- as you point out, development and management are not economic rent and I'd add abatement to that list).
Equivalently, we can just pretend that there has only ever been one owner.
The risk inherent in the ownership of land is having too much of your wealth concentrated in it, and having used leverage to purchase the land. Both are true for a large fraction of landlords in the world.
A real estate bubble bursting or anything that makes your area unappealing to live in would suddenly be really problematic and in the case of leverage get you negative equity.
Banks hold money for you, the cash would still be under your mattress if the bank did not hold it.
I'm sure you have a philosophical point here, but this is exactly how the modern economy prices risk. Your understanding of the semantics of risk is not being questioned here.
They pool deposits and they lend it out, taking on the risk of doing so with the guarantee they will make their depositors whole. This is called "taking on risk," and they are paid for this service (among the other instrumental services they provide in order to make this happen). Without banks providing this set of services, these deployable pools of capital would not exist.
This is absolutely not the same as the price risk that any asset holder has, and it is not what landowners are paid for.
It's not a philosophical point. It is literally a question of who is getting paid what, and why?
Any high risk high reward strategy gets you in charge of creating the risk to chase a higher reward.
The math is fairly similar between spending 10$ to buy a call option and a 1 million down payment to buy a 10 million property with 15 apartments to rent out.
When ownership shows up at zoning meetings, the main risk they seem to be concerned about is accidentally letting someone build enough housing. Heaven forbid!
Are you perhaps too privileged to have seen situations where owning land is a liability?
As we speak, close to a billion people are in the middle of ongoing wars. There are entire countries where land is worthless. Ukraine has several hundred square kilometers of land with a thick covering of fiber optic cables from drones.
A better first world example is laws change and now this site where you were gonna build self storage for 20yr before selling out to an apartment/office developer is now worthless
We have seen forest fires burning city blocks in west coast cities in the recent past, can't get more first world than that.
If you think insurance will save you, it might not if no one is willing to insure your property (large true in California nowadays) or the insurance company goes bankrupt in a crisis (happens pretty much all the time).
Why on Earth should I feel the slightest obligation to make whole some jerk who bought the right to kick me off a piece of land and lost money when that right became less valuable?
I have a much better idea: point, laugh, and say "sucks to suck!"
If you didn't mean to imply that I should feel an obligation to compensate the risk of a capital loss, what was your argument?
No, the system works the way it does because it was built by the rich, for the rich, to ensure they had a way to get paid for being rich. You can, of course, choose to deliberately not understand that.
That means the opposite of what you're telling everyone it means. When someone assumes risk it means the risk is theirs. You're debating the meaning of English words right now.
I take your overall point about rich people making laws. But on this specific point you're wrong. Take the L.
Anecdata here but I'm a landlord in an area with low 10s of thousands of residents and low 100s of rental units. I absolutely do not care about new housing being built, other than encouraging it because economic development of the town is good for everyone.
My neighbors, the homeowners who don't rent, are typically on the other side. And it's not unreasonable to want to keep SFH neighborhoods predominantly SFH.
My main risks have have absolutely nothing to do with more housing. It's more physical risk to the property and depreciation.
> If you remove landlords (but keep property managers, developers, etc
In this scenario, who owns the property? And if you are advocating that everyone should own their home, what is the point of a property manager? What about the people who do not actually want to own their home?
This is exactly my problem with these arguments that demonize landlords. I've lived in multiple cities where I knew I'd only live there for a couple years, and I'm only interested in renting. How do you live somewhere short term without someone owning the rented property?
Swapping the base layer of the capital stack has zero visible change to the person renting. In fact, I'm pretty sure it's common in asia.
Instead of:
Investor owns the land
Investor pays for construction, finance, maintenance
Investor receivers rent
They do:
Government owns the land
Investor pays to lease the land for 30 years or whatever
Investor pays for construction, finance, maintenance
Investor receives rent
The active roles don't change, the market that keeps them dynamic and competitive doesn't change, but the firehose of passive money goes into tax revenue instead of some rich guy's pocket.
Of course it is not a solution to current situation when real estate are very expensive, but in theoretical discussion where real estates are affordable you can buy it and sell when you move.
But I don't want to buy a home, maintain it, and have to sell it 2 years later. Renting provides a great solution that makes both sides of the transaction happy.
Singapore has the correct approach. Land Value Tax is the incorrect approach.
LVT has the same vulnerability as property tax: owners can worm their way into the policy details and redirect the surplus back into their own pockets. Leases bypass this problem through the competitive bidding process.
Community land trusts, cooperatives, nonprofits, universities, local government, etc.
The problem is always financing. If you're going to own a place you need a lot of upfront capital. If you own a place and plan to maximize rent increases it's easy to leverage your new asset to buy more properties. But if you just want to keep it near cost then you need a new infusion of capital for each new property. So, by their nature such endeavors don't grow as fast as rent maximizing landlord can grow.
The problem is not capital here. Universities and governments have quite a bit of capital. They could do this in a larger scale.
It's more about risk management. Do you want your university to be disbanded or your local government bankrupt if there is a war or natural disaster, or even a standard city block fire.
I assure you wars and natural disasters are not that uncommon in the grand scheme of things. That's why we have people or corporations with a higher appetite for risk assume the risk. These entities, unfortunately, don't always have your best interests in mind.
What cities in the US have the capital to do this at a large scale? Risk management is certainly a part of it but every discussion here in SF and broadly in the CLT movement is about how to get capital access.
A university endowment or a city's tax revenue is legally and structurally earmarked. They can't just liquidate those assets to buy for local real estate. For the non-profits and community land trusts actually doing this work, securing patient, low-cost capital is absolutely the primary bottleneck.
The high leverage of private landlords actually makes them more vulnerable to systemic shocks. Meanwhile, non-market housing models (like land trusts) don't over-leverage their properties, which is exactly why they historically have much lower default rates during crises.
Given the option of landlords making bank for their risk and then getting a government bailout when there's an economic shock or having more housing decommoddified I'd take the latter. There's very little housing in the US that is under these alternative structures so at the very least I'd encourage more experimentation with them.
The steelman interpretation would be that government is the only party allowed to own rental properties.
Nobody would be allowed to rent out a space they owned because it would turn them into a landlord. All of the rooms people rent out to others would go away. You wouldn’t be able to rent a private house from someone, you’d have no choice but to live in government owned housing developments.
This would be incredibly unpopular if implemented because it wouldn’t resemble the utopian fantasy it’s supposed to represent. It’s a vacuous idealism in the same category as “billionaires shouldn’t exist” that serves as a placeholder for an unspecified utopian government-run economy. The details are never specified, you’re just supposed to imagine it works and nothing is lost as a tradeoff.
I think Vienna somewhat functions like this, and it seems to be fine. Not that individuals can’t literally own property and rent it out, but that most housing options are government owned.
actually a lot is privately owned, but by law 2/3rd of every rental property must be offered as subsidized by the city. so in practice you own the building, but the city decides who gets to rent 2/3rds of it since the subsidized units are only given to people who have a low enough income.
> If you remove landlords (but keep property managers, developers, etc, which are all different jobs sometimes played by the same people)
You need to be specific about what you mean by “remove landlords” because that’s a nonsensical statement by itself.
Some party must be responsible for the investment to produce the property. Some part must own the property.
The most charitable interpretation of what you’re trying to say would be that private rental contracts are forbidden and the government would have a monopoly on renting properties out. So only the government could own properties that are rented and the entire rental market would depend on how much housing the local government decided to build and manage.
You tax away all the gains generated by the land value, which effectively eliminates the "landlord" component of a rental fee and directs the owner's incentives toward producing value via construction, improvements, or services instead of rent-seeking on an asset they did not create and which would continue to exist if they never set foot on it.
You could, for instance, require people who own habitations to actually live in that location. You could tax people who own property they do not actually live in very aggressively until they would be willing to sell for less to avoid the tax burden. You could have a system which taxes aggressively and builds lots of houses and gives it to people who own it as long as they live there.
There are quite a lot of ideas between "government owns everything" and "let vampire landlords do unlimited rent seeking."
As it happens, I think there is quite a lot to be said for the free market solution of just letting supply meet demand more or less freely, but I think your interpretation really is not the most generous one.
> But the vast majority of such people's financial outcome is actually from being a landlord, that is doing literally nothing except holding a piece of paper granting them monopoly on a plot of land
This is how I know that you've never tried to run houses. If you hire out a property manager and all of your maintenance you are not making money.
I have to be an electrician, a plumber, a painter, a drywaller, an engineer, a salesman, a delivery driver, a businessman, an appliance repairman and a lawyer. And that's to make a measly 8% on my money.
> There is literally nothing to be produced! The land is there regardless!
No one rents bare land. They are renting a depreciating asset that you have to upkeep.
Yea yea yea, Henry George says that the value is provided by the citizens around your property. I call bullshit. The value is the shelter, the heat, the comfort. That's what people need.
No I do "run houses." I bought a house, rented it out, paid a bit for maintenance throughout, covered the entire mortgage the entire time, then sold it for 50% highly levered capital gain in ~4 years.
It's not because I'm an awesome landlord or property manager. I did the bare minimum. It's because the location appreciated thanks to the community surrounding the house, which is the driving force of the vast majority of gains in real estate.
Landlords complaining is honestly some of the funniest stuff on the Internet. I really appreciate the lols.
Shelter, heat, and comfort? No: Location, location, location.
A crack shack with a busted roof and broken utilities in a good location sells for the same price as a pristine, functional mansion in the middle of nowhere.
A landlord is doing exactly the same thing as an investor. They are tying up their capital in exchange for an income, and the possibility of a capital gain.
The landlords could then pay rents to the local government. We could call that landlord taxes or something and use that to fund local services with them. Wait...
Property taxes are voted on by property owners under the steepest moral hazard while leases are actually competitive: this is the difference between the government capturing a minimal vs maximal fraction of the land rents.
If you genuinely think there is little difference, why do you care so much about not switching to a lease system?
Chicago has relatively affordable housing purchase prices as property taxes are very high. The government has taxed away property appreciation. Unfortunately the deferred compensation promises they have made to public sector employees are coming due and further tax hikes are needed.
As described above, a landlord is not a developer is not a property manager. Sometimes a single individual plays multiple roles, but that does not make them the same inseparable job.
The most popular proposal (from Henry George) is to maintain individual land ownership, but impose a land-value tax that approaches 100% of the land rent.
The result is that real estate basically sells for roughly what it would cost to rebuild whatever is built on the land.
There is still a premium charged (in the form of LVT) to allocate access to desirable locations, but the revenue goes to the government/community instead of the previous owner. And the eliminating the incentive for land speculation should actually reduce overall costs.
That is not a problem, but the problem is that now they are financially incentivized to screw their tenants as much as possible. With a different capital project, sure they're screwing their customers, but at least I go shop at a different store. Humans need housing, and moving is annoying and expensive.
Why is the landlord being unproductive relevant? If the government owned the land, they would never sell the land, so the concept of land appreciating doesn't exist. The only difference is that the government would possibly rent at-cost, but the profit margins for landlords are not the main factor driving up rent. Get rid of landlords and the rent prices would decrease only very slightly.
The market rate and supply and demand are going to determine the price of housing whether or not you have landlords. Remove landlords from existence and the alternative is to make everyone buy homes. I guess that would drive housing prices down a little because so much of the population would be living with their parents until they save up enough for a down payment, which might not occur in their lifetime. So demand would go down, but it would not be fun for the people who wished they could rent.
> I guess that would drive housing prices down a little because so much of the population would be living with their parents until they save up enough for a down payment, which might not occur in their lifetime
you mentioned supply and demand, if everyone is struggling to buy houses, downpayments wouldn't just go down a little.
in the end, everyone needs housing, every single house would be occupied just as now, but instead of having renters being squeezed by supply and demand you would have owners.
how is that a worse scenario?
let developers have rent, they are the risk takers, they deserve it.
> in the end, everyone needs housing, every single house would be occupied just as now, but instead of having renters being squeezed by supply and demand you would have owners.
Not every house is occupied now. Not everyone will sell at loss if they can't rent out. So more homeless people?
What about people who don't have any savings living paycheck to paycheck? There is clearly some floor on housing price and not everyone can afford housing even at zero margin. Giving out free mortgages like it's 2007?
What about new housing? With lower prices supply will further decrease, and in places with high prices it's usually already insufficient.
Because there's not actually enough money in America for everyone to be well off. You can either have a few silly rich people, and the rest of us constantly exchanging labour for cash until we die, or everyone is poor.
without renting though it would probably be more like buying a fridge. You could just buy it when you needed it and sell it when you no longer needed it.
With realtors taking a 10% cut on each transaction? Or do you envision a more liquid market with less paperwork? What about escrow, inspections, and handling disputes on large transactions?
BTW in the US, a big advantage of renting is not having to buy, sell, or maintain appliances like a fridge because the landlord has to deal with it.
I only partially agree with this - Access to housing for people unable to access a mortgage is very important. And the capital outlay historically required to OWN a house has been nearly impossible for the vast majority until recently. And even now, banks really hate lending to people not already "on the ladder" to use a British term.
For instance: I bought my wife's grand fathers house. It appraised for $165k, and he sold it to me for $130k, I put $50k down, and got an $80k mortgage. I earn a very decent amount around 4x the median household income. I have 22 years of employment history with 0 days "unemployed". I have maintained a DTI of less than 10% and a Credit Rating of 800+ for at least the last 15 years I've been tracking. I have more money in my brokerage than the house is worth, let alone the mortgage, and yet it still took 3 different banks, and over 13 months to close on the house. I was denied by Bank1 (who I have over 20 years of history with) and Bank2 (who owns my business accounts and holds $10s of thousands on average up to $100k regularly). Bank3 approved me, but by the time they approved me, interest rates climbed from 2.5% to 5.75%.
> without a strong guarantee you'd get it all back?
Mortgages are backed by the asset you are buying. $400k for a house is backed by the house. On top of that, almost every bank can sell off those mortgages and get the cash back immediately.
So, you are correct, I would not lend hundreds of thousands unsecured to a random person, but if I had the disposable capital, though, I WOULD buy a house with that money, and price in their credit rating to their interest rate, and turn around and sell it to Fannie/Freddie and recoup the principal that I lent.
Banks aren't on the hook for any of this (except for mortgages that don't conform, but most banks don't touch those, you have to go to brokers for those).
I have. it is work but definitely not a lot. It's more financial stress but that evaporates as your finances go up. Some people just like the control or have the asset though. Its all around a societal drain imo.
Maybe. I think when times are good it seem like that (right now) but when times are tough they can be stuck owning things that lose money. There is some risk in ownership.
You lose close to zero money owning land even in down markets. That's why there are vacant lots that cost millions of dollars in every major city. Near-zero carrying cost.
There's risk in owning housing and so we should make sure people get rewarded for that instead of rewarded for owning land.
>You lose close to zero money owning land even in down markets.
You still lose relatively though because the next person with their money in the market made some %
Land and real estate assets are generally a poor investment relative to the market without a ton of active management. There are god knows how many millions of people who own land that would be incredibly valuable if not for the civil engineering lobby getting environmental rules and laws written to their favor.
I guess it's time to abolish apartment buildings then. And how dare someone want to rent a house/condo/apartment when they only expect to live in a city for a couple years.
Landlords do not create apartment buildings. Developers do that. Developers should get more reward for developing things and landlords should get less.
Landlords do not manage properties. Property managers do that. Property managers should get more reward for managing properties and landlords should get less.
Sometimes these are the same individuals and they lump their fees into a single check, but these are not the same jobs and they should not be treated the same.
A microwave is orders of magnitude cheaper and easier to purchase than housing. In fact, they appear to be too cheap to be available at Aaron's for rent. So you're going to have to cough up $50 for a microwave from Walmart if you only want one for two months.
inb4 a rentier-class swoops in to "well actually" this because interest rates are up: you need to draw a box around the capital interests (current owner, previous owners, bank, bond holders) and treat them as a group counterparty to the renter if you want to understand the system. Otherwise you'll get kited by each free-money-recipient pointing to the other and saying "look over there!" Which members of the group are living it up vs under pressure at a given moment changes, but what remains constant is the gigantic flow of money that comes out of the renter and remains with the capital interests after subtracting off expenses.
If companies would allow people to spread out more we could probably improve that situation some, but they want us all concentrated in 10-20 major metro areas. There's cheap housing in this country, its just in places where the job market is extremely limited.
On a note about addressing housing concerns, it certainly would only help a minority of folks but what do people think about right of first refusal?
Like if a landlord wants to sell their building and someone comes along with an offer for $500k then the current tenants have an option to buy it at that price.
Certainly would be annoying for investors looking to buy quickly but potentially life changing for long term tenants about to get a new landlord.
I think right now, the only place I can afford a house (in a place I would actually like to live in), is in some derelict, abandoned Italian town in Sicily, or something like that.
That sounds like a great place to live. Good weather, quiet, Italian food & culture, safe & stable, public transit to the city…and you can work remotely.
The famous cheap (€1?) houses in Sicily (and other places with similar schemes) likely do not meet most of these criteria. It's not like real estate is cheap in Giardini Naxos...
I’ve been on the 50/30/20 budgeting rule for a while now, and I agree it’s a healthier perspective for an individual than a “30% gross on rent/housing” arbitrary metric. Housing is one part of a larger bill of necessities you have to pay every month because society dictates these necessities are not rights, alongside food, energy, transportation, insurance, healthcare, and communications. Laying all this out on paper then multiplying by two and accounting for taxes, helped me remain calmer in salary negotiations because I knew not what I thought I was worth, but what I actually needed to survive.
The grim reality is that over-financialization of markets combined with a lack of regulations against predatory practices (like surveillance pricing and algorithmic rent setting) added gasoline to the bonfire that was a fundamental housing shortage brought about chiefly from treating housing itself as an appreciating asset rather than the land housing sits on and taxing accordingly (don’t even get me started on residential property tax schemes popularized by the Baby Boomers and the associated gap between sale price and tax assessed values dictated by law). Growing wages won’t fix this, nor will cutting interest rates. Building more housing is the only way out, but existing homeowners don’t want their assets to decline in value, so that’s generally not happening. Rent control is becoming increasingly popular, and I think it’s a good idea to protect existing renters and force landlords to side with wanna-be homebuyers instead of homeowners by forcing revenue growth through volume creation (new housing) instead of rent hikes.
In most European countries this 30% rule has never worked. It's always been a completely out of touch rule, and, especially for single people, rent has always easily been 50% of their net income in major European cities.
Not really. Rent is too high. It's not a problem unique to America. Rents in Munich, for example, have also doubled since 2012. A three-room apartment often costs between €2,200 and €2,700 per month in this city. For reference, that's close to an entire net salary for many, even for someone in the top 20% of earners in Germany, where salaries are relatively low and taxes are high. The median net income here is around €2,200 per month.
This has been a key factor in my fiancée's and my decision to move away, as it's simply unsustainable for families with children.
That doesn’t really make sense with the point of the article being that someone could be spending less than 30% of their income on rent and still not have enough for their other expenses. If it was just rent being too high they would be over 30%. The suggestion here seems to be every expense is too high that even if you find the most dirt cheap sharehouse to reduce rent, you still might struggle.
Ed: obviously the 50/30/20 rule sums to 100% so would need to be net - although the US is weirdly treating health insurance as a "premium service" that go into the 50% here, not into taxes like in a modern society.
Also if you have children - I am not sure how it is for you in Germany, but in Poland landlords will not rent to anyone with children. Or ask twice as much because the assumption is if you don't have home already, you are suspicious...
in germany that's illegal. you are not allowed to deny families with children, and even small pets (small dogs, cats, hamsters, etc) can not be denied.
It's quite cruel how Germans still keep up appearances with applying for the apartment with elaborate portfolio, full personal and financial data, letters and so on. While the only portfolio that matters is envelope with EUR 1500 in cash, or at least was 2-3 years ago and now is probably higher. 5-8 years ago it was maybe funny but now is simply cruel.
I saw it in Berlin. In two occasions I saw the realtor be openly bribed in front of all of us, although whether he took the bribe or not I cannot say. I also saw a man bring mini muffins and a personalized letter from his wife, family picture included, but I'm not sure it counts.
Very Recently, wasn't there a lawsuit against apartment owners for a vast price fixing scheme based on them all using the same software package that was telling them all to raise prices at the same time.
At this point I honestly think this is a bit by design.
There is a crazy amount of land in the world, but either it's too expensive or you're not allowed to build over it, or a combination of both. Houses have been built for millennia but somehow in the most advanced period of humanity you're supposed to pay hundreds of thousands of dollars for a roof over your head.
I think that low key the ruling class + landlords are not interested that housing be an affordable thing, so the whole system works to create artificial scarcity. How's the population going to be forced to work unpleasant and low paid jobs if not by controlling their access to housing? You have to be too naive if you think that a few minds in your country's parliament haven't thought of this.
If someday economic activity gets automated enough, and the majority of people are not needed anymore for regular jobs, and this populace gets violent with their ruling class, then I think a lot of housing will be built outside of cities, and the supply of houses will no longer be a problem.
And those laws were passed with the political will of who?
Now with the benefit of hindsight what causes that seemed legitimate were used to hoodwink those people?
Have those causes and their peddlers lost credibility or legitimacy?
Western society is basically slowly recreating old world landless peasantry because we have adopted bad world views or bad morals or bad ideologies (or whatever else you want to call them) that allow us to be manipulated into incrementally creating the system that produces that outcome.
Complaints about NIMBYism and "ship it overseas and forget about it environmentalism" are sniffing around the right neighborhood, but there's a more general problem here.
> There is a crazy amount of land in the world, but either it's too expensive or you're not allowed to build over it, or a combination of both.
This is true, to a degree. There is another factor and thats WHAT kind of housing we build.
> ruling class + landlords are not interested that housing be an affordable thing
Off the mark, the real people pinning housing prices where they are, are home owners. Home ownership is the leading predictor of voting, and issues that maintain or raise current home prices will drive that up. https://www.gsb.stanford.edu/insights/if-you-lived-here-you-...
Furthermore home ownership is a functionally unmovable number: https://fred.stlouisfed.org/series/RHORUSQ156N (that fed data is interesting and says a lot, capturing the 2008 financial crisis, bad lending hardly moved the needle in real terms).
> controlling their access to housing?
The reality is that this is a social problem.
Boomers are living longer (higher quality of life) and alone. They either took their parents in (cohabitation) or put them in homes. I know plenty of elderly people who are living in large houses, by themselves, who had their parents, at that same age living with them. You're not going to see a bunch of retirees moving in together to save on bills - The TV show "Golden Girls" would not make sense today.
On that note, cohabitation among younger generations is down. Fewer people have roommates, and lots of them "want to live alone" - sharing a house with 4 friends is much cheaper than living in a studio or one bedroom. And there are whole categories of housing, like boarding houses, that have disappeared. Again this is a cultural problem, look at the TV show "Bosom Buddies" - this is something that would be lost on a modern audience for so many reasons.
Part of the cohabitation issue is "renters rights" have gone way too far. There are plenty of people with space, who will not cohabitate because the risk, cost and pain of a renter turning into a squatter is WAY too high. The rules to protect good renters from bad landlords have only served to push out good landlords because of bad tenants.
> If someday economic activity gets automated enough...
This will never happen. If you dont think were going to find new things to keep busy and if you dont think were going to find new ways to compete for "dominance" I have news for you.
this chart in the article has got to be the most confusing ever:
"Map showing the affordability decline by state as costs of living outpaced wages"
so a + is an increase in affordability as the title indicates (wages outpacing COL), or + is a decrease in affordability aka an increase in non-affordability (COL outpacing wages)
I am reminded of the phrase "Irrational exuberance" uttered by Alan Greenspan back in the mid 1990s. The housing market is absurdly over valued. It's going to crash. This is unsustainable.
The problem is absolutley that housing is too expensive, which of course a bunch of realtors are not going to point out.
Increasing wages will not fix the housing crisis, and will just drive prices higher. How convenient for a bunch of realtors...
In my neck of the woods (New England), home prices have doubled since March of 2020. I have yet to read a comprehensive overview of how this happened and how we get out of it. Of course, people went nuts offering over the asking price when interest rates were super low so I understand, to some degree, that baselines were reset.
But the current housing market doesn't feel sustainable. I don't understand how a proper middle class family could afford to buy in this environment, unless they are willing to put off any savings indefinitely.
It is very simple. Housing is not built.
This is at least 80% of the problem. The system is behaving exactly as you'd expect it to with even an Econ 102-level understanding. New supply isn't being built, or is being severely hamstrung, and more people want the supply and are willing to sacrifice (often too much) to get it. Add in rent-seeking behavior, both figuratively and literally, and prices quickly double in even mediocre areas with minimal long-term prospects for growth.
Relaxed zoning requirements for SFH and MFH buildings, relaxed or eliminated height restrictions for high rise density projects in urban areas, eliminating rent control, and a laundry list of other things would help alleviate the upward pressure.
Even if new stock were built, new homes in Houston start around $300k for a 3/2 configuration, but those are bought up nearly instantly because not many are built, and the remaining stock are $400-700k.
I grew up with 6 family members in a 3/2 house that was 1250sqft. Houses today start at 2000+ square feet in the USA. We DON'T need that. On top of that, there is very limited stock of homes for people who no longer have kids.
Every type of manufacturing in the US has gone toward lower throughput, higher price. Luxury apartments, 2500 square foot houses with no yard, $50k for a car. And it is because we are all comparing ourselves to each other and wanting to appear like we can afford this lifestyle, and its finally breaking. But it was allowed to go this way, because it was working. Pricing out the bottom 25% didn't negatively affect the profitability of the companies making these items, in fact, it made them more profit.
The answer is still build more (which you basically admit yourself in your first sentence).
Homes skew larger and more expensive precisely because it's so hard to build them so developers need to make more money from each one. The fixed costs per unit are too high, so the ones that need to be lowered or eliminated should be. That will incentive building more units not just more expensive units. You'd see a lot more 1200sqft new builds if it was more economically viable and developers could make a profit on a $125k home instead of needing $400k.
> You'd see a lot more 1200sqft new builds if it was more economically viable and developers could make a profit on a $125k home instead of needing $400k.
You do see them, but they are factory built. I could have a $75k manufactured home dropped onto a $20k slab, with $15k utility hookup, and have 3 beds and 2 baths and 1200sqft. It is viable outside of HOAs and "master planned communities" but it is hard to find places in the US that allow this in a "desirable" area.
I agree we need more, but we need smaller too. My parents right now have a 3600 sqft house they will die in, and can't maintain because they are in/approaching their 70s. They built it in 2008 for around $190k when there were still 2 kids at home, my grandmother still lived there, and my sister had a baby on the way.
Now their home is valued at $750k according to the county (after fighting and revising it down from $800k), and if it weren't for all the homestead exemptions and senior rates and whatever other tax breaks they were given, their property taxes would be over $25k/yr.
They've actually tried to sell it a number of times, but 0 bites even discounting it down to $500k, because the town they are in has no comps (single level 4 bed, 4bath on 3 acres).
Build Moar seems to be too simplistic. There's just too much demand and too much investment capital seeking profit. No matter how much you build, most of the housing supply is going to get sponged up by investors, landlords, and private equity, and the price isn't going to go down. You'd probably have to 4X to 5X the current housing supply to make a dent in prices.
>You'd probably have to 4X to 5X the current housing supply to make a dent in prices.
Not at all. The important thing here is that price is set on the margin. Relatively modest supply increases can have outsized price effects. As an example, consider rents in Austin - something like 30% housing stock increase led to 16% drop in median rent, all while Austin simultaneously had massive in-migration, i.e., rents fell despite demand surging.
As another example of margin behavior: vacancy rates matter a lot, a modest vacancy rate increase can crater rents, which we see in the CRE market.
When investors buy housing they almost always rent it out, increasing the supply of rentals and decreasing rent prices relative to the alternative universe in which no new housing is built.
It's interesting to say something sounds simplistic when your argument is basically "I feel like __________" and in fact the evidence shows exactly the opposite.
> most of the housing supply is going to get sponged up by investors, landlords, and private equity
To earn a return through renting or appreciation. If there are more houses than buyers returns drop.
> You'd probably have to 4X to 5X the current housing supply to make a dent in prices.
So do that.
Building new housing stock drives down the price of older, more beat up housing. So new housing being more expensive is fine, expected, and helps a ton still.
> And it is because we are all comparing ourselves to each other and wanting to appear
No. No no no! It's because capitalism rations by price and weights by wealth. Once inequality cooks up enough the whims of the wealthy outweigh the needs of the poor.
It is not the strength of those whims that squishes the poor, it is the strength of those whims multiplied by relative wealth that squishes the poor. The whims did not grow out of control. The multiplier did. Extreme inequality is the problem.
You can sprawl further out and you can build infill in sparsely populated areas, but you run up against the reality that desirable areas are going to be expensive because they're desirable, and the cost of demolishing existing multifamily homes to increase density further becomes infeasible in already dense areas.
I bet you actually can find affordable housing in the middle of nowhere / towns where people are actually leaving.
This is not to say there isn't low hanging fruit that market rate housing can help with, and some areas have more room for improvement that way than others, but there's a limit to where that takes you that reveals a deeper problem: we treat housing as an asset that "should" continue to appreciate indefinitely, and we even subsidize people using extensive leveraging to acquire it.
Not that simple. In Australia over the last 10 years, the number of dwellings increased by 19% while the population increased by a smaller 16% [1]. Yet house prices still doubled. This is the same trend that has continued for decades, growth in number of dwellings has tended to outstrip population growth but house prices shot up since 2001 when the tax settings were changed to massively benefit speculation.
We also have a pretty high number of unoccupied dwellings that are left empty, since some investors see the bother of renting them out as not worth the money, since they’ll make so much when they sell that it doesn’t matter!
1. https://australiainstitute.org.au/post/is-population-growth-...
We are talking about America. In your case housing would be even higher if it were not built. People continue to make things more complicated than it is.
Build, and keep building until it is cheap. Also, you would need to consider the specific places.
The claim is that if you increase supply the price will drop. The counter-example is a case where supply was increased and the price doubled. The question is why did that happen?
It very much looks like the "just build" model is insufficient to explain what's happened in that case.
Because demand outran the supply. Prices drop when demand falls below supply. Not when new supply is added.
Diiid you read what they said about Australia?
> the number of dwellings increased by 19% while the population increased by a smaller 16%
That is the opposite of demand outrunning supply.
Demand for housing increased faster than supply. As people gain wealth they demand more housing, so just looking at population changes doesn’t tell you much about housing demand.
What exactly they build in Australia, livable dwellings? In New Zealand cities they build 5 meters wide, two floor row houses, upstairs and downstairs split into separate apartments 25-30 sqm large. It's an investment token, not a dwelling. Across Europe they build the same housing tokens but buildings have more floors and are from a concrete instead of wood.
The price of homes has drastically gone up even in some communities around the world where no housing is being built because there is no demand for it; the given region is experiencing severe depopulation as everyone leaves for the faraway big city, except for a few elderly holdouts. Yet owners feel some kind of pressure to keep their asking prices high. To me, that means the situation is far from simple.
Areas even in the USA where housing is not built but people leave and there is low demand are very cheap.
I think there is another element, private equity (PE) has got involved in the housing market, and like anything that PE gets involved with it burns it to the ground and then exits with it's profit leaving behind a wasteland. PE equity will do anything to get their profit no matter who it hurts
Private equity owns about 500,000 homes nationwide, so like less than a half of a percent.
Anyway they got into the housing market because the margins are so good because everybody refuses to allow new housing to be built. Congratulations, you played yourselves.
> you played yourselves
Owners played non-owners
This would not matter if housing could be built.
I don't think it's that simple. In my town, we're building like mad (thousands of units) and it is possibly slightly impacting pricing in that the rise is not as meteoric as it was 7 years ago. But new buyers are still priced out. Houses are vacant. There must be other factors.
The cost of land and labor to build a house is relatively the same no matter what house you build. This also applies to apartment buildings.
Fancy it up a bit (mostly nicer appliances) beyond that and you take a $300k house to a $1M house.
Developers make about 20% on the total ( https://www.nahb.org/news-and-economics/press-releases/2025/... ). They'd rather make 20% of $1M than 20% of $300k. Same work crew either way.
Next question then becomes "is it better to sell 3 houses at $1M each ($600k for the developer) out of 10, or all 10 houses at $300k ($600k for the developer)?"
This also applies to apartments. Do you build 200 "luxury" units? or 200 affordable ones?
This reductionism doesn't seem useful. The population of people who want to buy homes has not grown in any way that is proportional to the cost of a home.
I've yet to hear anyone say why "build more" isn't a valid answer to lowering the cost of housing. Even if new builds stay at exactly the same price they're at today, the price of older homes will decrease as supply increases.
And I don't just mean in this thread, I mean ever. It's always hand-wavey "it doesn't work like that" when the evidence suggests that it does.
The underlying issue is that converting single-family suburbia to medium-density multifamily ‘ruins the neighborhood’, and cities don’t have the courage to eminent domain homes and replace them with apartment buildings themselves, so they outsource the housing function to the Free* Market, which is most definitely not interested in terminating the SFH market. Between the profitless-ness of apartments for the real estate industry and the use of suburbia zoning to discriminate since the early 20th century (nowadays in the guise of HOAs), the problem to solve isn’t in housing or urban planning, it’s in dethroning capitalism and classism. That’s why no explanation presents itself for why more housing isn’t a good idea: it’s a fine idea, but the U.S. ethos of ‘fuck you, got mine’ takes precedence, and it’s uncouth to say that out loud here.
Commercial new-build apartments happen elsewhere in the world, plenty of them in my city.
And then it’s $2000/m for paper thin wall and cheapest materials possible and has more stringent qualification requirements than a mortgage.
I asked why "build more" isn't a valid answer and your response is that we need to dethrone capitalism and Reddit-tier nonsense about HOAs?
Why is your solution "put 3 families in this single-family home" and not "build more single-family homes?" If the market isn't "interested" in "terminating" single-family homes what makes you think it would be a good thing to do so, other than the fact that it would hurt a cohort of people you seem to hate?
If you got rid of height caps, minimum lot sizes, and loosened zoning capitalist developers you hate so much would jump at the chance to build medium (and even high!) density housing. No need to have the government steal homes from people to do it.
Yes, great. Now ask the "why" housing is not being built.
And then ask the next "why".
Every amount of new housing will be purchased by competitive investors. You are heavily underestimating the amount of money unsophisticated investors have, and the psychological effect of owning more and more of territory. Most people will never say no to owning more money and territory.
So what, they will rent it out? If there's a lot of new housing being rented out, it drives down the rental prices, drives down the purchase prices, etc. Any investor that sits on vacant housing is losing money. When there's extreme shortage landlords can do this because the rise in value happens from the shortage and maybe the rents aren't worth it.
The only cure to investors buying housing is to build enough housing to keep it from being a good investment.
Tax homes that aren’t your primary residence to the point where it’s not a good investment.
This never works in real economy with real people. Even in Germany with very rigid address registration laws people invest in real estate like there's no tomorrow.
In other countries with lax address registration laws like Poland, real estate can be the only investment vehicle without capital gains tax. Yes, if you sell real estate in Poland after 5 years you pay zero capital gains tax and anyone can buy (please invest and make that mofo pop). Opposite to every other investment vehicle from bonds to shares to even currencies where the capital gains tax exists.
It's just pure rectified human greed.
You don't tend to see a lot of this in expensive cities - the acquisition cost is too high. Investors tend to buy in lower cost areas.
In the context of rentals, wouldn't we expect ~100% of private sector rental units to be purchased, owned, and operated by investors?
If you look at the amount of money created since Covid, this explains a lot of this increase in asset prices.
But beyond that, interest rates are a big driver of what people can afford for a monthly mortgage. These rates may come down a little. However, the FED facility that was creating sub 3% rates was likely a once in a lifetime opportunity.
Middle class families can, but young families just don't now. Median homebuyer age is now 56, up from 31 decades ago:
https://x.com/heimbergecon/status/1943925791055917417
As for how it all happened, I don't have a comprehensive exploration of this to share, but look at interest rates and house sale prices:
https://fred.stlouisfed.org/series/MORTGAGE30US
https://fred.stlouisfed.org/series/MSPUS
Sale prices begin rising immediately once interest rates dipped to the lowest ever (borrowers could "afford" more principal - sale price - for similar monthly payments).
Combine that with houses making up a significant chunk of balance sheets for the US, and we (collectively) are loathe to let prices fall:
https://eyeonhousing.org/2024/02/homeownership-is-key-to-hou...
HN, we seem to care about this. We post a lot about it. Maybe we should put together a site to consolidate this sort of information, work on articulating something insightful about what is going on, and then a system/group/accountability(this is important) for pushing this to our politicians. My grandfather used to do that and the US was improving. My dad did nothing other than vote. I've done nothing other than vote. The US stopped improving. It's easy to setup a ghost website and do nothing though, so we would need a way to hold each other accountable, broken out simple to follow actions to take. Basically a 10 step program but with the steps being political action we hold each other accountable to take.
>I have yet to read a comprehensive overview of how this happened and how we get out of it
Allow me to introduce you to Bryan Caplan - https://www.amazon.com/dp/1952223415
i would love to hear a YIMBY consider the market forces/how capitalism works and not just reduce it to regulation. aka when it costs over $500k to build a single apartment unit and most of those costs are construction with very little of the regulation burden driving up that cost.
If we're talking about home prices why are you talking about apartments? There are a lot of costs associated with apartment buildings that simply don't exist for SFH and MFH builds.
Apartments are a different beast.
Indeed, there's an entirely separate, far more strict building code for apartments than for single-family detached housing.
This was an explicit goal of the designers of the early building code split: make single family homes as cheap as possible, and apartments as expensive as possible.
Sorry, you think that YIMBYs don't consider this? Perhaps you should follow some YIMBYs!
What does it take to get a more efficient building market? Lots of building, lots of competition in building. Low barriers to new contractors becoming builders, etc.
It's truly only the YIMBYs who ever talk about any of this stuff in my experience.
Permitting admin is part of regulation, which in turn is required for construction.
yeah for sure and i didn't say that isn't a cost. i said it's a small part of the cost, almost negligible compared to the cost to actually build
Ah, yes, that mythical "cost to actually build."
As in, the cost to build things in ways that completely ignore regulations. Regulations about building materials that won't collapse, and won't catch fire, and won't give everyone living there cancer. Regulations about safe electrification; safe, clean, adequate water; wastewater systems that won't drown the lower floors in raw sewage.
Do you know about the Grenfell Tower disaster?
70 people died, 70 more were injured, and hundreds were left without places to live, because the builders didn't think it was important to follow regulations. So they could make an extra buck.
So tell us about what the "cost to actually build" is. Please. Just remember that cost isn't only denominated in dollars and pounds.
Is 10% negligible? 20%? How have you quantified this?
> i said it's a small part of the cost, almost negligible compared to the cost to actually build
Actually building is the same as building to regulations. Regulations make it more expensive. You can't just hand-wave separate them.
>most of those costs are construction with very little of the regulation
You would be surprised.
>it costs over $500k to build a single apartment unit and most of those costs are construction with very little of the regulation burden driving up that cost.
What? What?
I dare anyone here who's simping for regulation to try to develop from scratch something that does not benefit from the myriad of exemptions that apply to 1-few family residential development (because there'd be no political will for the racket if the average homeowner was subject to it).
Those $500k costs include $100k of which is engineering for a SWPPP that any sane site planner who doesn't want shit to erode in no time flat would have gotten 95% of the same effect of anyway.
And the dirt work guy's bill includes god knows how many extra hours it takes to get it all spot on to meet the plans. He could've shot from the hip and done the job but there were plans and had to hit them.
And of course the lawyer has to go rounds with the town over what level of maintenance detail needs to be specified in the SWPP.
And of course the rent has to cover the landscaper who comes once a month to mow the ditch grass and stuff because that contract is how they cover their own ass.
The reason every goddamn modern property looks the same with the same shitty corporate bland sidewalks and same planters and same parking lot and entry way with the same five styles of door and the same light level and same everything is because every party involved if formulaically trying to meet the regulations related to their trade as cheaply as possible. And everyone knows this stupid. Every single party in the chain of developing a building from the initial survey to specing the lightbulbs knows they could, without even getting close to underperforming solutions, deliver infinitely more value if they could just exercise their goddamn professional discretion.
The guy delivering a rented trench box to a construction site that's chiseled out of bedrock knows what he's doing is wasteful and stupid just as much as the guy signing the check and the guys wasting their dime dropping it into the trench but hey, the rules are the rules and they're all billing the next guy down the line for it so it all goes on.
I'm not sure what you're asking for here.
Used to be, the contractor would rent a trenchbox at his discretion. But that means "almost never", because the contractor that doesn't has lower prices than one that does, and just has to pay the occasional OSHA fine. But workers keep dying in trenches, so the government has to step in and make a rule "thou must always use a trenchbox".
We can't go back to "contractor's discretion", because then people die in easily preventable ways. The other alternative is MORE regulation, and the contractor has to do a soil study to know if they're required to use a trenchbox for this particular trench.
it most certainly is not going to cost me $100k in engineering to design a SFH in arguably one of the most regulatory burdened states in the US: vermont
>it most certainly is not going to cost me $100k in engineering to design a SFH in arguably one of the most regulatory burdened states in the US: Vermont
I can do that easily. Give me a ~10ac property where what isn't steep is stream or bog. I want to clear ~1ac total for 5-houses on 2ac each and the road to reach them needs to cross a stream and traverse some bog (read: offsets). The houses will have to be on piles because as expensive as that is that's cheaper than cutting flat land and doing walls or offsets.
surveys and delineation $20,000 bridge $25,000 road and driveway $75,000 stormwater $40,000 Wetlands offsetting $25,000 250 Permitting $140,000 the houses themselves (remember, they're on fancypants piles) $100,000 septics (mounds) and wells $75,000
total: $500k, 100k per house.
You could cut some out by DIYing the actual permitting submissions but even if you don't make costly mistakes in wording and/or detail level there's a lot of value in having your shit cross the government's desks on the letterhead of an engineering firm who's stuff they've approved a million times before.
The developer needs to then build the houses rich af on the inside and generally check every box to sell for enough to cover the costs. This kind of stuff is why so much of the development in Vermont is rich assholes from NYC in brand new million dollar homes on the world's shittiest gravel road with the world's shittiest driveways. Granite countertops and picture windows the size of rail cars are damn near free compared to the cost of putting a shovel in the ground.
covid was the largest money printing and wealth transfer event in history. When rich people get money they buy assets. We have had extreme asset inflation since then. Metals, equities, real estate etc. Watch Gary's Economics on youtube.
We get out of it by building more, read Abundance by Ezra Klein and Derek Thompson.
Its extremely simple.
There is one hackish solution though. Unilaterally implode the real estate prices worldwide. People were so busy stealing covid money that they simply dumped the loot into real estate. This will not trickle it down (nothing ever trickles down), but at least would evaporate it.
Of all the jobs to get replaced by AI, I would be happy to see realtors to be first in line (but I also think this is wishful thinking).
I feel like I get very little value out of what seems to be a mostly fixed/required price.
I know flat fee realtors exist, and if/when we sell our home, I’ll be looking into this heavily.
But I feel like they rank up there with car salespeople/dealers.
I used a discount buyer's agent and it worked great! We viewed houses on the internet ourselves, went to open houses ourselves, and arranged showings with seller's agents ourselves. Once we had it narrowed down to two houses, we brought our buyer's agent to look at both houses, offer suggestions, and do all the bidding and purchase paperwork.
The realtor cartel still enforced a 6% commission, with half to the seller's agent and half to the buyer's agent. Our contract with the buyer's agent refunded half of his commission to us. So basically we got a 1.5% home discount. Our buyer's agent still made 1.5% but didn't have to babysit us while traipsing through dozens of potential homes, so it feels like everyone wins.
Yeah even our best realtor, who I actually liked and thought he did a good job (see other comment here) spent probably 1/3 of his total time on our purchase just hanging out or also walking around an open house. Such a waste IMO.
I did the same and outright offered 3% less and did not invoke buyer's agent at all.
Also when I sold my house (> 1M USD) 2 years ago I used $100 flat fee listing service and outright refused to pay anything to buyer's agents.
Both transactions went well.
Here's a recent nytimes article in a quote positive experience using ai in place of a realtor:
https://www.nytimes.com/2026/05/28/technology/sell-house-wit...
> All three bidders waived inspection and appraisal, and they all had healthy financing
> I was transacting in a thriving market, with no special circumstances
Yeah, a hot real estate market is where a seller is likely to derive the least benefit. Although a talented agent in a hot market can drive a more competitive process, potentially generating higher offers. All of which is, to the author's credit, highlighted in the article.
Agents earn their keep in more normal/weak markets.
YMMV. When we sold in 2021, our realtor connected us with an interest-free lender who put up $76K for repairs and staging. This, and other services, made the difference between our selling for $1.8M and the $2.4M we got. Maybe we could someday get similar service from a realty AI, but in our recent experience, the humans made all the difference.
Realtors are experts in the market. A good realtor pays for themselves by getting you the best selling price or finding the best home for your price range. If you don't understand opportunity cost, then obviously it appears to be a ripoff. But once you understand, it's clear that realtors have value. And realtors are probably going to be the last to be replaced with AI. It's all about value judgement and AI is garbage at judgement.
Also, it's true this article isn't recognizing the root cause, overpriced housing, because realtors in general do better when prices are high. But "realtors in general" is a very different category than "your realtor".
I would disagree. Theres enough information readily available to be able to see what relative home values are, where the good school districts are, etc.
The only reason I’ve ever used a realtor is because I don’t have the time to deal with the contract/legal side of everything. Most would be better served by hiring an attorney and title company if your state allows.
Realtors are indeed market experts (not product experts). Commission pay incentivizes them to close deals quickly, not to maximize sale price. Yes they can educate first time buyers that they cannot simultaneously get the best location, condition of the house, and price. Good realtors will ask their customer which two (or sometimes one) are their real priority and realistically match them to available listings. If you're moving into an area they can provide some local information although they legally cannot comment on schools or crime. If you've done this before, realtors mainly just serve as gatekeepers to a cartel and literally unlock houses for you to view.
> they legally cannot comment on schools or crime
Which for probably 70-80% of people, especially young couple with or considering children, are the top two things they care about if not the only two things.
But there is an adverse selection problem. Some realtors are experts in the market. Buyers or sellers have few ways to identify them accurately. Most of those ways amount to they themselves having good knowledge of the market.
It's the same problem as picking active fund managers.
The decade of zirp between like 2013 and 2021 created a lot of shitty realtors because anyone with a pulse could sell or buy a house with ease. The true value of realtors is in bad economic conditions where serious work is needed to market and negotiate.
Yea,
"We currently have 10 houses renting at $2500 for 15 people who have $2000 to spend on rent. WHAT IF, we gave those 15 people $2500 instead. Housing crisis solved?"
-This article...basically.
Yes, might as well just give those $2500 to the landlords directly and skip the middle-man. It reads like a joke.
Build baby build. It's the only way.
Supply and demand, supply and demand. It’s not that complicated.
I’m not sure how or why this article got published by an organization that should, given its very nature, understand economics. The article doesn’t paint them or their members as people I’d trust in either side of a major financial transaction.
To the extent that an organization can understand anything, this one understands economics just enough to argue for policies that will get its members more money, and argue against policies that won't. Real estate is the quintessential stay-at-home-mom backup job so it's no surprise by and large they are not known for having a nuanced and academic understanding of economic theory.
They want wages to go up so that home prices go up even more, and their members make even more money for doing basically nothing most of the time.
> it's no surprise by and large they are not known for having a nuanced and academic understanding of economic theory
The folks I’ve worked with have been as dedicated to their career path as anyone, and while their expertise and skill varies that isn’t different than any job. I understand your point, but your (mis?)characterization hits me as a little biased and shallow.
It’s not “theory”; it’s literally what they do.
They're intentionally focusing on only one half of the equation because the other half is partly their fault, and addressing it hurts their members.
They either don't understand that addressing wages without supply simply increases prices, or they do understand and don't care because it's good for their pocketbook. Which one's worse?
The article does, agreed. But I don’t think it was written by actual realtors. It’s the product of an organization that is representing them poorly, or so it appears.
have you met a realtor?
They can be some great people but as a profession they are known more for their extroversion and soft skills than their high IQ understanding of economics lol
Yes, many.
The realtors I’ve met understand economics and markets very well. Not as academics but as practitioners.
It also depends on how hot the housing market is at any given time. Often time a realtor is just someone who decided everything else was too much work. (My whole family has been in the business for almost 70 years, both commercial and residential.)
I'm sure some do more, but my personal experience on the sales side is that realtors do nothing except serve as gatekeepers to get your house listed in the local MLS. Then they show up at closing to collect their commission.
On the buying side, they do more such as drive prospective buyers around to look at houses, though it's been long enough since I bought a house that I don't know how much virtual tours have replaced this. Either way, it's not what I'd call difficult work.
It is "work" in the sense that you can be busy doing things. Nothing is difficult by any reasonable sense of the word. All the realtors I know who are actually successful are constantly busy, constantly taking phone calls or responding to texts, there's very little downtime. I'm sure there's some nuance to it, and it probably helps to be in the business for a long time, but it's a backup job for 99% of people for a reason.
I've bought and sold a handful of properties in a couple states through my life and have dealt with probably 2 dozen realtors in some professional capacity, and only 1 has been what I would call "good" and that was basically just him giving us insight into the market, being willing to tell us not to buy a house because it wouldn't fit our needs 5 years in the future, etc. Basically just willing to sacrifice a faster or larger commission to get us what we wanted rather than just closing a deal ASAP, which IMO should be the minimum and not the mark of a "good" realtor.
> given its very nature, understand economics
I'd say being a realtor is more about dealing with the psychology of buyers and sellers than the economy. And yes, you are wise to not trust them. Their interests are not yours.
And as the saying goes, it's difficult to get a man to understand something when his salary depends on him not understanding it. I bet most realtors would prefer housing prices to stay high and the average home owner to stay rich. They are not here to solve the housing problem. They are a part of the problem.
Vicious cycle. There was a story yesterday about a couple's rent going up 70% after they told the landlord they were having a baby around the same time the lease was up for renewal.
https://sfstandard.com/2026/06/17/san-francisco-marina-landl...
> Increasing wages will not fix the housing crisis, and will just drive prices higher.
This is true though?
Did you mean "isn't"? The tone of your comment sounds like you mean to disagree with the quoted point.
No I am mostly agreeing with the quoted point
Is it the case that housing was previously just very cheap and this is the normal price?
What's your definition of normal? 300 years ago you'd just set up on a chunk of land and build your own house. I'm not saying that's preferable to today but the actual financial cost was comparatively extremely little.
I bet there is a middle ground where we could relax or eliminate a lot of building restrictions and NIMBY policies to ease the upward pressure or even exert some downward pressure on home prices. We're also fighting against 6-7% interest rates after an extensive period of 2-3%.
increasing wages will fix part of the inequality crisis because as you go up from working class to billionaires you get less income from wages and more from capital gains. if you raise wages that changes the distribution to be more equal and thats a good thing. but i agree it wont solve housing by itself.
for housing we need to replace zoning rules with a neighbor vote, put the community back in control instead of bureaucrats who block new apartments for dumb reasons or take bribes from developers to build luxury investment properties nobody wants. there should also probably be an escape hatch where anyone can build affordable/rent controlled apts without a vote but only if the location has high enough average rent. that would help balance out inequalities and break up exclusive rich neighborhoods, maybe even help against racism.
the other side is lower costs with less paperwork (removing zoning makes a big difference) and enforcing competition in the home building industry. make it easier to start a new business and break up corporate monopolies. create a safe path for undocumented immigrants to legalize themselves so they can have labor rights, make legal immigration cheaper and more predictable.
These are diametrically opposed:
> for housing we need to replace zoning rules with a neighbor vote, put the community back in control instead of bureaucrats who block new apartments for dumb reasons or take bribes from developers to build luxury investment properties nobody wants.
> there should also probably be an escape hatch where anyone can build affordable/rent controlled apts without a vote but only if the location has high enough average rent.
I don't think you're wrong; however, multiple things can be true at the same time.
In this case, housing prices are ridiculously high, and wages are ridiculously low, if you compare both to the overall cost of living excluding housing.
Realtors don’t own the houses.
The gp you replied to mentioned "realtors" because this thread's article domain is: realtor.com
Realtors earn commissions as a % of the price a house sells for.
It’s also a diabolical amount. My friend bought a house in San Jose, and both, the buyers and sellers agent got $50,000 each on a $2M house. They didn’t even help with the house search much.
Who agreed to those terms?
The buyers or sellers. No one is required to use a realtor. They simply provide a convenient service for a fee.
Tell me you have never bought a house in the US without telling me you have never bought a house in the US.
I've bought several houses in the U.S., and the last one I sold, I didn't have a realtor. I'm not sure what point you're making here.
That's an odd accusation to make with confidence.
https://en.wikipedia.org/wiki/Burnett_v._National_Associatio...
This lawsuit is about realtors acting against your interest (agency problem), and is not about you being forced to pay a particular commission.
You can choose your realtor. You can discuss with them.
This person just bought a 2m house!
> not about you being forced to pay a particular commission
It's literally in the first paragraph of the article.
"At trial, a federal jury found that they violated antitrust law by conspiring to force home sellers to pay inflated commissions to real estate agents."
The force applies to "inflated," e.g. they agreed to pay a fee but were forced to pay an inflated fee. Not they were forced to pay any fee at all.
I don't understand the point of this clarification.
There is a difference between "forced to pay a fee" and "forced to pay an inflated fee." The GP said it's not about being forced to pay a particular commission, which is the first one, which is accurate.
https://news.ycombinator.com/item?id=48585389 the thread started here where the commenter said "diabolical fee". In any case this is high pedantry.
Merch has to move for them to earn a percentage. If prices are systematically too high I would guess liquidity goes down.
Nothing a 50 year mortgage can't fix, I'm sure that article will be coming out soon to from our realtor friends.
The get a percentage cut of the sale price of a house.
Not usually. But homeowners don't usually set the price themselves. Yes, yes, yes, yes, yes, technically they can. But a _realtor_ is in their ear telling them MORE MORE MORE.
Actually realtors egg on buyers to offer more more more. And sellers to reduce asking prices. Whatever makes the sale happen quicker.
I've had "Amazing, yes, no trouble, we'll sell this quickly" followed by "Not moving, try dropping the price by 20%" a month later.
Realtors negotiate for themselves, not for either buyers or sellers.
I did have one who dropped their commission a little to close a sale, but that's not a common experience. (And they still did very well out of it.)
A good realtor should help the seller set a realistic price. Because if the house doesn't appraise for the selling price or more, the deal will fall apart before closing.
of course they are. what else could they possibly do? pressure you into selling for a little less? get sued for not getting the seller the best price?
also, they don’t get paid if something doesn’t sell for being overpriced.
it’s a market system.
> get sued for not getting the seller the best price?
Are they legally required to do that? How would you even prove it was due to them?
Don't live in the US, but we're facing similar problems here in Norway. One main driver is that there's not being built enough new housing. It's a combination of building being too expensive, higher interest rates, etc.
So the second-hand/used market is red hot. Renting has become so expensive, that many landlords have exited - so we're likely heading into a really bad crunch in the near future for the renters. I've read about people spending 50%-60% of their net pay on rent alone.
> One main driver is that there's not being built enough new housing.
I recently entertained the idea of building a new house. Not terribly surprising, but worth mentioning that the time and materials to put up the structure was going cost even more than buying a used house. If nobody can afford to buy a less expensive used house then naturally nobody is going to build the much more expensive new house either.
Therein lies the bottleneck.
For builders, they will buy a block of land and build many houses on it. The unit cost of a home drops dramatically when you are building 50 of them at once.
The real killer for them is interest rates, as they finance the whole thing and then can pay it off when all the homes are sold. High rates make the finances much more challenging to work.
For what it is worth, said home entertained was a manufactured home, so it is already pushing economies of scale. I'd hate to see a quote for a custom home. We have not truly figured out how to make housing scale very well, though. Even our most efficient methods are very primitive as compared to virtually all other manufacturing we do. Solve that problem and the price of all homes will plummet.
New things do tend to cost more than old things, that's pretty much always the case!
Where I live, people are blocking the construction of new apartments because the cost of the new ones is a bit higher, 10%-50%, than the average existing apartment.
The idea behind blocking the new apartments is that "new expensive apartments don't help anybody" and people get very upset that the new housing is going to the type of person that can afford to pay slightly more for the newer apartment. Rather they would prefer that new housing is only built if it's cheaper than existing housing.
So when housing does get blocked, the existing landlords demand the higher new rents that those wealthier people pay, driving up the overall costs on old apartments. The poorer people get displaced, the wealthier people have housing but worse housing, and the only people who are better off are the landlords of the older apartments.
You gotta look at the motivations. Rich people and activists can both agree that affordable housing requirements are a good thing. The higher the better. This makes the project not pencil out so everybody is happy - the homeowners who don’t want new neighbors and the activists who think that everything is gentrification. The only people who get screwed are the only people who don’t have a vote, the non-residents. Which is why zoning policy and approvals cannot be locally controlled.
I would argue that the people who get screwed the worst are all the people who can barely afford to pay current rent.
They get displaced when rents rise, having to move away from their friends, family, their kids' schools, etc. All because "activists" convinced them that their enemies are the people able to pay slightly more, rather than the system that says "only the X wealthiest people can live here, oh and we won't change X even though it's trivial."
I’m always a bit confused how this is so difficult for people to understand. If I want to move into your neighborhood, there are two options - I move into new construction or I move into your house. There is no option C where I decide that because the housing stock is garbage, I decide to go somewhere else.
Here's an academic paper on how many people don't understand housing economics, even though they understand the same concepts in other areas:
https://www.aeaweb.org/articles?id=10.1257/jep.20241428
I can't tell you how many times I've been told that "supply and demand doesn't apply to housing," both by super wealthy NIMBY homeowners and by those struggling to get by.
I've heard the same thing about supply and demand many times myself which seemed strange at first, but when I dug deeper I learned they aren't using the traditional definition for supply and demand, so what they were communicating was technically true, if meaningless. They weren't speaking the same language.
When I dug even deeper, I discovered that, pretty consistently, they don't understand the concepts anywhere, but their misconceptions sometimes incidentally fit reality, leaving it to appear as though they have an understanding sometimes. Housing is one of those places where those misconceptions don't usually fit and that is where the breakdown really becomes apparent, hence why they see housing as something unique.
> the type of person that can afford to pay slightly more for the newer apartment.
Relying on that is the root problem. I could technically afford the new house, but in the end I couldn't find a good reason to tie up that much capital for something that does the same thing as what I've already got, only shinier. If the price were more reasonable then I'd make the move and then someone else could move into my much cheaper used house. But, as things sit, I occupy the cheap house instead, leaving the next guy out in the cold. Trouble is that just because I can afford it doesn't mean I am willing to be a buyer. The price still has to make sense.
I am not alone in this. It has been well reported that people are now staying in their "starter homes" instead of upgrading like past generations used to.
There is a lot of cost and effort associated with moving into (or building) a new house. Honestly, where I live isn't huge but it's probably a bit more than I need at this point. But, absent a real shift such as buying an urban condo, it makes more sense to just hold onto the paid-off exurban house for the time being.
And yet, the new "too expensive" housing is 98% occupied, so there are slightly wealthier people who are actually paying to alleviate the housing shortage crisis with their higher rents.
Yet the same people lobbying to block the building of these new apartments are still saying that "nobody lives there" because it doesn't fit their mental model of the world.
> And yet, the new "too expensive" housing is 98% occupied
Too expensive housing doesn't get build.
Well, occasionally a developer does mess up! So it sits empty for a year or two, then prices fall to the true price, and only that individual developer lost out. The city still got its property tax, an empty new building for a year or two is no worse than an empty lot for anybody, etc. etc. etc.
But people that claim to hate developers find this sort of situation, a developer that built too expensive housing and ends up eating a loss, much worse than the current state of people being displaced all the time.
I’ve been thinking about this quite a bit lately.
I live in an apartment in Stockholm but I also own an old forest cabin. It’s perfectly legal for me to live in said cabin permanently, but it would be strictly illegal for me to build a new house to the same simple standard. The building codes are basically making it illegal to be poor.
Similar patterns exist for student housing. The old style of student corridors with small rooms are no longer being built. Instead we are basically getting full apartments with individual huge bathrooms because the building codes mandate that everything is wheelchair accessible even when it’s practically temporary housing and they could get by with making 1/10 apartments accessible.
And that’s not even getting into how NIMBYism is enabled by laws that basically guarantee stagnation anywhere housing is in demand.
Shit’s fucked.
A lot of the stricter codes have very real safety benefits though - modern electrical is much safer, fire sprinklers add significant cost but really do help contain fires, etc.
(Not that it's all good, e.g. I don't like Washington's WAC 51-11R which just seems way overcomplicated.)
>A lot of the stricter codes have very real safety benefits though
And it comes at a cost of slowly destroying our society and turning everyone into landless peasants. Is that worth it?
Nevermind that a lot the IBC is ghost written by industry to the benefit of industry. A lot of local addendums are the same but for local interests. A lot of the permitting process is hack garbage to obfuscate how bad it all really is.
And then when you end up with actually accessible version of those it is different again. Which I had for a few years as student. No under sink cabinets. Even more massive bathroom. The bathroom was nearly the size of those small bedrooms.
Similar problems here in Croatia, few reasons for it:
- Boom of AirBNB's and apartment rentals with tourism, with real low tax rates
- Limited liability abuse - company opens up, sells 30 apartments in a new building, build out the building, don't get any permits, just close the company down and open a new one. Legally, they are untouchable, and getting the permits is now on the apartment owners. Multiple friends live in such buildings, and maintenance is a PITA, trying to legalize it is a PITA, getting water/power is a matter of making shady deals with the neighbours, basically even living in it is technically illegal but not much they can do.
- Large influx of illegal money into the housing market (we have no law to investigate source of income), so money could be laundered easily.
- "Legalization procedures" where if you built a house before a certain year, or just started construction, it could be legalised. This caused people to build "fake roofs" and then claim it as a real building later on.
- Recently, immigration joined too - workers from non-EU countries are now allowed to get work visa's, and a lot of landlords are renting out a small 50m2 apartment to 10 people at the same time for ridiculous prices. The poor workers have to share bedroom with 10 other people, which is a terrible living condition, causing accidents like a whole floor collapsing due to 50+ people living in the building. While it's not legal, inspections are rare and the grey market is thriving.
- And my favorite - as a large number of apartments are bought as investments and uninhabited - around 22% in the capital, according to official estimates, with about 500k free total, in a country of 3.5 million people - the government got a great idea:
They will free up more housing, by offering the landlords of the empty apartments to rent thenm out with government guarantees. This means the government will pay them out 60% of the future rent money immediately, so the landlord can buy another apartment as an investment immediately using that money, and just get richer.
Now, we're in an interesting situation:
- Prices have risen quite a lot, like 3x over the last 5-6 years
- Existing landlords will get funding from the government to buy more apartments
- Meanwhile, new loan rules came out, prevent people from getting a loan that is more than 45% of their salary (after subtracting the costs, including your current RENT). 10% of the value has to be provided immediately by the buyer, and after loan payment and living expenses, you need to have at least 900 euros remaining each month from your salary.
In a country with a median salary of 1300 euros, with median rent being about 500-700 euros, this puts a lot of people in a locked position - you can't get a loan to buy, because you are renting. So from the 1300 euros of your salary, the bank subtracts 500 euros of rent as your "living expense", leaving you with 800 euros monthly total, which is under the legal limit for getting a loan, even tho once you buy the apartment you would not pay rent anymore.
So to get a 30 year loan to buy a 50m2 apartment, you need to have about double the median salary.
Now, they are talking about property taxes, which will force people barely making ends meet to sell the inherited land/houses/apartments for cheap to people that can afford it.
Is it the wages or that shitty one bedroom apartments go for $2000+
In 1970 a $300/month apartment would be ~$2000/month in today dollars. I do think rents are too high as productivity and supply chains are much more efficient. I think in the 70s we were still using black pipe for gas, iron septic lines, and copper pipes for water. But, I don't think new builds or renovations are cheaper inflation adjusted (harder to estimate).
Cost of money (inflation), building, and maintenance is the floor for rents.
The median monthly rent for houses and apartments in the U.S. in 1970 was $108, or around $930 in today's dollars. So, in today's dollars, that would be $11,160/year. Median household income in 1970 was $9,870, or $84,714 in today's dollars.
Median rent in the us today is around $1,750, or around $21,000/year. Today's median income in the us is around $89,000. So, housing cost has nearly doubled, while wages have only risen by about 5%. And that's just housing. I'm sure the math for healthcare and education costs is even more grim.
What we spend on housing has doubled. That doesn't mean the cost has doubled. It means that we buy a lot more housing than we used to.
Real estate cost is local and there are parts of america where the prices have gone nuts. But there's a lot more where it hasn't and housing is affordable.
Both are true. We’ve made cheap housing illegal and we’ve demanded ever higher quality housing.
We need to allowed for revealed preferences. In developers we trust.
> But there's a lot more where it hasn't and housing is affordable
In many of those places salaries have been stagnant or work has dried up
So we have a weird situation where someone living in a big city with a large salary is priced out of real estate by high prices, and someone living in a smaller city with more reasonable real estate prices is priced out by a lower income
It's not universal of course, but it's a squeeze that a lot of people are feeling
Most of the sunbelt isn't like that. You can buy a 4 bedroom house in Atlanta for 270k and a 2/1 for like 160 and salaries are fine.
> So, housing cost has nearly doubled
That is in line with expectations:
1. The average house is ~60% larger than in 1970. More house equates to higher costs.
2. In 1970, the typical working-class man would spend time in a public house 5-6 nights a week. Today, third places are nearly nonexistent. Houses, largely driven by the internet opening it up to the world, has become more than a place to eat and sleep. Monetary spending is naturally directed to where one spends their time and energy.
Supply of housing has not kept pace with population since then. So you have more people chasing relatively fewer houses.
Also compare a 1960s or 1970s house to one built today. Today's houses are bigger and much more luxuriously appointed, with gourmet appliances, stone countertops, multi-head showers, walk-in closets, huge bathrooms, etc.
Once the boomer generation dies off or goes into assisted living you'll see a lot of those 1970s houses coming back on the market.
The house I live in has one small bathroom. It was probably built before there was indoor plumbing. (Early 1800s.) A back of the mind concern when the day comes I end up selling but not much I can do about it. The house has had a lot of upgrades over time but some things can't be easily changed.
> Once the boomer generation dies off or goes into assisted living you'll see a lot of those 1970s houses coming back on the market
But will they be affordable? Or will they be bought up by real estate conglomerates to be rented to the younger generations?
More supply should make them more affordable. Buying a house was never "easy." Some people seem to think that minimum wage workers were buying houses back in the 1970s and that wasn't the case. At all.
You seem to be using family income and not household income for 1970.
https://fred.stlouisfed.org/series/MEFAINUSA672N
The 1970's median salary was $800 (so rent was 37%), the 2026 equivalent is $5220 or 49%.
Incidentally, the 1970s are when productivity kept rising, but typical worker pay stopped rising with it.
Were apartments $300/month in the deep suburbs of cities though? Because I'm always surprised to hear my parents tell me rents for 1 bedrooms in the place I grew up in outside of Boston are in the $2-2.5k range (confirmed just now, not an affluent suburb). Census data seems to put the equivalent in Massachusetts at $120/month in 1970, which would be roughly $1k/month in 2026. $300/month in 1970 might even be high for what people were paying in Manhattan in 1970.
In 1970, median rent was $108 a month, utilities included.
https://www.nytimes.com/1973/04/08/archives/108-a-month-rent...
How many apartments were $300/m in 1970?
Probably not many. The median rent reported in the census was 108.
Per state breakouts: https://www2.census.gov/programs-surveys/decennial/tables/ti...
My parents bought the home we grew up in, which is located middle of Queens/NYC for ~$30k around 1977/8. It sold most recently for $3M. Rents were typically well under $300mo. $150 in not so great areas. That was a high inflation time though.
Today, I live in a small city in a house I bought for about $200k 20 years ago. IIRC, it sold for $80k around 1992. Worth about $450k today. A decent 2BR apartment rents for like $2k here, a nice one >$2700.
Very few, 300 USD was considered rather high in my area back then, maybe a house would be 300. That area is now in the top 5 expensive areas to rent.
In the late 80s early 90s I was paying 350 USD for a 2 bedroom.
Could have all the best reasons in the world,
Listening to NPR yesterday, they mentioned it’s a renters’ market in the Sunbelt [1]. Lots of new supply here in Texas and I just signed a lease recently with 2 months free in DFW. Bringing me down to ~$1550/month. Lots of places are offering 2-3 months for free.
[1] https://www.zillow.com/rental-manager/market-trends/tx/
H1-B crackdown is cooling the housing market in cities like Dallas
https://news.ycombinator.com/item?id=48399957
$1,550 a month for what? A three bedroom, 1.5 bath duplex with a garage maybe. For a flat though? Shoot me.
That’s a sort of interesting question. On one hand, landlords are easy to resent, they extract a lot of income primarily by owning something rather than doing anything productive.
On the other hand, wages haven’t kept up with inflation and the super-wealthy are constantly capturing more of the value. At least in the case of small-scale landlords, maybe they are just the only lower-to-middle class people who’ve managed to defend the deal they had in the 90’s, proportionally speaking…
Are you saying that you blame apartment prices on landlords? If you build more apartments then market rent goes down and landlords can't charge more if people can just find cheaper apartments. It's not like landlords just choose whatever price they want - it's significantly bound by the demand.
Markets aren’t magic, they are the result of people pushing back and forth on each other.
What do you mean by “blame?”
I felt like my post was generally in the less-finger-pointing direction.
I guess I'm just confused why your entire comment is about landlords and the super-wealthy when the article and message you are responding to don't mention either.
Landlords and rent are obviously related.
The line of thought that links super-wealthy people and wages is described in my first post. If you want to argue against it that’s fine, it isn’t a perfect link. But I’m not sure what to do with general confusion.
It's largely landlords causing trouble building housing where it's needed because it would limit how much they can make.
are you referring to NIMBY homeowners? because yes, people who own houses are the most likely to prevent more housing from being built (although not the only reason more housing isn't being built)
Yep, referring to NIMBYs.
Landlords don't care. You put a 5/1 beside their slum and they're ecstatic because that means the land under their slum is now worth "build a 5/1 here" money.
don't forget about algorithmic collusion
https://www.justice.gov/opa/pr/justice-department-requires-r...
what proportion of the housing crisis do you think is because of what you linked, and what would be your evidence?
> RealPage widely touts the impact of its products, publicly advertising revenue increases of 2-7%.
https://oag.dc.gov/release/attorney-general-schwalb-sues-rea...
it's a component but not central afaict. of course it's localized and depends on housing market concentration, major metros see a large share of units held by relatively few entities like Greystar.
“I have seen people technically meet the 30% rule and still feel financially strained,” shares Linda Grizely, a certified financial planner and financial wellness speaker. “The pressure isn’t the rent alone; it’s the combination of rent plus everything else in their financial life."
dual income expectations raising costs for everyone, plus work culture necessitating clustering in metros - everything conspires against affordability
Can both be true?
one bedroom (and living alone) is a luxury and always has been
Not true.
Rent for one bedroom apartment was 500$ in 1998, cold / hot water included other utilities are extra.
I was making 35K back then and it was enough to afford relatively good living - car, groceries, gas, occasional meal for 2 at a restaurant.
And gas was 35cents on the Wet Coast of Canada.
$35,000 in 1998 is $72,500 in 2026, which is still a totally fine income. I know people living pretty well on that in New York City.
>I know people living pretty well on that in New York City.
median asking rent in 2026 for NYC is $3616/mo ($43,392/yr) meaning rent alone would be 60% of that income, assuming that the $72.5k figure is after taxes (which it probably isnt).
if you take taxes off, you're probably at like 55-60k. that means rent alone is 70%-77% of income!
"living pretty well"?
Yes, because you really don't have to pay that much. Those expensive apartments go to people who aren't very price sensitive (either because they actually have the money, or because they want to live it up in their 20s/30s and are spending beyond their means) or who are willing to live with enough roommates to make it affordable. If all you can find is a $3.5k unit, you'll need to get a roommate. But you can find better if you put in the work and look beyond StreetEasy.
The median household income in New York City is only $81,000 per year! People make it work!
well, if one bedroom now goes for 2000$ that's x4 increase
where as the 72K vs 35K is only x2 increase
So, no, your math doesn't work.
Who said a one-bedroom is $2,000?
I'd say at least 2K. But the poster above says it's over 3K.
The poster above was quoting the median for all apartments in New York City, the (second-?)most expensive market in the country. Nationally it’s about $1,600 for a 1br: https://www.apartments.com/rent-market-trends/us/
You mentioned NY - logical to look at NY then no?
Is this true? I think SROs were very common in the US in metropolitan areas.
It was common plot point in media to: 1) kick your kids out at 18, 2) if two men lived together they were assumed to be dating.
I think SRO's are very different from "One bedrooms" and even from studios? a studio or a one bedroom has a kitchen, a bathroom, and some living space... I think SRO's typically have a bed, a chair, and sometimes a desk. Bathrooms were shared, I'm not sure how kitchen/cooking space worked?
yep, a ton of SROs have been lost in cities like SF https://ccsroc.net/s-r-o-hotels-in-san-francisco/
also - gentrification of apartment housing stock over time raising the price floor and phasing out of public housing
Many localities will have co-living restrictions for single-family homes.
Apartments exist everywhere with a population over 100. Does no one rent an apartment with roommates anymore?
They avoid it because it sucks
I would think greed is a luxury and always has been, more than a simple adobe and living alone.
Stop this race to the bottom stuff. You know what else is a luxury and always has been?
HVAC, transportation, anything beyond maybe emergency medicine, Internet access, education, drinkable tap water, …
The fact that the bulk of the US population has these things is what makes us a first world country.
Actually the US is a first-world country because it's allied with the US. Russia is a second-world country because it's allied with Russia, and Switzerland is a third-world country because it's allied with neither.
Why not both? Wages are too low and rents are too high.
The common factor: the capital class screwing over the working class.
Look at real, median household income. It's been going up and up. The things that have gone up in relative cost are housing (because we heavily regulate building it) and premium services like healthcare and education because of Baumol.
Probably also doesn't help that to many people want/need to live in the same few areas. If you could take your office job (which in most cases would work perfectly fine) and move to a less popular area, 30% might be rather high.
That's the thing or at least one thing. These discussions aren't about most small towns and cities in the Midwest. They're about prime areas on the coasts for the most part. Heck where I live about an hour west of Boston/Cambridge is a lot cheaper than the metro itself for the most part.
I'm paying 28% of my net income for rent and utilities on a one bedroom apartment. I could find a cheaper place too and it would be just as nice, just not in as desirable part of town. Not sure I'll ever be able to afford a house though.
Housing prices in the Midwest have also inflated greatly.
Well, it doesn't help but that's where the money is and as a society we should want people to move where they are most productive. Geoffrey West shows in Scale that social outcomes like GDP, patents, etc. but also crime grow with a factor of 1.15 while infrastructure needs like pipes, wires, heating cost, gas stations, etc only shake with a factor of 0.85. So it should be highly desirable to have larger, denser cities. Unfortunately, it seems that once the boomers had stepped into adult hood and bought there first homes, we decided that cities are complete now and existing neighborhoods shall not change anymore.
Does median represent the normal anymore?
It depends on the distribution. The reason it is often used is when there are extremes in the distribution like a handful of people paying $1B per year on a property pulls the mean upwards.
Also depends whether you can about the middle more than the 10-20% of the people most struggling who can earn much less than the mean or median
The median alone doesn't paint the whole picture. We need to compare the spread as well. The median doesn't care if you make just under the median, or $1 a month.
Certainly better then the mean....
When it comes to income and wealth, I don't think so. There aren't enough people in the middle ground between rich and poor for that to be a meaningful stat for most things.
If there are very few people in the middle ground, and more people are poor, then wouldn't the median be a poor person and therefore somewhat representative? I'm not sure I'm following your logic here...
If you look at income distribution over time you'll see that the middle indeed shrunk. However, they moved to high income.
Link for the curious:
https://en.wikipedia.org/wiki/Baumol_effect
Baumol plus zoning and NIMBY driven real estate hyperinflation basically explain the modern economic malaise among especially the young.
I’ve also heard this called “in-deflation.” Inflation in everything you need, deflation in everything you make.
so many projects got nerfed by NIMBYs during good economic times and now are infeasible. there's more political will for change now but i'm still skeptical things will change much given the cost of construction in major metros.
Deporting or deterring much of the construction workforce certainly doesn't help either
Thank you for linking what I was too lazy to link.
To add, politics usually responds to Baumol by subsidizing demand and/or more regulation. Needles to say both make it worse. Article: https://www.niskanencenter.org/cost-disease-socialism-how-su...
People who are able to restrict housing development (e.g. existing home owners) have too much political power on a topic that shouldn’t be up for a vote.
Imagine if current hospitals could object to opening new hospitals. Or grocery stores could object to competitors getting permits.
This literally is how it works. You need a certificate of need to open a hospital and existing hospitals lobby heavily against granting new ones
> Imagine if current hospitals could object to opening new hospitals
LMAO
They can! It sucks!
https://en.wikipedia.org/wiki/Certificate_of_need
> The common factor: the capital class screwing over the working class.
This thought terminating cliche is getting real old. What are your solutions? and what evidence do you have that those solutions will solve the problems? Shaking your fists at "the elites" and regurgitating populist slop is not going to
It's the opposite of a thought-terminating cliche. It refers to an entire world and body of work, which include solutions.
You could start by reading Marx, who laid a lot of the groundwork.
> Shaking your fists at "the elites" and regurgitating populist slop is not going to
I like the way you trailed off halfway through your knee-jerk reaction, underscoring just how much your response is an automated result of indoctrination.
Kapital describes the problem well. His proposed solutions were awful.
> It's the opposite of a thought-terminating cliche
> You could start by reading Marx, who laid a lot of the groundwork.
Are you aware that you just responded with another? You did the "read theory" meme lol
> I like the way you trailed off halfway through your knee-jerk reaction, underscoring just how much your response is an automated result of indoctrination
so you don't have solutions or evidence is what I'm gathering? just another lefty populist spouting tired platitudes?
Yes, of course, but consider the source. Who do you think this article, about literal rent seeking behavior is representing? Certainly not the working class...
It’s that wages have not risen with inflation.
Aside from less than a quarter point (0.24) from Covid, wages have in fact risen with inflation and that small difference is also likely to disppear soon.
https://usafacts.org/answers/are-wages-keeping-up-with-infla...
It is in fact rents, especially with mandatory add-ons. The actual cost of renting a place is a lot more than the direct rent payment.
Frankly the statistics do not feel right - I remember jobs that were easily found at $15 per hour in 2012 and cost of everything was insanely low. One bedroom / 750, McDonald burger, $1, McDonald soda $1, a pack of beer $7. Now eveything is easily double or triple and the basic jobs are still at $15.
I bang on this drum a lot. We need Land Value Taxes to incentivize productive use of land, and we need to eliminate (or greatly reduce the burden of) Zoning (Japan has zoning but a great model that really allows building housing efficiently). When it costs $50k in permits and takes 2 years just to put a shovel in the ground, to build a single family home, and millions to build an apartment building, of course homes are expensive.
Inefficiently taxed land, and artificial scarcity via laws, turned housing into an asset class. This problem will not go away, in any country, as long as those two things are not resolved.
Again seeing some blaming poor immigrants for this in the very first answers.
Meanwhile, where do the money for OpenAI and the SpaceX IPO comes from? Who got hold of so much money? How did they got hold of it?
And here's the killer question: would they, and the rules and system supporting them, change in any way if there were less immigrants?
No amount of money will help jurisdictions that still refuse to permit new buildings in face of a constant influx of people.
You cannot live in Musk's banking account. You have to have the actual physical structure, and current laws in hotspots like San Francisco and New York do their utmost to prevent new development.
Places like Austin, which are less restrictive, don't have this problem.
>You cannot live in Musk's banking account. You have to have the actual physical structure, and current laws in hotspots like San Francisco and New York do their utmost to prevent new development.
>Places like Austin, which are less restrictive, don't have this problem.
Not really fair to compare 2 cities on the waterfront with no obvious space to build over to a city in the middle of Texas. San Francisco is even worse than New York(IMO) because of the hills.
We've had the technology to build skyscrapers for over 100 years. They're illegal in 90% of the city
We don't even need skyscrapers to relieve the housing shortage. Legalizing duplexes, townhome, quadplexes, condos, or three story buildings that contain six units would add a lot of supply.
>We've had the technology to build skyscrapers for over 100 years. They're illegal in 90% of the city
Not a great idea for coastline cities. Will cause soil to sink and the more you build the faster it goes.
Few people want to live in sterile skyscrapers.
What about subjecting this theory to a practical experiment?
In many places of the world, the skyscrapers are full, and the people who move there leave behind another apartment for those who don't want to live in a skyscraper.
housing is expensive everywhere, not just in SF and NYC. def expensive in Austin. how do the zoning laws in SF make NYC more expensive?
Housing in SF and NYC are on some level substitute goods. Many of the people living there are mobile and the ones deciding prices on the margin. If SF rent was $10k and NYC was $3k, many are going to leave SF to get a similar type of lifestyle in NYC for cheaper, raising demand for NYC housing. If SF zoning laws allowed building an incredible amount of housing, lowering rents to $2k, while NYC is at $4k, many people would leave NYC, lower housing demand and thus rents, to get a similar urban lifestyle in SF.
This is the whole crux of why NIMBY is such a collective problem. When NYC doesn't build because SF should, when SF doesn't build because the Bay Area should, when the Bay Area shouldn't build because Texas should, everyone collectively pays higher prices because overall housing supply is reduced and many people move between them.
But even if/when the law finally allows more building, you will have to compete with a richer, and richer, and richer upper-upper-upper class - both people and firms - who will price you out.
The rich only buy so many homes.
Its close to a pigeon hole problem. If there are 10 houses and 11 people, the homes are going to go up in price until the 11th is homeless (or moving away to somewhere cheaper). If there are 100 people, its the same issue except magnified, this is what happened in the bay area. Significantly more people than homes. But if there are 100 homes and 10 people, it doesn't matter how rich they are, the prices will drop because there is less demand. It will also be less attractive as an investment vehicle, because they will demand less rent.
>The rich only buy so many homes
Oh, don't worry, they also buy land to build luxury condos for the upper-upper class - that can't buy but can still pay rent.
>But if there are 100 homes and 10 people, it doesn't matter how rich they are, the prices will drop because there is less demand
No, the price won't drop. The market is extremely inelastic. These homes are collateral for other investments of the super-super-super rich (people or organisations). It is better to keep them vacant rather than drop their value by lowering the rent, which would cascade to their leveraged investment.
This is why: - rents only go down when there is a big generalized financial crisis, otherwise they never go down. The best that used to happen was that rent stayed stagnant while wages rise, but that isn't happening... - you see so many empty appartements and retail spaces everywhere.
I mean, there a a HN front-page story about vacant spaces a day ago. You should read it.
it can't be those 8 guys with >50% of the wealth! no sir, it must be all those poor people taking up the poor people's space they were alotted in 1995.
What do you mean? Trillions move through the stock market every day from pensions, mutual funds, foreign governments, 401ks. And professional trading.
I’m sure many immigrants had money on the IPO as well?
The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.
Equal treatment sounds good to me. Which point are you responding to?
> I’m sure many immigrants had money on the IPO as well?
Either it's bad faith or you don't understand the implications. Either way, GL with whatever.
Immigrant groups like Chinese and Indians are more financially savvy and successful than the average American.
These trillions that go to SpaceX and whatnot are trillions that aren't going to building more homes, nor increasing wages. Not even as a second-order effect.
There is no "trillions that go into SpaceX". You and others seem to have a massive misunderstanding about how the stock market works... they could have sold 10 shares at $50 and still have a valuation in the trillions... Market cap does not mean they have that money in hand or even that it is being taken from someone else...
They literally sold less than 5% of the total shares in the ipo by the way...
Henry George was right about everything
Always has been. You have to suck the money out of inefficient real estate to compress their margins and make it a commodity (=Georgism) or you let real estate bleed your economy dry (=what every Western country is doing today).
Yet if I open X, I'm being told constantly that my European mind can't comprehend how poor we are and the richest European country is poorer than the poorest US state.
The US has an insane K-shaped economy[0]. People in the upper part of the K arm live in a completely different country than the rest of the population
0: https://en.wikipedia.org/wiki/Recession_shapes#K-shaped
I'm aware of the phenomenon, but thanks for letting me know about its name.
It looks like people on the upper arm of the K are not only experiencing the economy differently but are also grotesquely unaware of the lower arm.
Well, of course. The owner of the site believes:
> The EU should be abolished and sovereignty returned to individual countries, so that governments can better represent their people
> Although this rule isn’t necessarily wrong, the reality is that modern budgets are much more complicated than they used to be, so you can’t take the 30% rent rule as a hard-and-fast guideline.
Modern budgets are not much more complicated. The rent is too damn high!
Wages in america are extremely high, its just property prices are even higher.
Go tell that to Oklahomans and others still making a minimum wage of $7.25 an hour
If you can find a single person still getting paid that, please give me their info and I will have them making twice that by tomorrow.
In my state (Idaho) they can (and do) pay less than minimum wage if you are a tipped employee. [1]
"Most" who are in those positions tend to make at least minimum wage, if not more, but that is not a guarantee, and it is harder to claim tips as "stable income" when trying to get credit/housing.
Median wage/rent is hard to apply. Totally different results if you look at what the typical renter makes (at least in my area). Minimum wage is one thing...but when it takes 3-4x minimum wage to stay at 0 every month things get difficult.
[1] https://www.dol.gov/agencies/whd/state/minimum-wage/tipped
I'm making that much as a software engineer in a 3rd world country. Hire me :)
Hell, Google pays Junior Engineers less than that in Bangalore.
I could probably pack a bus or several buses just with the town I live in. How many openings do you have? :P
i can introduce you to ~50 people making about that amount. let me talk to my school and i can probably get a few hundred more.
very kind of you to offer them all a job at twice that. how do i reach out to you?
Where are you located?
NC
I'm not in NC, but Walmart starts associates at $14/hr and will (almost) hire anyone. A quick check shows they have tons of open positions throughout the state, full time with benefits.
That's a good slight of hand you pulled there. Most of the demographics here won't have taken a path through college that equips them with the specific knowledge to catch it.
(I'm not gonna spoil it, I wanna see if anyone else can figure it out)
I'm making zero. I have been in IT, a developer (but out of date mostly VB and SQL), managed dev teams, managed IT departments. Unfortunately I have a record and it's hard to get someone to give me a second chance plus now I'm over 50 and too old/overqualified for the minimum wage jobs. Would love to hear your ideas.
Shit, people don't even make minimum wage in states with tipped minimum. Bartenders be getting less than that, and people aren't drinking like they use to.
I'm very interested in hearing the opportunity you can give someone who's willing to work for $14.50/hr though.
"Basketball players are extremely tall."
"Go tell that to the middle school travel team in my neighborhood."
Why are you even making this comment? The comment you responded to was obviously talking about median wages of the entire US population. Real Wages are near all-time highs - it's just a fact, you can look up the data yourself.
Havent you got states that haven't increased the minimum wage, just for inflation, in decades? Don't most people live in cheap wooden houses on top of all this? Isnt all your livestock full of chemicals to counteract the unsanitary factory conditions they must be processed in so the average American can even afford it in the first place? Doesnt half your country still hate blacks?
And finally, why do so many people kill themselves in America? Can't be that great. Don't know of many hunter gatherers offing themselves
They’re reaping what they sowed based on how their states population votes. Oklahoma is doing exactly what’s its people wanted and voted for.
Hint: property prices are set by wage levels
really? you think it's not significantly effected by anything else? like amount of housing available?
Pretty much no.
and your evidence that property prices are almost entirely set by wages is?
Want to make a bet on what happens to rents in South Padre Island, TX (near SpaceX's Starbase) in the next 6 months?
Want to make a bet on what happens to rents in San Francisco after Anthropic's or OpenAI's rents after they IPO?
There's no reason either event should decrease supply or increase demand, correct? So prices should be stable?
For the ones that didn't read the article, it says there. The problem is that the state takes more and more away from the workers wages:
"The biggest flaw: It uses gross income, not take-home pay
One of the biggest issues with the 30% rent rule is that it’s based on your gross income—not the amount of money that actually lands in your bank account on payday.
To illustrate this flaw, let’s use some real-world numbers. According to the latest FRED data, the median household income in the U.S. is about $84,000 per year, or roughly $7,000 per month before taxes.
Under the 30% rule, you could theoretically spend about $2,100 per month on rent if this is your income.
But let’s take a look at what your take-home pay could be with this salary. "
It may say the problem is taxes take too much money so you can't pay landlords, but how do we know the real problem isn't that landlords take too much money so you can't pay taxes? Or Comcast takes too much money so you can't pay landlords and taxes?
We know it, because during the last 50 years, already adjusted to inflation the USA government budget increased by 2.48× per capita.
And unless your argument is that public services are 2.48x better now, then yes, I know that the problem is, as usual, that the government is taking workers money away to do as they please.
Landlords are the least productive class in society, and it's not even close in terms of ranking.
It's worth being precise about this because it's a really important point. Most people who we call "landlords" are simultaneously a landlord and a property manager. Property management is an important and productive job. But the vast majority of such people's financial outcome is actually from being a landlord, that is doing literally nothing except holding a piece of paper granting them monopoly on a plot of land. That plot of land's value (separated from the buildings on top of it) is generated, by definition, by the community surrounding the plot.
So when you say landlords are the least productive class in society, it is that they are totally unproductive by their nature. There is literally nothing to be produced! The land is there regardless! Then the fact that they collect a tax on consumption of a good they did not create makes them a negative-productivity component.
If you remove landlords (but keep property managers, developers, etc, which are all different jobs sometimes played by the same people), it would be a strict improvement to everything about our economy.
I'm going to assume ignorance and try to explain why landlords exist. Of course you could already understand this and have this as an ideological stance, in which case my effort is likely wasted.
Landlords assume a similar role in economy that banks do, they assume risk on your belalf. We have quantified this to an extent that you can reliably put a dollar amount on how much risk there is.
When you are renting and there is a job change or war or natural disaster or really, anything inconvenient at all, you can more or less walk away without losing much.
Landlords do not assume risk in their role as landlords.
The land is there regardless of whether anyone "takes on the risk."
Landlords often take on risk in their role as property managers or developers. They should be rewarded more for that, and not at all for their simple ownership of land, which again: would be there regardless of whether someone else or no one at all owned it.
We need to draw a box around the property owner, the previous owner, the owner before that, etc, because the current property owner does take price risk, but only by virtue of the payment they made to the previous property owner and so on. The intra-chain P&L distribution is not a legitimizing factor if you believe the entire ownership structure is an exercise in rent seeking (in the economic sense -- as you point out, development and management are not economic rent and I'd add abatement to that list).
Equivalently, we can just pretend that there has only ever been one owner.
The risk inherent in the ownership of land is having too much of your wealth concentrated in it, and having used leverage to purchase the land. Both are true for a large fraction of landlords in the world.
A real estate bubble bursting or anything that makes your area unappealing to live in would suddenly be really problematic and in the case of leverage get you negative equity.
Just because you can lose money does not mean you are "taking on risk" in the way a bank or insurer does.
If they didn't "take on that risk," the land is still right there being land.
That is not true for banks or insurers, where if no one was willing to hold that risk then the inverse product wouldn't exist.
Banks hold money for you, the cash would still be under your mattress if the bank did not hold it.
I'm sure you have a philosophical point here, but this is exactly how the modern economy prices risk. Your understanding of the semantics of risk is not being questioned here.
Uhhh... banks do not "hold money for you."
They pool deposits and they lend it out, taking on the risk of doing so with the guarantee they will make their depositors whole. This is called "taking on risk," and they are paid for this service (among the other instrumental services they provide in order to make this happen). Without banks providing this set of services, these deployable pools of capital would not exist.
This is absolutely not the same as the price risk that any asset holder has, and it is not what landowners are paid for.
It's not a philosophical point. It is literally a question of who is getting paid what, and why?
Landlords assume artificial financial risk entirely created by landlords
Of course, that's how risk works.
Any high risk high reward strategy gets you in charge of creating the risk to chase a higher reward.
The math is fairly similar between spending 10$ to buy a call option and a 1 million down payment to buy a 10 million property with 15 apartments to rent out.
When ownership shows up at zoning meetings, the main risk they seem to be concerned about is accidentally letting someone build enough housing. Heaven forbid!
Are you perhaps too privileged to have seen situations where owning land is a liability?
As we speak, close to a billion people are in the middle of ongoing wars. There are entire countries where land is worthless. Ukraine has several hundred square kilometers of land with a thick covering of fiber optic cables from drones.
A better first world example is laws change and now this site where you were gonna build self storage for 20yr before selling out to an apartment/office developer is now worthless
We have seen forest fires burning city blocks in west coast cities in the recent past, can't get more first world than that.
If you think insurance will save you, it might not if no one is willing to insure your property (large true in California nowadays) or the insurance company goes bankrupt in a crisis (happens pretty much all the time).
Why on Earth should I feel the slightest obligation to make whole some jerk who bought the right to kick me off a piece of land and lost money when that right became less valuable?
I have a much better idea: point, laugh, and say "sucks to suck!"
I did not say anything about how you should feel. That's up to you.
I'm telling you why the system works like it does now. You can, of course, choose to deliberately not understand it.
If you didn't mean to imply that I should feel an obligation to compensate the risk of a capital loss, what was your argument?
No, the system works the way it does because it was built by the rich, for the rich, to ensure they had a way to get paid for being rich. You can, of course, choose to deliberately not understand that.
That's an amusing misunderstanding of history. I can see why you'd feel this much animosity if you strongly believe this.
Good luck changing things without understanding how they work though.
Enjoy the high interest rates <3
> I should feel an obligation to compensate the risk of a capital loss
Where did they say that?
"Landlords ... assume risk on your belalf."
That means the opposite of what you're telling everyone it means. When someone assumes risk it means the risk is theirs. You're debating the meaning of English words right now.
I take your overall point about rich people making laws. But on this specific point you're wrong. Take the L.
Perhaps you misunderstood what assuming risk means?
No, you just wish I misunderstood.
Anecdata here but I'm a landlord in an area with low 10s of thousands of residents and low 100s of rental units. I absolutely do not care about new housing being built, other than encouraging it because economic development of the town is good for everyone.
My neighbors, the homeowners who don't rent, are typically on the other side. And it's not unreasonable to want to keep SFH neighborhoods predominantly SFH.
My main risks have have absolutely nothing to do with more housing. It's more physical risk to the property and depreciation.
Those same landlords also control many of the levers that might cause their investment to be less profitable.
Definitely
This is why strong regulation is important.
> If you remove landlords (but keep property managers, developers, etc
In this scenario, who owns the property? And if you are advocating that everyone should own their home, what is the point of a property manager? What about the people who do not actually want to own their home?
This is exactly my problem with these arguments that demonize landlords. I've lived in multiple cities where I knew I'd only live there for a couple years, and I'm only interested in renting. How do you live somewhere short term without someone owning the rented property?
Swapping the base layer of the capital stack has zero visible change to the person renting. In fact, I'm pretty sure it's common in asia.
Instead of:
They do: The active roles don't change, the market that keeps them dynamic and competitive doesn't change, but the firehose of passive money goes into tax revenue instead of some rich guy's pocket.You could buy property and sell it later.
Of course it is not a solution to current situation when real estate are very expensive, but in theoretical discussion where real estates are affordable you can buy it and sell when you move.
But I don't want to buy a home, maintain it, and have to sell it 2 years later. Renting provides a great solution that makes both sides of the transaction happy.
They can be privately owned and have the land value (unearned value, by definition) simply taxed away.
Or you can have the government own the land but do long-term (99 year) leases, like they do in Singapore.
Singapore has the correct approach. Land Value Tax is the incorrect approach.
LVT has the same vulnerability as property tax: owners can worm their way into the policy details and redirect the surplus back into their own pockets. Leases bypass this problem through the competitive bidding process.
Community land trusts, cooperatives, nonprofits, universities, local government, etc.
The problem is always financing. If you're going to own a place you need a lot of upfront capital. If you own a place and plan to maximize rent increases it's easy to leverage your new asset to buy more properties. But if you just want to keep it near cost then you need a new infusion of capital for each new property. So, by their nature such endeavors don't grow as fast as rent maximizing landlord can grow.
The problem is not capital here. Universities and governments have quite a bit of capital. They could do this in a larger scale.
It's more about risk management. Do you want your university to be disbanded or your local government bankrupt if there is a war or natural disaster, or even a standard city block fire.
I assure you wars and natural disasters are not that uncommon in the grand scheme of things. That's why we have people or corporations with a higher appetite for risk assume the risk. These entities, unfortunately, don't always have your best interests in mind.
What cities in the US have the capital to do this at a large scale? Risk management is certainly a part of it but every discussion here in SF and broadly in the CLT movement is about how to get capital access.
A university endowment or a city's tax revenue is legally and structurally earmarked. They can't just liquidate those assets to buy for local real estate. For the non-profits and community land trusts actually doing this work, securing patient, low-cost capital is absolutely the primary bottleneck.
The high leverage of private landlords actually makes them more vulnerable to systemic shocks. Meanwhile, non-market housing models (like land trusts) don't over-leverage their properties, which is exactly why they historically have much lower default rates during crises.
Given the option of landlords making bank for their risk and then getting a government bailout when there's an economic shock or having more housing decommoddified I'd take the latter. There's very little housing in the US that is under these alternative structures so at the very least I'd encourage more experimentation with them.
More experimentation sounds great.
Most of the knowledge we have about what works and what doesn't is from decades ago.
The steelman interpretation would be that government is the only party allowed to own rental properties.
Nobody would be allowed to rent out a space they owned because it would turn them into a landlord. All of the rooms people rent out to others would go away. You wouldn’t be able to rent a private house from someone, you’d have no choice but to live in government owned housing developments.
This would be incredibly unpopular if implemented because it wouldn’t resemble the utopian fantasy it’s supposed to represent. It’s a vacuous idealism in the same category as “billionaires shouldn’t exist” that serves as a placeholder for an unspecified utopian government-run economy. The details are never specified, you’re just supposed to imagine it works and nothing is lost as a tradeoff.
I think Vienna somewhat functions like this, and it seems to be fine. Not that individuals can’t literally own property and rent it out, but that most housing options are government owned.
actually a lot is privately owned, but by law 2/3rd of every rental property must be offered as subsidized by the city. so in practice you own the building, but the city decides who gets to rent 2/3rds of it since the subsidized units are only given to people who have a low enough income.
That isn't a steel man
> If you remove landlords (but keep property managers, developers, etc, which are all different jobs sometimes played by the same people)
You need to be specific about what you mean by “remove landlords” because that’s a nonsensical statement by itself.
Some party must be responsible for the investment to produce the property. Some part must own the property.
The most charitable interpretation of what you’re trying to say would be that private rental contracts are forbidden and the government would have a monopoly on renting properties out. So only the government could own properties that are rented and the entire rental market would depend on how much housing the local government decided to build and manage.
You tax away all the gains generated by the land value, which effectively eliminates the "landlord" component of a rental fee and directs the owner's incentives toward producing value via construction, improvements, or services instead of rent-seeking on an asset they did not create and which would continue to exist if they never set foot on it.
Is this the most charitable interpretation?
You could, for instance, require people who own habitations to actually live in that location. You could tax people who own property they do not actually live in very aggressively until they would be willing to sell for less to avoid the tax burden. You could have a system which taxes aggressively and builds lots of houses and gives it to people who own it as long as they live there.
There are quite a lot of ideas between "government owns everything" and "let vampire landlords do unlimited rent seeking."
As it happens, I think there is quite a lot to be said for the free market solution of just letting supply meet demand more or less freely, but I think your interpretation really is not the most generous one.
> But the vast majority of such people's financial outcome is actually from being a landlord, that is doing literally nothing except holding a piece of paper granting them monopoly on a plot of land
This is how I know that you've never tried to run houses. If you hire out a property manager and all of your maintenance you are not making money.
I have to be an electrician, a plumber, a painter, a drywaller, an engineer, a salesman, a delivery driver, a businessman, an appliance repairman and a lawyer. And that's to make a measly 8% on my money.
> There is literally nothing to be produced! The land is there regardless!
No one rents bare land. They are renting a depreciating asset that you have to upkeep.
Yea yea yea, Henry George says that the value is provided by the citizens around your property. I call bullshit. The value is the shelter, the heat, the comfort. That's what people need.
No I do "run houses." I bought a house, rented it out, paid a bit for maintenance throughout, covered the entire mortgage the entire time, then sold it for 50% highly levered capital gain in ~4 years.
It's not because I'm an awesome landlord or property manager. I did the bare minimum. It's because the location appreciated thanks to the community surrounding the house, which is the driving force of the vast majority of gains in real estate.
Landlords complaining is honestly some of the funniest stuff on the Internet. I really appreciate the lols.
Shelter, heat, and comfort? No: Location, location, location.
A crack shack with a busted roof and broken utilities in a good location sells for the same price as a pristine, functional mansion in the middle of nowhere.
"And that's to make a measly 8% on my money."
Amazing how many people insist on being landlords despite it apparently being a life of sawdust and sackcloth.
> If you hire out a property manager and all of your maintenance you are not making money.
Because you can't acquire attractive real estate. Who cares about a unit in Slutdrop, Idaho?
A landlord is doing exactly the same thing as an investor. They are tying up their capital in exchange for an income, and the possibility of a capital gain.
The difference is that investment in a company can create “more company”, whereas investment in land can’t create more land.
> investment in land can’t create more land
But investment in housing can definitely create more housing, and that is by far the most common type of landlord.
Then let's move all land ownership to the government and let landlords build housing on it
The landlords could then pay rents to the local government. We could call that landlord taxes or something and use that to fund local services with them. Wait...
Property taxes are voted on by property owners under the steepest moral hazard while leases are actually competitive: this is the difference between the government capturing a minimal vs maximal fraction of the land rents.
If you genuinely think there is little difference, why do you care so much about not switching to a lease system?
Chicago has relatively affordable housing purchase prices as property taxes are very high. The government has taxed away property appreciation. Unfortunately the deferred compensation promises they have made to public sector employees are coming due and further tax hikes are needed.
As described above, a landlord is not a developer is not a property manager. Sometimes a single individual plays multiple roles, but that does not make them the same inseparable job.
You can improve the land, build more units, replace an small old house with a 4 story apartment building, etc.
Correct, which you should be rewarded for as a developer. I recommend 0% tax on improvements and 100% tax on land value.
Without land ownership, how is it decided who gets to develop what where?
The most popular proposal (from Henry George) is to maintain individual land ownership, but impose a land-value tax that approaches 100% of the land rent.
The result is that real estate basically sells for roughly what it would cost to rebuild whatever is built on the land.
There is still a premium charged (in the form of LVT) to allocate access to desirable locations, but the revenue goes to the government/community instead of the previous owner. And the eliminating the incentive for land speculation should actually reduce overall costs.
I didn't say no land ownership. I said tax the gains of land ownership. Nothing changes about who decides what gets built etc.
That is not a problem, but the problem is that now they are financially incentivized to screw their tenants as much as possible. With a different capital project, sure they're screwing their customers, but at least I go shop at a different store. Humans need housing, and moving is annoying and expensive.
Why is the landlord being unproductive relevant? If the government owned the land, they would never sell the land, so the concept of land appreciating doesn't exist. The only difference is that the government would possibly rent at-cost, but the profit margins for landlords are not the main factor driving up rent. Get rid of landlords and the rent prices would decrease only very slightly.
How is a property being used for housing not productive?
The market rate and supply and demand are going to determine the price of housing whether or not you have landlords. Remove landlords from existence and the alternative is to make everyone buy homes. I guess that would drive housing prices down a little because so much of the population would be living with their parents until they save up enough for a down payment, which might not occur in their lifetime. So demand would go down, but it would not be fun for the people who wished they could rent.
> I guess that would drive housing prices down a little because so much of the population would be living with their parents until they save up enough for a down payment, which might not occur in their lifetime
you mentioned supply and demand, if everyone is struggling to buy houses, downpayments wouldn't just go down a little.
in the end, everyone needs housing, every single house would be occupied just as now, but instead of having renters being squeezed by supply and demand you would have owners.
how is that a worse scenario?
let developers have rent, they are the risk takers, they deserve it.
> in the end, everyone needs housing, every single house would be occupied just as now, but instead of having renters being squeezed by supply and demand you would have owners.
Not every house is occupied now. Not everyone will sell at loss if they can't rent out. So more homeless people?
What about people who don't have any savings living paycheck to paycheck? There is clearly some floor on housing price and not everyone can afford housing even at zero margin. Giving out free mortgages like it's 2007?
What about new housing? With lower prices supply will further decrease, and in places with high prices it's usually already insufficient.
demand is not number of buyers. it is amount of dollars buying. Excluding investors will disproportionately drive down prices.
I don't understand this school of thought?
Without renting everyone would have to buy a house / apartment on each move.
Because there's not actually enough money in America for everyone to be well off. You can either have a few silly rich people, and the rest of us constantly exchanging labour for cash until we die, or everyone is poor.
without renting though it would probably be more like buying a fridge. You could just buy it when you needed it and sell it when you no longer needed it.
With realtors taking a 10% cut on each transaction? Or do you envision a more liquid market with less paperwork? What about escrow, inspections, and handling disputes on large transactions?
BTW in the US, a big advantage of renting is not having to buy, sell, or maintain appliances like a fridge because the landlord has to deal with it.
...at much lower prices.
Absolutely. Rackteering party and bureaucracy always finds themselves returning in all society until killed or thrown over.
If it's so easy to make money without doing anything as a landlord, what's stopping you from doing it and donating the profits to charity?
Only the rich get richer. You have to be rich to acquire the free money rights. The poor don't get richer, or the system wouldn't work.
So pool your money with other poors and enter the infinite money game
I only partially agree with this - Access to housing for people unable to access a mortgage is very important. And the capital outlay historically required to OWN a house has been nearly impossible for the vast majority until recently. And even now, banks really hate lending to people not already "on the ladder" to use a British term.
For instance: I bought my wife's grand fathers house. It appraised for $165k, and he sold it to me for $130k, I put $50k down, and got an $80k mortgage. I earn a very decent amount around 4x the median household income. I have 22 years of employment history with 0 days "unemployed". I have maintained a DTI of less than 10% and a Credit Rating of 800+ for at least the last 15 years I've been tracking. I have more money in my brokerage than the house is worth, let alone the mortgage, and yet it still took 3 different banks, and over 13 months to close on the house. I was denied by Bank1 (who I have over 20 years of history with) and Bank2 (who owns my business accounts and holds $10s of thousands on average up to $100k regularly). Bank3 approved me, but by the time they approved me, interest rates climbed from 2.5% to 5.75%.
> And even now, banks really hate lending to people not already "on the ladder" to use a British term.
TBF, would you give some randomer a few hundred grand without a strong guarantee you'd get it all back?
> without a strong guarantee you'd get it all back?
Mortgages are backed by the asset you are buying. $400k for a house is backed by the house. On top of that, almost every bank can sell off those mortgages and get the cash back immediately.
So, you are correct, I would not lend hundreds of thousands unsecured to a random person, but if I had the disposable capital, though, I WOULD buy a house with that money, and price in their credit rating to their interest rate, and turn around and sell it to Fannie/Freddie and recoup the principal that I lent.
Banks aren't on the hook for any of this (except for mortgages that don't conform, but most banks don't touch those, you have to go to brokers for those).
Have you ever owned property before? Maintaining property is a lot of work and locking up that much capital is a lot of risk.
I personally think it’s usually a shitty investment and a waste of my life, so I’m glad to pay someone else to use theirs.
Yeah I tend to agree, there is a good reason I am not a landlord. Too much work, too low a return on the investment.
I have. it is work but definitely not a lot. It's more financial stress but that evaporates as your finances go up. Some people just like the control or have the asset though. Its all around a societal drain imo.
Eh, I'd put thieves as worse. They have negative productivity.
Maybe. I think when times are good it seem like that (right now) but when times are tough they can be stuck owning things that lose money. There is some risk in ownership.
You lose close to zero money owning land even in down markets. That's why there are vacant lots that cost millions of dollars in every major city. Near-zero carrying cost.
There's risk in owning housing and so we should make sure people get rewarded for that instead of rewarded for owning land.
>You lose close to zero money owning land even in down markets.
You still lose relatively though because the next person with their money in the market made some %
Land and real estate assets are generally a poor investment relative to the market without a ton of active management. There are god knows how many millions of people who own land that would be incredibly valuable if not for the civil engineering lobby getting environmental rules and laws written to their favor.
I guess it's time to abolish apartment buildings then. And how dare someone want to rent a house/condo/apartment when they only expect to live in a city for a couple years.
Landlords do not create apartment buildings. Developers do that. Developers should get more reward for developing things and landlords should get less.
Landlords do not manage properties. Property managers do that. Property managers should get more reward for managing properties and landlords should get less.
Sometimes these are the same individuals and they lump their fees into a single check, but these are not the same jobs and they should not be treated the same.
How else do live in an area short term, with no desire to purchase property, without the existence of someone owning the rented property?
How would I own a microwave if I only needed a microwave for two months?
A microwave is orders of magnitude cheaper and easier to purchase than housing. In fact, they appear to be too cheap to be available at Aaron's for rent. So you're going to have to cough up $50 for a microwave from Walmart if you only want one for two months.
> Developers should get more reward
From who? Someone has to pay them to do the development, right?
Yeah the people who live there
inb4 a rentier-class swoops in to "well actually" this because interest rates are up: you need to draw a box around the capital interests (current owner, previous owners, bank, bond holders) and treat them as a group counterparty to the renter if you want to understand the system. Otherwise you'll get kited by each free-money-recipient pointing to the other and saying "look over there!" Which members of the group are living it up vs under pressure at a given moment changes, but what remains constant is the gigantic flow of money that comes out of the renter and remains with the capital interests after subtracting off expenses.
If companies would allow people to spread out more we could probably improve that situation some, but they want us all concentrated in 10-20 major metro areas. There's cheap housing in this country, its just in places where the job market is extremely limited.
On a note about addressing housing concerns, it certainly would only help a minority of folks but what do people think about right of first refusal?
Like if a landlord wants to sell their building and someone comes along with an offer for $500k then the current tenants have an option to buy it at that price.
Certainly would be annoying for investors looking to buy quickly but potentially life changing for long term tenants about to get a new landlord.
I think right now, the only place I can afford a house (in a place I would actually like to live in), is in some derelict, abandoned Italian town in Sicily, or something like that.
> derelict, abandoned Italian town in Sicily
That sounds like a great place to live. Good weather, quiet, Italian food & culture, safe & stable, public transit to the city…and you can work remotely.
if you can work remotely. And if Italy will let you immigrate. I would bet those two ifs fit a small percentage of the populace, unfortunately.
Yeah, I was going to comment on the remote side of things... Can't manage that at the moment, so it's a no-go for me on that ground.
The famous cheap (€1?) houses in Sicily (and other places with similar schemes) likely do not meet most of these criteria. It's not like real estate is cheap in Giardini Naxos...
I’ve been on the 50/30/20 budgeting rule for a while now, and I agree it’s a healthier perspective for an individual than a “30% gross on rent/housing” arbitrary metric. Housing is one part of a larger bill of necessities you have to pay every month because society dictates these necessities are not rights, alongside food, energy, transportation, insurance, healthcare, and communications. Laying all this out on paper then multiplying by two and accounting for taxes, helped me remain calmer in salary negotiations because I knew not what I thought I was worth, but what I actually needed to survive.
The grim reality is that over-financialization of markets combined with a lack of regulations against predatory practices (like surveillance pricing and algorithmic rent setting) added gasoline to the bonfire that was a fundamental housing shortage brought about chiefly from treating housing itself as an appreciating asset rather than the land housing sits on and taxing accordingly (don’t even get me started on residential property tax schemes popularized by the Baby Boomers and the associated gap between sale price and tax assessed values dictated by law). Growing wages won’t fix this, nor will cutting interest rates. Building more housing is the only way out, but existing homeowners don’t want their assets to decline in value, so that’s generally not happening. Rent control is becoming increasingly popular, and I think it’s a good idea to protect existing renters and force landlords to side with wanna-be homebuyers instead of homeowners by forcing revenue growth through volume creation (new housing) instead of rent hikes.
In most European countries this 30% rule has never worked. It's always been a completely out of touch rule, and, especially for single people, rent has always easily been 50% of their net income in major European cities.
Canada here: it can absolutely, definitely get worse.
Not really. Rent is too high. It's not a problem unique to America. Rents in Munich, for example, have also doubled since 2012. A three-room apartment often costs between €2,200 and €2,700 per month in this city. For reference, that's close to an entire net salary for many, even for someone in the top 20% of earners in Germany, where salaries are relatively low and taxes are high. The median net income here is around €2,200 per month.
This has been a key factor in my fiancée's and my decision to move away, as it's simply unsustainable for families with children.
That doesn’t really make sense with the point of the article being that someone could be spending less than 30% of their income on rent and still not have enough for their other expenses. If it was just rent being too high they would be over 30%. The suggestion here seems to be every expense is too high that even if you find the most dirt cheap sharehouse to reduce rent, you still might struggle.
The 30% assume gross, pre tax income - not net.
Ed: obviously the 50/30/20 rule sums to 100% so would need to be net - although the US is weirdly treating health insurance as a "premium service" that go into the 50% here, not into taxes like in a modern society.
This rule makes little sense for a country with an almost 50% tax rate.
It originated in the US, not meant to apply to all contexts/countries.
Both numbers matter though. Something is unaffordable only when you can compare the price and income.
Also if you have children - I am not sure how it is for you in Germany, but in Poland landlords will not rent to anyone with children. Or ask twice as much because the assumption is if you don't have home already, you are suspicious...
in germany that's illegal. you are not allowed to deny families with children, and even small pets (small dogs, cats, hamsters, etc) can not be denied.
It's quite cruel how Germans still keep up appearances with applying for the apartment with elaborate portfolio, full personal and financial data, letters and so on. While the only portfolio that matters is envelope with EUR 1500 in cash, or at least was 2-3 years ago and now is probably higher. 5-8 years ago it was maybe funny but now is simply cruel.
I have never heard of someone paying cash to get an apartment tbh
I saw it in Berlin. In two occasions I saw the realtor be openly bribed in front of all of us, although whether he took the bribe or not I cannot say. I also saw a man bring mini muffins and a personalized letter from his wife, family picture included, but I'm not sure it counts.
People who do don't have the time to talk with you about it:)
Very Recently, wasn't there a lawsuit against apartment owners for a vast price fixing scheme based on them all using the same software package that was telling them all to raise prices at the same time.
yes, RealPage
https://en.wikipedia.org/wiki/RealPage
At this point I honestly think this is a bit by design.
There is a crazy amount of land in the world, but either it's too expensive or you're not allowed to build over it, or a combination of both. Houses have been built for millennia but somehow in the most advanced period of humanity you're supposed to pay hundreds of thousands of dollars for a roof over your head.
I think that low key the ruling class + landlords are not interested that housing be an affordable thing, so the whole system works to create artificial scarcity. How's the population going to be forced to work unpleasant and low paid jobs if not by controlling their access to housing? You have to be too naive if you think that a few minds in your country's parliament haven't thought of this.
If someday economic activity gets automated enough, and the majority of people are not needed anymore for regular jobs, and this populace gets violent with their ruling class, then I think a lot of housing will be built outside of cities, and the supply of houses will no longer be a problem.
> or you're not allowed to build over it,
And those laws were passed with the political will of who?
Now with the benefit of hindsight what causes that seemed legitimate were used to hoodwink those people?
Have those causes and their peddlers lost credibility or legitimacy?
Western society is basically slowly recreating old world landless peasantry because we have adopted bad world views or bad morals or bad ideologies (or whatever else you want to call them) that allow us to be manipulated into incrementally creating the system that produces that outcome.
Complaints about NIMBYism and "ship it overseas and forget about it environmentalism" are sniffing around the right neighborhood, but there's a more general problem here.
> There is a crazy amount of land in the world, but either it's too expensive or you're not allowed to build over it, or a combination of both.
This is true, to a degree. There is another factor and thats WHAT kind of housing we build.
> ruling class + landlords are not interested that housing be an affordable thing
Off the mark, the real people pinning housing prices where they are, are home owners. Home ownership is the leading predictor of voting, and issues that maintain or raise current home prices will drive that up. https://www.gsb.stanford.edu/insights/if-you-lived-here-you-...
Furthermore home ownership is a functionally unmovable number: https://fred.stlouisfed.org/series/RHORUSQ156N (that fed data is interesting and says a lot, capturing the 2008 financial crisis, bad lending hardly moved the needle in real terms).
> controlling their access to housing?
The reality is that this is a social problem.
Boomers are living longer (higher quality of life) and alone. They either took their parents in (cohabitation) or put them in homes. I know plenty of elderly people who are living in large houses, by themselves, who had their parents, at that same age living with them. You're not going to see a bunch of retirees moving in together to save on bills - The TV show "Golden Girls" would not make sense today.
On that note, cohabitation among younger generations is down. Fewer people have roommates, and lots of them "want to live alone" - sharing a house with 4 friends is much cheaper than living in a studio or one bedroom. And there are whole categories of housing, like boarding houses, that have disappeared. Again this is a cultural problem, look at the TV show "Bosom Buddies" - this is something that would be lost on a modern audience for so many reasons.
Part of the cohabitation issue is "renters rights" have gone way too far. There are plenty of people with space, who will not cohabitate because the risk, cost and pain of a renter turning into a squatter is WAY too high. The rules to protect good renters from bad landlords have only served to push out good landlords because of bad tenants.
> If someday economic activity gets automated enough... This will never happen. If you dont think were going to find new things to keep busy and if you dont think were going to find new ways to compete for "dominance" I have news for you.
this chart in the article has got to be the most confusing ever:
"Map showing the affordability decline by state as costs of living outpaced wages"
so a + is an increase in affordability as the title indicates (wages outpacing COL), or + is a decrease in affordability aka an increase in non-affordability (COL outpacing wages)
https://na.rdcpix.com/a19175a2a7e40c2a2272c013b8b3458aw-c174...
I am reminded of the phrase "Irrational exuberance" uttered by Alan Greenspan back in the mid 1990s. The housing market is absurdly over valued. It's going to crash. This is unsustainable.
too bad houses AREN’T for living in, but for speculating
Wage slave wages not even keeping up with inflation and they all think it's houses that are the problem lol.
Americans are very confused when it comes to societal/collective issues. We saw this during the pandemic.