This article makes some interesting points, but I do find it strange that they reference George without referencing his famous idea of a land value tax in this context, a proposal which would at the very least put a sizeable dent in the ability of landlords to directly benefit from the increase in value of their land resulting from municipal service improvements while also encouraging better use of property in general.
Rent controls could be another alleviating factor. As could indirect competition from subsidised/social housing.
I'm not really comfortable with how the article attempts to frame municipal social improvements as something which must implicitly also drive wealth inequality, despite the other potential remedies to this.
Rent control is good for the people who already have housing who don't see their rents go up, but it's bad for people who might want to move to an area. It's very much a "pull up the ladder behind you" sort of policy and in the case that the article addresses it will tend to weaken coalitions in favor of reducing housing prices for new home buyers/renters and will tend throw currently homeless people under the bus.
It's also bad for the people in those apartments, because it traps them there. Life circumstances change and people get different jobs. Maybe you live in Palo Alto and get a job in San Francisco or visa versa. Before you'd swap apartments with someone moving closer to where you are now, with rent control nobody can move.
If you can't afford to live in a non-rent controlled apartment in a given area, that's not going to change if your own apartment becomes non-rent controlled. You'll just be forced to move out of the area to somewhere more affordable.
I really don't see how making more apartments expensive to live in helps anyone but landlords.
The argument is that rent control is a poor bandaid over the long-term problem of housing supply, because it reduces political pressure to build more houses. It's not the same longterm fix that changing zoning laws would be, for example.
1. It incentivizes owners to convert rental stock to housing stock.
2. It disincentivizes developers from building new rental stock.
3. It concentrates demand and removes supply driving up the price of non-rent controlled apartments.*
* Every rent controlled place that is lived in my a person who can't afford market rent displaces an individual who can afford market rent who then competes for the remaining rental stock driving up the prices of the non-rent controlled apartments.
Where does the displaced person who can't afford market rate go? They could afford it at one point, just their wage increases were dwarfed by housing price increases. All it asks is that landlords have a %cap on how much they can increase their rents each year. It's just not sustainable to displace all your tenants every pop of the housing market. It's not like the landlords property tax gets affected when market value goes up, landlords are encouraged to hold and not build on their properties right now because property tax burden is assessed when you sell or build, doesn't matter what realtors can get for your property or how much you ask from your tenants every month.
There are many downsides to rent control, but #2 is usually not one of them. A sensible rent control policy limits rent control to housing built before year X. This is the case for all cities in California that have rent control. For example in San Francisco the apartment needs to be built before 1979 to be under rent control.
This is a good thing for creating new housing. New apartments will not be under rent control and can command higher rent, so developers are incentivized to build new apartments.
Henry George thought that land was our common inheritance, but was in favor of free markets. He did not support rent control. He thought of rent as a fact owing to the value of the location, and the question is not how to make the rent lower. The question is who gets to profit off the fruits of nature.
Rent control, in effect, converts tenants into pseudo-landowners with less fungible rights.
If locations are valuable, and by extension the rents, that is good. But to whom does the rent belong?
If rents are unaffordable, it is because wages are too low and the rent is not shared... which comes back to bargaining power and the overall health of the economy.
Taxing production, for instance, harms economic health.
But allowing speculators to hold the land for ransom creates stagnation, sprawl, and harms the bargaining power of labor... by worsening everyone's best available options for living and working.
> But allowing speculators to hold the land for ransom
Property owners paid all the development costs, directly and indirectly,as well as all the maintenance and bureaucratic work.
If you rent an appartment, you're not paying for a percentage of the lot. You're paying for the fraction of a whole system (structural, electrical, sanitary, etc) which exists only because those who invested their hard-earned cash puting everything together.
More importantly, that little lot is only worth something because other investors spent their hard-earned cash investing in that area, either in urban development projects or in commercial and/or industrial activities.
So quite obviously that sort of exploitation angle makes no sense as it is based on a very weak strawman (i.e., there is only value in occupying a specific region in space) that had no bearing in reality.
Let's put it this way: what would happen to San Francisco's housing costs if magically the entire tech industry raised their figuratice anchor and moved elsewhere?
The idea of Land Value Taxation, which was George's proposal, is that improvements are to be exempted from taxation, and the effort of property management is to be considered as authentic labor.
How ownership has a very similar effect as rent control, especially in California where prop 13 exists.
Should we abolish home ownership and have everyone buy into a single rental market such that prices wouldn't be distorted beyond what median area incomes are.
The issue at hand will always be that there isn't enough housing for newcomers, if we mandated housing construction to grow in a parallel way with office construction and job growth we wouldn't have nearly the sorts of problems we have today.
You don't have to mandate construction of housing. You just have to get rid of the INSANE barriers to housing construction that exist today in places like SF and the wider Bay Area.
The mandate the post you are replying to speaks of wouldn't be to create housing but tie it to the rate at which other types of buildings are created. I believe the poster is referencing the situation in California where a town will let office space be built for 10k workers but then not allow any housing to be built for those workers.
My belief for that issue is that zoning powers need to be removed from towns and done at a state level as travel technology has made it too easy for towns to push off their negative externalities to other towns. Towns have no incentive to add new housing stock as that leads to more people needing to be serviced and new voters who might push to change the way of life that the current citizens enjoy. Businesses on the other hand, don't get to vote and usually pay much more in taxes than they cost in services. Every city appears to have towns that have realized this an effectively become polluters by letting new business come in but making it other towns problems to pay for. If the state controls zoning, and likely the burden of providing services, then that kind of fucking over of your neighbor won't occur at the level of cities other than ones on interstate borders like NYC and the two Kansas Cities.
I believe we need explicit housing mandates in the way we have parking mandates. Except this time, we'll be creating a more universal public good.
Just as how parking requirements make it much easier to find parking in high density and otherwise crowded areas, housing requirements will do the same for housing. A lot of folks on the public housing side of the debate want to decomodify housing through public ownership, but it would be far more effective if we just mandated housing be a part of every commercial development project nation wide.
This would be good for so many reasons ranging from better land use to much more abundant housing.
Additionally, zoning codes should be a state or federal system, as this would make it much easier to build economies of scale around housing development. But the placement of those zones/codes should still remain in the hands of local muncipalities, as no municipality should be able to protect their right to certain types of euclidian zoning.
I definitely agree with you about zoning needing to be done at the state level. I'm somewhat optimistic that some of the state level zoning initiatives in CA will take hold and we'll see some progress in this area. Fingers crossed!
This will sound counterintuitive but you absolutely have to mandate housing. Compare this to parking requirements, if we want an abundant housing supply we need to distort the market price of housing the same way we did for parking.
Require that new offices build an equal square footage of housing on top of themselves, and you've immediately build enough housing for at least the initial stage of population growth that comes with that new office.
I think you should hope to live in more than the handful of square meters than a classic tech worker occupies in an office.
Housing people on the same ground area than the offices would probably prove to be a huge technical challenge since it would effectively need probably 8 to 10 times the square footage, not to mention I'm not quite sure people really all want to have their colleagues as neighbours.
I'm not saying that the housing would need to go to those who work in the office, if anything it should be a part of the broader open market.
I'm also not saying that the office needs to match the housing supply of it's office workers in full, as a lot of new office development is hiring from people locally as well. But say, if you looked at the Seattle area, where Microsoft and Amazon have built over 10 million square feet of office space in recent years, an extra 10,000 apartments would go a long way in relieving the pressure on housing prices.
Hmm, maybe we could have a "housing credit" market system. For every office building with n workers, require housing for some % of n within the local area. Then the credits would be priced according to the imbalance between residential and commercial construction. Excess housing around? (Hah.) Well the residential builders will have to pay the commercial builders!
With higher property taxes or land value tax that stops being true. It’s true today because our tax policy is designed to use home ownership as a tax shelter, which favors the wealthy over the poor and limits upward mobility.
"Economists have demonstrated that high-cost high-income areas receive most of the tax benefit. For example, San Francisco, California receives $26,385 per home while El Paso, Texas receives $2,153 per home, a 1,225% difference.[28] The five highest income metros receive 87% of tax inflows, with over half going into California alone.[29]"
Yes, it is a serious question. I was worried you were going to bring up the interest deduction, and you did.
If there are people out there "sheltering" themselves from taxes by paying more in mortgage interest, those people are idiots. Any savings you gained on taxes were already wiped out by the fact that you effectively threw away money on your home (i.e. your money did not go into equity; to you, the money just went into a black hole).
I understand that they pay less in taxes as a result of mortgage interest, but if you have an actual choice between (1) spending $1 on mortgage interest and getting a tax deduction or (2) spending $1 on principal and not getting a tax deduction, the choice that leaves you wealthier is #2. Obviously this is not how mortgage payments work and ignores choice (3) of putting money in some other asset, and the time value of money should be considered, but for each equivalent dollar, I would rather get more equity in my home than a tax deduction. The tax deduction is nominally smaller than the equity you would gain on an equivalent amount of money going to principal rather than interest.
This isn't even considering the extra costs of homeownsership, especially property tax and maintenance (and the latter is tax deductible to a much smaller extent than mortgage interest).
Not the OP, but also to consider is the high exemption on capital gains tax to be paid on a home sale: $250k for single owners, or $500k for joint owners. If I buy a house for $500k, live in it for a few years, and sell it for $750k, I get that $250k in gains tax-free.
> The tax deduction is nominally smaller than the equity you would gain on an equivalent amount of money going to principal rather than interest.
True, but you can't ignore the "choice (3)" that you mention. I'm not in the market for a house right now, but if I were, I would absolutely get a mortgage even though I could pay cash for the whole thing. It's a non-zero risk, but I feel it's a reasonable bet to believe I can make enough in the markets to more than offset the mortgage interest, especially with the MID in play reducing my overall tax.
That doesn't really address the point the parent was making about buying a house being a good tax shelter (I agree with your premise if you restrict thinking to just that), but I don't think it's safe to ignore it in the bigger picture, either.
Doesn't really matter what it's for; at the end of the day you don't pay tax on the gain. If I invest in a stock or mutual fund that sadly only grows with inflation, the IRS still gets its cut from my gains. Home sales are (AFAIK) unique in this treatment.
The Texas constitution is written in such a way to provide defense-in-depth against an income tax, or any tax that even looks like an income tax. I don’t even think you’re allowed to file a bill with lege council that lets you file a bill to pass an amendment to remove the wording that prevents income tax—that sort of thing. You’d for sure get sued, and there’s no way the reps would keep their jobs.
That so many people from California will move to Texas over the next 20 years that it will change the voting population’s habits and Texas will get a state income tax.
>Should we abolish home ownership and have everyone buy into a single rental market such that prices wouldn't be distorted beyond what median area incomes are.
>Rent control is good for the people who already have housing who don't see their rents go up, but it's bad for people who might want to move to an area. It's very much a "pull up the ladder behind you" sort of policy and in the case that the article addresses it will tend to weaken coalitions in favor of reducing housing prices for new home buyers/renters and will tend throw currently homeless people under the bus.
You could defray those negative effects by building lots of public housing and/or heavily subsidizing new construction.
> You could defray those negative effects by building lots of public housing and/or heavily subsidizing new construction.
To the extent that you actually do that, you will naturally lower the market rent to the level that you wanted, making rent control pointless (except that it removes the signal that would warn you when you need to build more housing).
>To the extent that you actually do that, you will naturally lower the market rent to the level that you wanted, making rent control pointless (except that it removes the signal that would warn you when you need to build more housing).
You kind of answered your first clause with your second. Demand can rise very rapidly, but supply can only grow slowly. If you want to keep housing prices stabile for people so they're not being thrown out of their homes or displaced, public housing doesn't address that because you don't get the signal that it's a problem until after the displacement has happened.
Or, just let private builders build. Housing is not magically immune to supply and demand. Only advocating for the government to increase supply isn’t a very effective solution.
>Housing is not magically immune to supply and demand.
It kind of is because housing isn't the only component of housing value. Access to transit, safety, and public amenities like parks and schools are a huge component of what makes housing valuable. All of those things are public goods built by the government. Expecting private builders to build is just allowing public expenditure to line the pockets of a landowner who did nothing to add value to it.
Do you think that people would choose to ignore housing that isn't close to certain public services, if it existed? No, they would choose to live there because it'd still be closer to their workplace than neighboring cities and what not.
Don't forget that if the private sector isn't spending money to create value for the rest of us where we need it, then the alternative is spending people's money through government efforts. And as with any government effort, it is still less efficient because of its much bigger bureaucratic overhead.
>Do you think that people would choose to ignore housing that isn't close to certain public services, if it existed? No, they would choose to live there because it'd still be closer to their workplace than neighboring cities and what not.
Yes. People with money would choose to ignore them and they would wind up being peripheral slums and shanty towns because there aren't public services being built out to support the capacity.
> it is still less efficient because of its much bigger bureaucratic overhead.
Have you never interacted with a telecom provider or health insurance company? Heavily regulated industries and monopoly industries tend to approach messy bureaucracies as well. The messiness of bureaucracy comes from having to suit everyone's needs rather than just ignoring segments of the population that aren't profitable to serve.
This article of faith that government is inherently more bureaucratic or less efficient than the private sector is just not borne out by anything but religious devotion. The assumptions of perfectly fungible goods in a perfectly competitive market, which provides the theoretical basis for the idea of market efficiency, doesn't even hold in real estate.
> And as with any government effort, it is still less efficient because of its much bigger bureaucratic overhead.
Government programmes aren’t always less efficient than their private equivalents, e.g. the NHS in the UK is more efficient than many private healthcare systems (source: https://www.bmj.com/content/343/bmj.d5143)
Why is it important to accommodate people who might want to move to an area? Does everyone have the right to live anywhere they want to live without having to pay the necessary price to be there? For example, does everyone have a right to expect a residence on a Hawaii beachfront? And if not, why is it reasonable to portray a city as somehow lacking because it serves existing constituents above new ones?
It's like saying some cars are more responsible for a traffic jam than others, or some people on the subway contribute to it being crowded more than others. Everyone takes up space. The people who live somewhere contribute to the housing problem just like people who move in, in proportion to the amount of space they take up.
Choosing a subclass of people to scapegoat doesn't solve a structural problem.
It's also useful to think about who is doing things to make things better or worse. Moving in makes things worse, moving away makes things better. Building more housing helps, removing housing makes things worse.
So far that seems to make sense, but here's the counterintuitive part: in any given year, choosing not to move away is as bad as moving in. You're taking up space someone else could use.
(But normally we don't beat ourselves up too much for taking up space.)
It’s exclusionary and merely the local version of nationalism. If you don’t want anyone to move to an area raise taxes and stop allowing new business etc. - ie, actually discourage new growth.
But no place does that. They actively encourage new growth, just not new housing, which has the effect of systematically displacing lower income people, and eventually the middle class too. Long term it ends up hurting the original people it was supposed to benefit - ie. all the Californians crying about how their kids can’t stay in state when it’s the discriminatory policies they supported that created that situation.
I have to be honest, the linking of 'nationalism' to this discussion looks like hyperbole to me. Those who want to prevent housing growth or higher-density are not thinking "I don't want people of type X living here". They are most often thinking about what they personally want for themselves - the quality of life they want, the neighborhood character they desire, the breathing room/space they desire, the amount of traffic they want to deal with, and so on.
> If you don’t want anyone to move to an area raise taxes and stop allowing new business etc. - ie, actually discourage new growth.
Personal responsibility is still a thing. If someone can't afford to live in some area, or they don't like what they're getting out of it in terms of wages or expenses, they shouldn't move there.
> They actively encourage new growth, just not new housing
If people continue to move there, they are signaling they are OK with low wages or high expenses or any other drawbacks associated with that choice. If they are not OK with those things, they shouldn't move there.
No, they are signaling that, in a world that does not have limitless options and alternatives, this one option is at least marginally better than other available options. It doesn't mean the option is good, or even sustainable, just that it's not the worst one.
I, for one, would like to raise the bar a bit and give more people actually good options.
Anyone who suggests that a "best option" that involves commuting 3 hours every day is actually a good option is not someone I want in charge of public policy.
I have to be honest, the linking of 'nationalism' to this discussion looks like hyperbole to me.
I have seen a lot of people in my area assert that my political will should be subordinate to theirs because I came from somewhere else. Last place I lived, the notion that a particular demographic I fall into should be kept out of the general housing market when possible due to pricing others out was not just a fringe idea but part of several (ultimately successful) city council candidates' platforms. Perhaps people in your area are less nutty about outsiders.
If someone can't afford to live in some area…
Yes, those who can't afford the rent can live elsewhere, so rent control is not needed.
In San Francisco the return on land is so much higher than the return on work. There's no scenario under which this leads to a healthy society. NIMBY excesses created a modern feudalism. Why would the new hard-working generation subsidize the previous one and suffer taxes order of magnitude higher than the previous one (through property tax for example)? This is like a Ponzi scheme. There's nothing fair nor sustainable with this model. That's when in a properly working society you would have the State or Government take over and override the local policies to implement what's good for the greater good. Not what's good for the SF boomer wanting to sell his shack for 2M and retire in Florida. A couple of billionaires in Atherton should have no say on Caltrain improvements that could benefit millions of working people at the expense of a couple of trees in their backyards.
I realized this when my landlord came home with a brand new Mercedes SL one day, and I was still taking the N to work despite having a 6 figure tech salary. I was basically subsidizing his car payment. I worked at a 6 person startup that received a few million in funding, and between our personal rents and the rent of our office, probably around 40% of that investor money went into the pockets of landlords. If our startup was somewhere cheaper, yeah we wouldn't have raised $X million, but we wouldn't have needed that much just to exist.
> There's nothing fair nor sustainable with this model.
This is an opinion and not fact - it's how it looks from your perspective. The line between what is a smart investment and unfair feudalism is pretty gray, and I am betting people decide how to frame the situation based on how it personally affects them. That is, I am betting everyone is acting in a self-serving manner.
> Not what's good for the SF boomer wanting to sell his shack for 2M and retire in Florida.
This statement comes off as ageist. Why is it wrong for the SF boomer to want to make a gain off their investment and retire elsewhere? This is a core mechanism of every modern society.
> A couple of billionaires in Atherton should have no say on Caltrain improvements that could benefit millions of working people at the expense of a couple of trees in their backyards.
You are cherry-picking. It isn't just a "couple of billionaires in Atherton". But even if it were, why can't they choose to defend their quality of life? Why does everyone have to live in the bay area? This all comes off as people feeling entitled to live in a highly-desirable region, but on terms that suit them.
>Why is it important to accommodate people who might want to move to an area?
It's not just people moving into an area, it's moving within an area.
Rent control creates an market where existing renters are inhibited from moving even into the building next to their current residence. It prevents free movement in/out and within the market.
This also makes it so landlords want to evict/churn renters as much as possible, so they are incentivized to become slum lords. Landords invest as little as possible into the property because as soon as a renter moves in, that renter is never going to leave and the landlord sees diminishing returns over time.
OK here's a better alternative. Instead of rent control on a per-unit basis, cities could provide subsidies to long-term low-income residents that reduce their personal expenditure on rent. The subsidies would be paid for through taxes, thus amortizing the subsidy across the local tax base instead of impacting an individual landlord or unit.
But let me note that this must be done only for long-term residents (that is, those who have been there for years). For example, if someone moved to SF within the last 5 years, they should have known what the price of living there is. This is one of the most desirable cities, and it makes sense that it would be expensive and that not everyone would get to live there. Those moving there in recent years therefore, simply made an irresponsible personal choice and must yield to the consequences, rather than being subsidized at others' expense.
This already happens with income-subsidized housing. The added long-term requirement is absurd for the same reasons that locking people into long-term rentals is bad for rent control. You don't want to inhibit movement in the market.
People should be able to move easily because it's good for all of us. The less friction there is in the labor market, the better off the economy is. It's also very good for the sellers of labor who now have better ability to move to where their services are most wanted or negotiate better rates.
It's not super unreasonable for a city to try to protect its current residents but when an entire country of cities are all protecting their own residents that country is much worse off.
> Because the "new ones" are the kids of the "existing ones", in many cases, if not most.
Do you have a source for this? Personally I don't buy it.
But just for a second, let's assume that's the case. Would you be OK with limiting rent subsidies to just those who either have provably been residents for multiple years (let's say 5+ years) or have long-time roots (e.g. family)? I don't think any city owes expansion and housing supply and a re-architecture to accommodate just anyone who wants to move there.
Non-anecdotal? Not at the moment, sorry. I'd have to go dig. But anecdotally, most of the people I hear complaining about rents (not in SV, various places on the East Coast) are complaining about it being impossible to stay near aging relatives.
> Would you be OK with limiting rent subsidies to just those who either have provably been residents for multiple years (let's say 5+ years) or have long-time roots (e.g. family)?
I personally? It really depends on the form the "rent subsidies" take and how they're financed. I do think that thinking of "build more housing if there's more demand" as a "rent subsidy" is a bit odd, if that's the sort of thing we're talking about here.
> I don't think any city owes expansion and housing supply and a re-architecture to accommodate just anyone who wants to move there.
Now we're talking about the moral and ethical dimension of things, right? Opinions on this differ widely; I personally do not have strong opinions that would apply in a blanket way, and would prefer to analyze specific cases (i.e. specific cities) on a case-by-case basis.
Not everyone has a right to a specific house of arbitrary size in a specific location. Sure.
But it's also a bit hypocritical to encourage and incentivize building tons of new office space, and then be surprised when the people who are to fill that office space would like to live within a reasonable commute distance of that office, and then deny them that opportunity, because "it will change the character of the neighborhood", or, "it will reduce my home value".
Your, or more generally, the present population's children, are among those who will seek to establish new households.
Whilst unlimited population growth is impossible, stagnant communities and regions tend to slide into decline. Those regions most amenable to and rewarding of new activity tend to grow.
California occupied this position, globally, for much of the period from ~1930 - 2000, and particularly from ~1950-1975 or so. It does so far less now, with housing costs being a major factor.
Maybe not, but would you agree it's important to keep families together? If my children turn 18 and want to move out of the house but stay in the region to be close to family, they might not have many options when rent is $3000 per month and minimum wage is $7.
[Apologies - copying a comment I made elsewhere, but it is relevant to the point you made]
Here's a better alternative to rent control. Instead of rent control on a per-unit basis, cities could provide subsidies to long-term low-income residents that reduce their personal expenditure on rent. The subsidies would be paid for through taxes, thus amortizing the subsidy across the local tax base instead of impacting an individual landlord or unit.
But let me note that this must be done only for long-term residents (that is, those who have been there for years). For example, if someone moved to SF within the last 5 years, they should have known what the price of living there is. This is one of the most desirable cities, and it makes sense that it would be expensive and that not everyone would get to live there. Those moving there in recent years therefore, simply made an irresponsible personal choice and must yield to the consequences, rather than being subsidized at others' expense.
If you are going to adopt a policy of stagnation in housing availability, you need to adopt a policy of stagnation across the board. You can't have incentives that encourage businesses to locate in your area and at the same time refuse to allow additional housing for the jobs that the business creates. You should prefer to send to universities out of state where they are more likely to find jobs out of state rather than expanding your local higher education options. You should help with relocation expenses for young people who don't get into college, since you don't have enough jobs for them locally. And you should hope that the current industries you have remain relevant, because it is hard to adapt and diversify without allowing growth.
The circumstance isn't exclusive to just people wanting to move to a new city. Rent control increases moving friction, which could be due to changing life events such as having kids, being an empty nester, or wanting to move to a more convenient neighborhood in the city.
Do you want your local school to be able to hire teachers, or your local restaurant to be able to get help? Housing costs make everything where you live more expensive. Lowering housing costs makes everything else cheaper for you too.
> Do you want your local school to be able to hire teachers, or your local restaurant to be able to get help?
Yes, and they would still be available. If wages/living conditions are not good enough for them and they move away, there would be an under-supply of their labor which would cause their wages to rise, which would self-correct the problem.
Right now, those same people are willing to work for less. This is a personal choice they are making. And I don't think it obligates lower residents to provide lower-cost housing or greater housing supply.
In CA there is an under supply of both teachers and wages. The market will not correct even if wages/living conditions are 1:1. There are already people living paycheck to paycheck, unable to generate a dime of savings. There are people who are priced out of cost of living despite holding a job, and they opt to be homeless in an RV or car. Here is a great article about this new class of homeless in CA:
> Why is it important to accommodate people who might want to move to an area?
They're going to move there anyway. Making it more difficult and expensive won't stop them, as the example of SF shows. Accomodating them, then, is about mitigating the negative effects of immigration on residents and welcoming your new neighbors.
I don't think this is going to be true in the longer-term, and clearly SF has an exodus underway (https://www.sfgate.com/expensive-san-francisco/article/Bay-A...). People will (are?) realize that the benefits of SF are not worth the tradeoffs (if their circumstances are such that they can't make it there), and move elsewhere. They might (should?) make their way to many of the inexpensive cities away from the coasts that are more affordable, and the new residents moving into those cities will help make them vibrant cities.
At some point, the incumbent residents of SF or other communities may change their policies if what they desire is different. Or not.
But I don't think there is any lack of housing supply or jobs in the middle of the US. What is lacking is the exact housing people want, at the exact price point people desire, at the exact locations they want to live in, in the line of work they want to be in. Demanding such an exceptional situation is highly unreasonable. Making tradeoffs/compromises is a part of life, and no one is entitled to have the best on every dimension by default - that has to be earned.
You're right! SF has an exodus underway among certain groups. It may be possible that this might be distinct from an overall exodus and resulting shrinking population, however.
Is it possible that your perspective, while completely valid in every possible way, may not be as widely shared as you could hope for?
This is the thing that always gets me. It has been hugely painful for hundreds of thousands of people living in the bay area, for 10-15+ years now. Sure, maybe in 20 years people will give up and prices will go down again. Maybe. But what a pyrrhic victory it will be for the long term landowners who got their way only through imposing hardship on others for 30+ years.
But I guess they just don't care. "I got mine; fuck you" seems to be an attitude prevalent around here.
If there's enough demand in the market, either the person already living in the apartment or someone else is going to live there.
With rent control, whoever lives there pays lower rent. Without rent control, whoever lives there pays higher rent.
There is no net change in the number of people living there either way.
So why (other to benefit landlords) would we want whoever lives in a given apartment to pay higher rent?
"it will tend to weaken coalitions in favor of reducing housing prices for new home buyers/renters and will tend throw currently homeless people under the bus"
Landlords are not going to voluntarily lower rent prices if they can get away with charging more (else rent control would not even be necessary), and homeless people are not going to be able to afford the higher prices that non-rent controlled apartments cost.
> [Rent control policy] will tend throw currently homeless people under the bus.
Precisely the opposite is true. Uncontroversially the immediate effect of abolishing rent control will be to create more homeless.
Rent control does not apply to new construction in many cities such as SF, so it does not affect the incentive to build. The mechanism by which abolishing rent control might lower prices somewhat for wealthier people moving into the city is by clearing out the less fortunate who have built lives here, adding their units to the market. Those that have nowhere else to go will become homeless.
It's bad for people who might want to move to an area of you believe that rent control significantly affects the supply of housing.
If you believe that then it might be worth pondering why New York's highest rate of homebuilding occurred when it had its strictest rent controls though.
In reality all rent control really does is redistribute some the spoils of rising land values from certain owners to certain renters.
This makes some property owners extremely angry but as far as renters and potential renters are concerned it's potentially good or potentially neutral.
If you really want to incentivize home building you need to disincentivize land hoarding. That means repealing prop 13 or implementing LVT.
Just because there was a boom during the time of ham fisted rent control does not mean it was caused by rent control nor does it imply that rent control was even good for it.
Have you ever considered how much more housing might have been built if it weren’t for rent control?
If I am renting somewhere, surely I am putting money into the local economy? If I am doing that, then surely I deserve some of the benefit of an improving economy? As it is, a renter is punished for improving the local economy because it improves the value and the cost of rent goes up. As it is, employers aren't exactly keeping up with inflation. Add in the increasing cost of rent? Time to move. Oh, wait, all the high tech jobs are highly concentrated when they don't need to be.
> In reality all rent control really does is redistribute some the spoils of rising land values from certain owners to certain renters.
No, rent control also redistributes the burden of rising rental costs from people who have rent control to people who don't, and tends to make that burden larger than it would be otherwise.
> If you really want to incentivize home building you need to disincentivize land hoarding. That means repealing prop 13 or implementing LVT.
On this, we agree. And we can't just simply throw rent control in the trash overnight and expect everything to work out. It needs to happen in concert with other initiatives that increase the housing stock, and be phased out over time, with targeted help to more vulnerable people.
But I don't expect any of this to happen, at least not until things get to people-are-rioting-in-the-streets levels.
>No, rent control also redistributes the burden of rising rental costs from people who have rent control to people who don't
Supply of apartments and demand for apartments doesn't suddenly change under rent control so no, there's no market pressure making non rent controlled apartments more expensive hence there is no redistribution between renters.
Lucky renters get below market rate and unlucky renters get market rate.
There is only re-redistribution from rentiers (landlords) back to renters. 1% -> 99%.
I don't think rent control is the best solution for the housing crisis (100% LVT ftw) but it's intellectually dishonest to pretend that it hurts renters. It never has and it never will.
> Supply of apartments and demand for apartments doesn't suddenly change under rent control
Yes it absolutely does. Demand doesn't change, but supply is artificially reduced because people with rent control are less likely to want to (or be able to) move out.
People who don't move out aren't increasing supply but they also arent competing with other people seeking new apartments so they aren't increasing demand either. It's net neutral.
Unless you're talking about the people forced on to the street or out of the city entirely by rising rents...?
>Rent control is good for the people who already have housing who don't see their rents go up, but it's bad for people who might want to move to an area.
I don't see the problem. "Wanna move to the area" is a choice. "I am forced out of my house because of higher rent" is not.
Try rephrasing the first as "I can't move into the area because I even though I would gladly pay what a landlord would freely charge, his current lessee has a legal claim to renew at a rate below that."
Living in a particular place is always a choice. You shouldn't be entitled to get the same house at half the price just because of the accident of where you happened to be born.
There is a large section of the SF Bay area that is horrified at the idea of closed borders, yet they are as horrified at the idea of anyone new or poor moving into their neighborhood.
Why not? If you were born there, you should have claims there.
Would you extend this idea to property? After all everything you've inherited is like that too (an accident of birth). How about parents? Perhaps children should be assigned to random families at birth, to keep it fair? How about citizenship? Would you give up your citizenship because you being an X citizen is just an "accident of birth" (and as such not really entitled to it)?
People don't have "accidents of birth". People are born in a place because their parents moved there. And the important part comes after the birth: people grew up there, played there as kids, connected with the place, etc. A place is part of a person's life history. It's not just a consumer good up for grabs by the highest bidder.
Here is also Paul Krugman in The New York Times 19 years ago:
The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable.
...
None of this says that ending rent control is an easy decision. Still, surely it is worth knowing that the pathologies of San Francisco's housing market are right out of the textbook, that they are exactly what supply-and-demand analysis predicts.
But people literally don't want to know. A few months ago, when a San Francisco official proposed a study of the city's housing crisis, there was a firestorm of opposition from tenant-advocacy groups. They argued that even to study the situation was a step on the road to ending rent control -- and they may well have been right, because studying the issue might lead to a recognition of the obvious.
It's interesting because the argument these NIMBYs use against studying rent control is the exact same as the one gun rights activists and the NRA used against allowing the CDC to study the effects of gun ownership rates.
These privileged "progressives" need to be put in their place politically.
This seems to assume that rent controls are the only thing preventing new home construction (because of the uncertainty of being able to sell units without being hit by rent control), but supply can be restricted in many ways. The most common of which is simply running out of room thanks to natural boundaries (rivers, oceans, lakes) and local policies against building high density housing.
So rent control tends to show up in areas where rents are growing significantly faster than inflation already, meaning the rent control is at best a band-aid over the existing problem. And then the problem gets worse and economists blame rent controls.
Additionally, people in rent controlled units are strongly incentivized to stay put, keeping the unit off the market. Knowing this, landlords must estimate the future market and price that in to new rates or they risk being even more below market rate after that new renter has been there for a few years. This is a feedback loop between landlords. Therefore, even if median rent paid in the city is reasonable, all available units are priced sky high.
This leads to people being stuck forever wherever they managed to land on their first try. Got a new job offer across town that pays better? Ready to upgrade from your straight outta school studio apt? Too bad. Moving out of your established rent control would cost you so much you’d be moving for an effective loss. Just stay immobile and keep that unit off market for decades.
I see this argument a lot about how bad it is to be stuck and I really can't wrap my head around how its presented. Laid bare its "you've been underpaying so long you won't be able to afford overpaying."
If the landlord suddenly demands double the rent and you don't have rent control, and everywhere else in town demands double the rent, you are homeless. If you have rent control, your landlord cannot double your rent, but it still goes up at a fixed % a year, and you aren't gonna go homeless.
Housing prices have rose faster than wages can keep up, either you offer some limits at how much you can gouge from a tenant or you accept the consequences of low income workers forced to live far from their low wage job (increased vehicle usage due to being far from convenient transit, more congestion on the roads, more pollution in the city), as there's just not enough jobs in these far flung areas.
The great irony is that all of these debates and issues and perilous environmental and economic situations could all be avoided if we simply built dense supply to match demand. This is the U.S., we do nothing better than create heaps of supply to exceed demand. Distal suburbs hastily constructed in wildfire lands aren't the answer; you have to build housing where you've built the jobs. That means building UP so people don't have to travel for hours and hours sideways to find something they can live in with their wages.
"Knowing this, landlords must estimate the future market and price..."
No. Just because a landlord is saddled with low rent units does not mean they can charge more for vacant units. They can only charge what the market will allow. They can't magically find renters willing to pay 50% above market just because they have some units being rented for 50% below market.
Correct. The most credible study on the matter (Diamond et Al. 2018) makes it clear rent control over the decades evolves to hurt the disadvantaged the most.
To aggressively build housing. But this requires local politics to cordially ignore the calls to keep the status-quo. In many places, it isn't possible. :/
Raising LVT proxies (e.g. property tax) would make the NIMBYs quieten.
Untaxed land -> higher property values -> NIMBYs start getting agitated about proposed housing developments taking chunks out of their home equity by increasing supply
I like the approach Houston has taken: no zoning. Many say it won't work, but it does. HOAs pop up in some places if they really don't want commercial.
OK, but isn't the existence of zoning basically the same as the existence of HOAs, in that people have chosen to enact these policies locally, much as HOAs enact hyper-local policies? You seem to be OK with HOAs but not zoning laws, so my question is why are zoning laws bad when it is the choice of their residents (through representative democracy) that they enact policies that preserve their area's character and quality of life?
Basically, HOAs are smaller scale. Also, there's a big difference between a bureaucratic gov't doing it and a bunch of residents doing it. Here's the thing about zoning: the people on whom it is enacted probably have a part of one vote in the city council. The decisions are mostly made by the rest of the city. This is especially true in a city as large as Houston.
It's the classic problem of tyranny of the majority, which is best solved through hyper-locality (i.e. HOAs).
I disagree with the framing of this as 'tyranny of the majority'. The size of the group of people which is allowed to enact policies is entirely arbitrary, and I don't see a principled reason as to why HOAs would be OK but cities would not. I feel those who are OK with HOAs but against city-level policy-making that constrains growth are likely just drawing the line in a way that matches their own interests or ideologies.
I also don't understand why you are framing government as inherently bureaucratic as part of this argument. If that's the case and it justifies not having policy-making left to public governments, why not apply the same logic wholesale and say that we don't need city- or state-level governments at all?
How would you propose to do this? Houston is an incredibly large and diverse city, and different places have different needs. It's much easier for people from the actual place to come to a resolution than bureaucrats in a council chamber, many of whom have essentially zero specific knowledge of the area or problem at hand.
> why not apply the same logic wholesale
I think we should. The more sovereignty we can reserve to individuals, the better. That which must be given up should be given first to as hyper-local an organization as possible, growing in scope/scale only as needed.
> why not... say that we don't need city- or state-level governments at all?
Because obviously some things (like, say, some city issues) can't be handled well by a government smaller than a city. This doesn't mean that everything needs to go to them. You're deliberately misunderstanding my arguments to try to discredit them.
Make towns growth into cities. A lot of heartland available. A lot of people wants to own their house. Good Mortgages. Good construction credits. Industries can have tax benefits to be there.
There is technically a second option - better transit to handle it but it is usually a worse one and like landfills they have to be built somewhere. And of course the most efficient, scaleable, and clean transit benefit from higher density housing. And of course people resist that as well. The problem with rent isn't that we don't have a cure but that people don't want to take their medicine.
Wrong. Long term, subsidies encourage building more housing. Rent control has the opposite effect. On top of that, subsidies can be directed to bring the most benefit to the city (teachers, for example), while rent control benefits whoever happens to be renting at the time it is instituted. There are better long term options, but the political reasons for rent control are because the short term problems can't be ignored, so they aren't actual alternatives to rent control.
Subsidies encourage more housing as much as any other demand-increase does, which is to say, not at all, where supply is effectively constrained. Existing actors in the landlord, real estate, and finance markets all benefit from constrained supply and price inflation.
You've got to break that logjam, and LVT is one of the most effective ways to do that.
Remember: they're not making any more land. You can build out (sprawl, congestion) or up (density). Low land taxes or high improvements taxes both discourage density and encourage sprawl. You cannot change land-use by adjusting demand parameters, long-term and large-scale, only supply and holding costs.
Land value tax requires a constitutional amendment in California. Once again, with feeling: it does not solve short term problems and is therefore not an alternative to rent control.
Also, you've ignored that renters are still encouraged to increase housing supply with rental subsidies. If they have enough votes to enact rent control, they have enough votes to increase housing supply for the long term solution.
Nope. New landlords are incentivized to build housing. The only thing that could stop them is regulations from existing landlords, but in a place with enough votes for rent control or subsidies, existing landlords do not have the votes to stop them.
Counterfactual: San Francisco has rent control and subsidies (Title 8). Landlords have the votes to stop construction.
Plus; the probem is *regional8. It's the Bay Area as a whole which is chronically short new housing. SF alone cannot absorb all new demand. Similar dynamics affect most constrained markets.
Again; your economic understanding is flawed, as is your grasp of historical facts.
It is not a counterfactual. Once you have rent control, existing renters will no longer be in favor of building new housing. You're confusing having the votes at two different times, among other things.
Do nothing and let the market sort it out. It's time to try some actual laissez fair now that intervention has failed, as was predicted by most economists.
Minimal zoning, minimal taxes, minimal codes. Just boil it down to the raw essentials and give a legal guarantee that every building permit application will be processed in 6 weeks and furthermore legally guarantee that for new buildings all of these new rules are immutable or 10 to 20 years.
Rent control tacked to region wide inflation levels is still good policy even if it's bad economics. People should have an inherent right to place, if they didn't the immigration and native rights debates around the world would be non-existent.
Rent control also has the positive effect that if renters put in effort to improve the economic value of their community and neighborhood, that they wouldn't be displaced in the process. I'd also point out that rent control doesn't always have to happen as a result of low supply, nor does rent control necessarily reduce housing construction should zoning be relaxed in the process (in the era with the highest levels of rent control in Manhattan, was also the era of the highest amount of construction).
This isn't about choosing where to live, and as a matter of fact Zurich does have very strong tenant protections and rent controls. This is about if you've lived somewhere 20 years, and the neighborhood changes, where you were a part of improving the conditions of the neighborhood, you should have the right to remain in your home at a price you can afford.
We as a society should incentivize people improving their neighborhoods, as right now we're doing the exact opposite in areas with large numbers of renters.
I probably wasn't clear on this, but I'm referring more towards the broader neighborhood a person lives in. At least currently, rent control and land ownership is the only clear way to prevent outsiders from coming in and disrupting the community.
The kind that come in, buy up property and evict every tenant living in said building, followed by raising prices such that no one who lived in the area previously could afford it.
This isn't about outsiders who move to a neighborhood with the goal of having a place to live, this is about investors walking into a neighborhood and viewing it as a financial opportunity.
why of all things should people have the right to live in a dwelling they dont even own for a fixed price in perpetuity? prop 13 is pretty awful but at least it makes slightly more sense than rent control.
I never said it should have to be at a fixed price, and you could ask the same question for why does a person own property that they don't live in.
Landlordism and rent seeking is an inherently immoral thing that we allow to exist in our society, and we need land value taxes alongside reasonable rent controls (like the ones Oregon just passed) to stop these behaviors.
If you live in California it's honestly better to just not know about it.
Before reading that Wikipedia page I never batted an eye at golf courses in city centers, dilapidated shacks with huge yards bordering Google's HQ, or empty lots worth millions sitting undeveloped in the middle of a housing shortage.
I don't understand how a land value tax would correct for the issue the original article outlines. That is, landowners will be the primary beneficiary of municipality improvements regardless of whether we have a land value tax or property tax.
Rent control can also distort markets and change the way people live. So say you have rent controlled apartment close to work but later lose your job. In that case people are heavily incentived to stay put so less likely to move and more likely to commute longer distances for work.
Often around these kinds of high-density cities, many (most?) people are living some sizeable distance from work anyway so I'm not that rent controls would be massively influential there either way. I agree with the principle that we should attempt to reduce commutes but I think there are other issues at play which are more relevant to commutes specifically such as agglomeration which generates areas which are dense in work and relatively sparse in housing and vice versa.
So there are other dynamics at play, some cultural like being expected to be physically present when your work could be done either at home or from a local desk-space or something to that effect. I'm sure there are other possible answers to this, but quite a straightforward one to me seems that paying your employees for their commuting time would probably be right in terms of incentivising employers to allow more remote work or even set up satellite locations (possibly as a part of a desk sharing arrangement) in areas typically considered commuter belts.
One other thing I've seen in NYC is that rent control results in increasingly divergent incentives for the landlord and the tenant over time, assuming that the value of the property is increasing.
It gets to the point where some landlords do truly despicable things to drive out tenants who they cannot otherwise legally ask to leave. It also leads to things like tenants refusing necessary repairs because they fear the landlord will use that as a pretense to raise the rent or evict.
> Often around these kinds of high-density cities, many (most?) people are living some sizeable distance from work anyway so I'm not that rent controls would be massively influential there either way.
Plenty of people commute from an inner suburb on one side of the city to a job on the far side of the center. If they could move to the corresponding inner suburb on the other side, and pay the same rent, that would be a substantial saving for them, at no cost to anyone else.
> I'm sure there are other possible answers to this, but quite a straightforward one to me seems that paying your employees for their commuting time would probably be right in terms of incentivising employers to allow more remote work or even set up satellite locations (possibly as a part of a desk sharing arrangement) in areas typically considered commuter belts.
That's not workable; employees can just pick a long commute and pocket the money. And what about those who aren't traditionally employed, or the small companies who'd be bankrupted by this?
Employers don't put their offices in the center of the city out of malice. They do it because it's better for productivity, and/or a better work environment that lets them attract more talented employees. That's real value that you destroy when you make it expensive for two people to swap houses and live nearer where they work; even if you force the bill onto the employer it's still a loss to society.
> If they could move to the corresponding inner suburb on the other side, and pay the same rent, that would be a substantial saving for them, at no cost to anyone else.
Why do you assume they would want to? I don't want to move every time I switch to a job in a different part of town.
How is this any different than if a person owned their home, how many people sell their house should they take a job further away. Rent control generally only contributes significant savings if you've lived somewhere a long time.
> how many people sell their house should they take a job further away
That's... extremely common in areas with functional, non-distorted housing markets. There's some financial friction involved in buying and selling a home, plus the obvious emotional attachment, but I nonetheless still regularly hear of people moving across town for a shorter commute or a more desirable neighborhood. It's not a huge deal unless home sales are heavily taxed or the local property tax regime favors long-term owners (the homeowner's equivalent of rent control).
There are inherent costs associated with selling/buying used property and this is especially true for housing. Renting does not have the same inherent overhead when switching, only the common overheads (moving physical possessions, changing mailing address, etc).
I lived in a rent-controlled apartment in the 1980s and it was impossible to get the landlord to fix anything (i.e. invest in anything) regardless of what the laws said (this was Cambridge, MA, and the usual junk grad student apartments next to campus). He wasn't going to get any additional rent for anything put into the building.
In fact his best option was to let the block decay and become uninhabitable so he could pull it down, put up something better, and rent out at market rates to new tenants. A few years back I drove down the street and guess what: the buildings on that street had clearly been built since I graduated.
Why would a land value tax decrease the benefit landlords accrue from municipal service improvements?
We already have a property tax, and the only difference between a land value tax and property tax is that it favors one type of landlord (the ones who develop their land) over another.
To the extent that municipal service improvements increase the utility provided by housing in the area, landlords are able to collect more rent from tenants (not necessarily from the same tenants -- new tenants with more buying power will be more interested in the area after municipal services improve). Since that increase in utility for tenants is derived from the location of a lot rather than what's built on it, the value of the land itself increases while the building remains unchanged. So taxing improvements can't recapture the utility increase the way that taxing land can.
FTA> Consider an increase in the quality of public services — say, garbage collection, or perhaps in San Francisco the elimination of public urination. ... Why exactly would non-landowners press for improvements in their cities? The value of those improvements will be captured mainly by other parties.
Gee, I don't know. Maybe I don't want to live a city that reeks of urine and has garbage all over the place...even if the effect of that is that more people want to come live here as well.
I think the point is that when some areas push for that, their rents go up, and some people get priced out. Either an equilibrium forms where there's a "pee+garbage rent discount" for an area, or you see migrations across the "smells like pee+garbage" boundary as rents adjust.
I suspect it has to do with the sign of the derivative of demand, where the trend is to look for better areas (overall reduction in pee, higher rent) or to look for cheaper rents (more pee).
His point is that any improvement will result in higher rents, as well. The people paying for the "improvements" will be the renters. It's entirely rational that people would put up with public urination if the only other option is "paying" for it to go away (even if they might not be happy with putting up with it).
Then don't live in a city that reeks of urine and has garbage all over the place. Cities are ancient relics of a time when human beings had to have their atoms in the presence of each other to communicate rapidly. Don't live in one unless it has the quality of life you can accept. If you keep supporting sub-par cities, they'll never improve.
> Cities are ancient relics of a time when human beings had to have their atoms in the presence of each other to communicate rapidly.
You're forgetting the transfer of material possessions and wealth, safety, and employment. It's great that you've found a way to work remote, but that's the not the reality for the majority of people. I also wonder whether 5 million people living in less than a thousand square kilometers is more or less wasteful than 5 million spread out over a billion square kilometers. You'd have to spend a lot more to transfer all the goods everywhere, as well as moving people around.
I believe I once read that at the population density of Tokyo, every human on Earth could fit into the state of Texas. Whether that would be desirable is another question, but I imagine that a lot of our current environmental problems would go away with increased density.
You forget another important factor - infastructure scaling. If communication alone was adequate we would see companies going to disporia models or setting up in unincorporated areas- instead they are paying premiums to concentrate in /expensive/ cities.
This article contains an central economic fallacy.
> Take the example of San Francisco; with nicer streets, even more people might want to move there. That would push up rents by an amount roughly equal to the value created — putting the gains from the higher quality of life into the pockets of landowners. ... The political economy problem now should be obvious: Why exactly would non-landowners press for improvements in their cities? The value of those improvements will be captured mainly by other parties.
This is equivalent to saying, why would anyone want a Starbucks to open in their neighborhood when the value of the Starbucks is captured mainly by Starbucks shareholders? (Assume, for the sake of example, you like Starbucks, otherwise replace with whatever you like.)
The answer, obviously, is that enough people find it to be a beneficial trade for both parties: people want to spend more money for better coffee. That's the invisible hand of the market that improves the sum of things.
Similarly, gentrification is about people wanting to pay higher rent to live in a nicer neighborhood. Yes the landlords get more money... but the tenant gets the nicer neighborhood! (Or closer access to more jobs, or whatever.) That's the whole point. That's free trade.
The author tries to claim that "residents just won’t care enough about the quality of life in their city." That couldn't be more wrong. On top of it, the author literally contradicts themself with the earlier line "with nicer streets, even more people might want to move there". You can't have it both ways, sheesh...
> Similarly, gentrification is about people wanting to pay higher rent to live in a nicer neighborhood. Yes the landlords get more money... but the tenant gets the nicer neighborhood! (Or closer access to more jobs, or whatever.) That's the whole point. That's free trade.
You're misreading the argument. Yes, the renters want to pay more, but the problem is not that they want something nicer, it's that this system takes that natural desire for something better and combines it with NIMBY policies to skew it in a way that results in the centralization of financial capital in fewer people. This cripples the economy overall. The renters ARE getting capital in the form of nicer streets, better coffee, and a shorter commute, but you can't buy goods and services with nice streets, better coffee, and shorter commutes. You buy goods and services with money, but all the money is in the hands of the landlords. The economy does better with a wider distribution of resources because a wider distribution results in more spending on real goods and spending on real goods generates new wealth.
One person with a great deal of financial capital will buy real goods too, but only up to a point. After that, they will invest in markets, which create and destroy money seemingly at random. That's not a good place for most of our economic resources to be. It's better to have as much money being spent on real, useful products as possible in order to maximize economic stability long term.
It prevents San Fran from growing even faster than it already is, but it's not going backwards or anything. NIMBY is a separate problem.
> but you can't buy goods and services with nice streets, better coffee, and shorter commutes
That's turning it backwards. That's like saying you can't buy clothes with food or vice-versa. The streets, coffee and commutes already are the goods and services which people, on the whole, desire (even if some individuals don't).
Complaining that money is in the hands of landlords is no different from complaining it's in the hands of Starbucks shareholders. Money doesn't disappear... when landlords receive higher rent, that money is either being re-invested or spent on "real, useful products" in the end.
It means the economy doesn't grow as fast as it would otherwise. But again, it's not shrinking, or remaining stagnant.
If you call that "crippling" then keeping Central Park in Manhattan also cripples the economy, by preventing the economic growth that would result in replacing it with hundreds of blocks of offices and apartments.
Democratic communities are allowed to choose to slow down economic growth in order to preserve a more liveable physical environment.
Do you think preserving Central Park cripples the economy overall?
> when landlords receive higher rent, that money is either being re-invested or spent on "real, useful products" in the end.
This is simply untrue. Wealthy people do not eventually hit zero on their balance sheets, they typically keep the wealth, invest it by gambling in the market, and pass it on to their children who also do not spend it all. Spending is the key to economic growth and wealthy people absolutely do not spend as much as poorer people on real goods. The economy is always better off with wider distribution of wealth.
By investing it. And even the small proportion being kept as cash in the bank is invested by the bank.
> invest it by gambling in the market
If they're investing well, then they're directing that capital to productive uses, helping to produce goods that people buy. If they're investing badly by "gambling" then they will quickly lose their money to good investors who will direct it to productive uses, producing goods that people buy.
> and pass it on to their children
Regardless of your views on an inheritence tax (I personally favor it), what is not spent will continue to be invested, and the same arguments above apply.
If every single dollar in the economy is invested and nothing is spent on real products, it's fake money and will inevitably collapse. Investment is not wrong in itself, but investment that is out of balance with spending on real goods is crippling because the real goods are where the rubber meets the road on investment returns. That is what happens when only a few people have all the cash and the rest are just barely getting by. You aren't maximizing growth and, as a consequence, your nation will lose power in the global market.
Can you expand on this? Wealthy people may not hit zero on their balance sheets, but isn't investing their capital in corporations a form of spending? That is, it enables the corporation to make capital expenditures to produce goods and services that will in turn be purchased. As long as wealthy people continue investing their capital, it should be healthy for the economy?
Yes, there is a balance that has to be struck between how much of your economy is investment and how much is spending on real goods because they are symbiotic. The problem is that when inequality rises too high, you end up with too much money being invested and those investment returns either slowing down or being artificially accelerated by gaming the market other ways (think the 2008 collapse).
>Similarly, gentrification is about people wanting to pay higher rent to live in a nicer neighborhood.
Not the same people though. The quote from the article holds true for tenants who cant afford higher rents. Gentrification is generally a processes of displacement. There the old saying, that graffiti tags keep the rent low holds true.
Well of course. But that's just how the economy works.
Workers whose skills are no longer needed get let go and have to retrain to more productive skills. People who live in a neighborhood that gets too nice for them to afford wind up moving to a neighborhood they can afford.
If you argue that neighborhoods shouldn't improve because rents will go up, you're basically arguing against economic progress in general.
It's the same as saying a longer-lasting higher-quality product shouldn't be released because it will cost more than the lower-quality one.
But the point of the article is to break down the economic incentives. If you're personally disadvantaged by economic progress, you're incentivized to oppose it. I'd argue there's significant empirical evidence of this throughout history. The author posits that a large number of people in major cities are incentivized in this way, and while I don't know what the numbers are, I'd argue the theory is sound.
I'm yet to see any resident going to council meetings complaining that the streets are too clean, that public transportation is too good. I don't think most people connect the two things, plus a good chunk of the residents are property owners and would prefer the land value to go up. Finally, I also doubt that the improvement of public services is the main factor driving land prices up. For instance, here is Lisbon, it's mostly due to the foreigners buying up the stock (more than half the buyers are foreigners). I suspect the cause is similar in London.
> I'm yet to see any resident going to council meetings complaining that the streets are too clean, that public transportation is too good.
You'll see them complaining that rents are too high. And you'll see them objecting that better public transportation would "change the character of the neighbourhood" or whatever, which tends to be code for pushing up the rents.
> Finally, I also doubt that the improvement of public services is the main factor driving land prices up. For instance, here is Lisbon, it's mostly due to the foreigners buying up the stock (more than half the buyers are foreigners). I suspect the cause is similar in London.
No respectable economist agrees with you. Foreign investors are a bogeyman who are easy to blame for everything since they're not there to defend themselves.
The main factor is neither public services nor foreign investors.
It's economic growth. With the exception of retirement communities, it's locally-situated companies producing more value, hiring more employees, paying them more, which results in those employees wanting nicer homes, nicer neighborhoods and better public services. And why shouldn't they?
As someone who used to live in a house that got graffitied almost weekly, often with gang symbols, my sympathy for neighborhoods that are shitty because of the idiotic choices of their own residents is zero. Bring on the gentrification, the people are way nicer, and they actually make the city a better place to live.
You know, I think you can't really argue against gentrification _and_ against things like white flight. I suspect that most people actually feel like you do. What they don't want are the consequences of gentrification.
They want things to get better but to capture all the surplus from the betterness. So they want to continue to live where they did, have the streets be cleaner, have the stores be nicer but not have anything go up in price.
The economy isn't generally zero sum but some things definitely are close to zero sum.
> This is equivalent to saying, why would anyone want a Starbucks to open in their neighborhood when the value of the Starbucks is captured mainly by Starbucks shareholders? (Assume, for the sake of example, you like Starbucks, otherwise replace with whatever you like.)
> The answer, obviously, is that enough people find it to be a beneficial trade for both parties: people want to spend more money for better coffee. That's the invisible hand of the market that improves the sum of things.
But that's precisely the fact that Starbucks doesn't capture all or even most of the value they create. Trade is a wealth creation mechanism for both sides; Starbucks makes more money than it costs them to make coffee, but people get coffee that's worth more to them than they paid for it. If that wasn't the case - if Starbucks was charging such high prices that the coffee was only barely worth it to customers (perhaps because they were in a monopoly position) - then people wouldn't care whether a Starbucks opened near them or not.
> Similarly, gentrification is about people wanting to pay higher rent to live in a nicer neighborhood. Yes the landlords get more money... but the tenant gets the nicer neighborhood! (Or closer access to more jobs, or whatever.) That's the whole point. That's free trade.
But it isn't free trade, because there's no meaningful competition. No-one can build new buildings, so the landlords form a de facto cartel.
That doesn't make any sense. Landlords are competing with each other for the best tenants (hence buildings being improved, amenities added, etc. as necessary), and tenants are choosing between landlords for the best buildings, between neighborhoods for the best quality of life, and between cities for the best value.
It's all competition. Just because there's a fixed supply of real estate doesn't mean there's no competition within it! One has nothing to do with the other.
If all buildings in a city were owned by the same single landlord, then it would be a different story. But that's obviously not the case.
I'm sure George explained it better, but I'll try.
Between-landlord competition will keep building prices at a level that's equal to the value they create, but it does nothing to ensure that the surplus gets fairly distributed. If you imagine a town of millers and bakers, as long as people can freely switch jobs then both will be equally profitable careers, because they'll have an equal share of the surplus. But if you only allow certain people to be millers then the price of flour will rise to the point where a baker can only just get by, while the millers will grow rich because they capture all of the surplus. There's no incentive for a landlord to sell at any less than the full value that their buildings are worth - and eventually the full value of all economic activity from people living in their buildings.
You're not defining what you think "fairly distributed" means, or why a landlord shouldn't benefit fully from a rise in real estate prices, any different from how a stockholder should benefit fully from a rise in stock prices.
Remember, owners are investors. Landlords gain when economic growth happens, the same way they lose when the economy shrinks. They put up capital and pay interest to invest in buildings they think will gain in value. And as prices go up, landlords pay higher property taxes too (and unlike capital gains, they can't wait until they sell).
But landlords aren't generally capturing the "full value of all economic activity" from people living in their buildings! That doesn't make any sense -- as people's salaries go up, they want nicer buildings/neighborhoods, but they also want nicer vacations, nicer food, nicer schooling for their kids, and so on. Landlords capture some of the economic growth of a region, but only to the extent that's what tenants prefer to spend their income on. The same way Starbucks captures growth, but only to the extent people want to spend their money on nicer coffee -- no more, no less.
The NIMBY/zoning conversation is a real one... and it's up to a community to decide democratically if they prefer less housing that is more expensive, or more construction for more affordable rents. But I don't see how there's anything more or less "fair" about one side or the other. It's a question of what the community wants. Manhattan would have cheaper housing if it replaced Central Park with blocks of high-rise buildings. That isn't a question about fairness, though.
There's no absolute "should" for what you're talking about, but the argument most economists would make is that most other tax schemes other than land value taxes are economically inefficient. One way this can manifest is deadweight loss.
This means that we misallocate resources.
For instance, consider a man who buys a lot of land next to city hall. He does nothing with it for years as the city grows up around him. His lot is now worth a lot of money and he pays very little for it yearly. One way of looking at this is in terms of how much it costs to provide him services: nothing, so his property tax is net positive. Another way is that there is a net loss to society because his property is not put to use in an economically efficient way.
Economically efficient does not necessarily mean developed, by the way. Golden Gate Park may be an economically efficient allocation of resources, though it is not used for built up space.
Housing prices are dictated solely by jobs. Look at a neighborhood in mountain view in the 80s and that same neighborhood today, I bet its the exact same single family houses, but the houses are an order of magnitude higher in price with zero upgrades. Not because the streets are swept more regularly or anything, but solely because tech companies are handing 22 year olds 6 figures and landlords smell blood in the water.
Now look at a place with lower playing jobs, like Cleveland, and the absolute opulence you can buy for 1m in Shaker Heights. Century old mansions are in play here. How much would this monster be in SV:
Oh and note that its across the street from the train line that takes you straight to downtown, or the airport with a transfer. It's also less than a block from two huge parks and in one of the best school districts in the city. All of these huge quality of life perks going for it, and its still $88 a square foot because Cleveland does not have SV salaries.
>This is equivalent to saying, why would anyone want a Starbucks to open in their neighborhood when the value of the Starbucks is captured mainly by Starbucks shareholders? (Assume, for the sake of example, you like Starbucks, otherwise replace with whatever you like.)
Someone can quite rationally not want a Startbucks to replace Jamba Juice if they really like the latter but won't ever drink anything at the former. It's not sufficient justification to block the Starbucks, but it's not a bizarre or inconsistent or misinformed preference.
Similarly, if I don't care that much about the streets being nicer, but it comes with much more payments for my living space, then I can quite rationally not like the changes, even as I continue to grin and bear and pay the rent.
That's not a good enough reason to e.g. block people from moving in or imposing rent controls, but it's not a somehow fallacious model that you've become worse off and someone else has become better off.
The ultimate question to me is how the common weal benefits. A question for which in part the problem is in not having a good measure. Certainly not GDP or mean income, though measures of net happiness or well-being exist.
Both supply and demand for housing is geographically constrained which mean that if demand in a local geography goes up, so does the price. This means that the market can be efficient locally even if inefficient globally.
Since food and water are not constrained in this way (i.e. can be transported), local price increases are usually due to inefficient distribution (supply chain issues/spoilage) or global supply shortages. This assumes that people consume a relatively consistent amount of food/water.
It's good to have an economy in which really good meals that cost 100x or 1000x as much as a normal, good-enough meal are available to those who want them. Likewise it's good to have an economy in which really good houses (which in practice means houses in particular locations) are available to those who want them.
This matches some of Greg Clark’s descriptions of a preindustrial Malthusian economy in A Farewell to Alms (https://www.amazon.com/Farewell-Arms-Ernest-Hemingway/dp/068... or see his lecture https://www.youtube.com/watch?v=uYJJlnyDpps). When the population is limited by scarce natural resources and the technology to alleviate the scarcity does not exist (or is forbidden in the case of San Francisco), then virtue is vice and vice is virtue. For example, disease increases mortality, leading to increased average incomes, so he argues that the dirty Europeans had higher average incomes than clean Japanese.
Rent control as any other control tend to more control. I may say unpopular opinion, but if you can't afford to life in SF - fk SF and the valley and move to the place witch fits you more.
Look at amount of angel investors in the valley, their amount is decreasing year to year. People are leaving SF/valley for a better places for better costs/proposition value. It's a general economical factor. All those will eventually, led to describing popularity/population of the area and decreasing rent as result. When a tech giant will leave sunny California, all those NotInMyBackyard will be happy to get a new block next to their place in order to get a job.
If everybody who can't afford to live in the area moves then we won't have people staffing grocery stores or cooking in restaurants or teaching kindergarten.
Exactly, and allowing that ebb and flow of the market to work is a good thing. As other people pointed out, it's not like there wouldn't be grocery store staff and that's the end of it. The demand is still there. And when the supply is low but the demand stays the same, the wages go up. All of these things are connected and tend towards an equilibrium.
The thing that keeps things from flowing properly are artificial regulations. For example, artificially low housing (like gov subsidized) in expensive areas make it so low income people can work in high income places for low wages. They can't afford to eat at the restaurants (or buy other higher income things local to the area), but they can afford to work at them. The regulation is artificially boosting supply to match demand so wages do not trend upwards.
> As other people pointed out, it's not like there wouldn't be grocery store staff and that's the end of it. The demand is still there. And when the supply is low but the demand stays the same, the wages go up.
The reality is that this doesn't happen when it gets really bad. A few real-world examples:
Nebraska had (as of December 2016) 11 counties without a lawyer[0].
In California, when immigrant labor started getting deported, celery farmers kept increasing wages to attract new labor, and even after more than doubling their wages, couldn't get enough people to pick all the celery.[1]
>Nebraska had (as of December 2016) 11 counties without a lawyer[0].
A court-appointed attorney is a constitutional right (6th amendment). The government guarantees you will have the option of legal representation if accused of a crime, and you can take it all the way to the Supreme Court if you don't get that.
>In California, when immigrant labor started getting deported, celery farmers kept increasing wages to attract new labor, and even after more than doubling their wages, couldn't get enough people to pick all the celery.
Then wages weren't high enough. It really is that simple. And if the farmer can't get anyone to buy the celery priced high enough to support the costs of labor, then he shifts away from labor intensive crops, or outsources the crops, which is exactly what the article says he did. This is a healthy functioning market, responding to supply and demand pressures. And $$$ awaits the man or woman who invents a cheaper way to harvest celery at lower labor costs.
Yes you will. A reduction in labor supply means wages for those roles will go up. But if everyone is willing to live in these locations for low wages, then that means they are accepting the tradeoffs of low wages for other benefits of living in the area.
Well golly, I guess billionaires will just have to bag their own damn groceries or maybe work on building more housing so the help can have a place to live too
That would in turn make the area less attractive to live in, and some of the wealthy people who want to have groceries would consider living elsewhere.
It's not black and white like that but in general this is how markets are supposed to work (in theory).
The author’s main point seems to be that in a market dominated by landlords in which rents are rising, cities do not have an incentive to improve public services as any improvement in their quality will only benefit landlords through further increases in housing prices.
Am I missing something, or wouldn’t higher tax revenues from growing property values easily offset this issue in such a scenario?
This is why California's property tax system, in which taxes don't increase until a property is sold, is often cited as a major factor in its housing dilemma.
To be pedantic, 1978 California Proposition 13 (Prop 13) limits property tax increases to a max of 2% per year. In the decades since, especially in areas with high growth, the overall tax being paid on property has become a tiny percentage of the property value. This tax is reset to a reasonable rate when significant construction or a sale happens.
Can't stress often enough the problem that the unintended consequences of this bill have caused. Most people that voted for it though it would just limit the increase of property taxes on homes. They didn't realize it affected warehouses, factories, etc. It's a mess that has to be changed.
If I remember my government class, it was primarily backed by the owners of multifamily rental property. While most single family houses at the time changed hands every few years, apartment buildings were typically kept for decades.
> wouldn’t higher tax revenues from growing property values easily offset this issue in such a scenario?
If the tax values indeed follow the actual property values. And if the country/city has a sufficiently high property tax percentage. Some places have only tiny property taxes.
I never saw an issue with this. Council tax pays for things like garbage collection, local services and street cleaning. Unless those things are disproportionately more expensive for expensive houses(and I strongly suspect they aren't), why would they pay more?
Like someone else already noticed - when you buy a house for say £20m, you will pay about £3 million in stamp duty, which is insane already. Owners of expensive housing already pay a tonne in that tax for the privilege of owning it.
> I never saw an issue with this. Council tax pays for things like garbage collection, local services and street cleaning. Unless those things are disproportionately more expensive for expensive houses(and I strongly suspect they aren't), why would they pay more?
Because we live in a society and those with the most expensive houses have likely derived the most benefit from that. Just like anything else, the price of civilization is about the value it provides, not about what it cost to produce.
> Like someone else already noticed - when you buy a house for say £20m, you will pay about £3 million in stamp duty, which is insane already. Owners of expensive housing already pay a tonne in that tax for the privilege of owning it.
Stamp duty is a terrible mechanism: it mainly just discourages people from moving, which then means it doesn't even raise that much revenue.
>>Because we live in a society and those with the most expensive houses have likely derived the most benefit from that.
How so? The same limits on garbage collection still apply regardless of how expensive your house is. Even if you have a £20m mansion the council will only collect one bin per week. I'd risk a guess that expensive mansions also require fewer police and fire department visits, and as for street cleaning I have no opinion really.
>>Stamp duty is a terrible mechanism: it mainly just discourages people from moving, which then means it doesn't even raise that much revenue.
I agree with you. I'm looking to buy a house right now and stamp duty feels like money thrown into a fire - basically paying few grand for the luxury of purchasing a place to live.
The difference is what that funds. In the UK, council tax is intended to fund things like rubbish removal. In the US, property tax funds schools. Other taxes make up for the low “property” tax in the UK (property in quotes because renters pay it directly too - it is an occupancy tax not an ownership tax)
Property taxes should be relative high, so the city gets their part of the increasing land value when the city grows. So that land owners get to collect only a small-ish part of the windfall of the increased value.
It is, after all, the city that made the land more valuable by building more city around it.
Higher tax revenues does not offset the problem of increases in housing prices.
You may say that housing prices is not a problem, and cities should just lean into it an keep improving public service, but if they are trying to reduce housing prices thst might be counter productive.
But does it really work that way? I.e. the effect may be real enough, but among the non-landowners, who actually considers that the net effect of improving the city would result in them personally paying more to live there?
Many vocal folks online in the neighborhood, though don't know their numbers are significant or not. (Measure S in Los Angeles was soundly defeated.) In another neighborhood (East LA) new businesses were vandalized allegedly by anti-gentrification groups.
They don't want the city to be as shitty as possible. They want to be able to get what they can afford.
Here's an analogy: Imagine if Apple drove all PC competitors out of the market, fair and square, by making a lovely product that is expensive, to the point and PC makers couldn't sustainably sell low-cost lower-quality PCs. Imagine you can't afford an Apple Mac, but you cold have afford a low-cost lower-quality PC. You'd suffer becuase the world is passing you by and leaving you out. Would you be wrong for opposing Apple's business in any way you can? If you are exlucded from the social contract, you have no obligation to uphold it.
You haven't read the facebook comments in our neighborhood group, where even the upgrade of a crumbling parking lot or flop house covered in graffiti to a modest apartment building meets howls of protest and "disgust."
> Why exactly would non-landowners press for improvements in their cities? The value of those improvements will be captured mainly by other parties.
Good example of this: residents in the Tenderloin (successfully) fought planting of trees because of gentrification. I can't find the original source but this [1] mentions the opposition.
Overall I found this article pretty shallow. For one it ignored recent history where American cities were in decay up until the 1990s.
A core problem here is that homeowners gnerally consider rising prices to be good. Thing is, it's only good if you cash out. Take Vancouver where a rundown Victorian might cost you $4m+. You might have bought that for $175,000 in the 90s but that $4m won't help you move to another part of Vancouver (unless you move much further out or move to something much smaller) because everything else is just as expensive.
You definitely can't trade up to a nicer area or a bigger house either. Where that gap might've been $50,000, it's now more likely $500k+.
Another problem not mentioned is Dutch Disease [2]. I'm firmly of the belief that Australia is pretty much at this point. What people don't realize is that when property prices go up so much this also affects commercial prices and those higher prices are inputs into everything you buy. You still need workers. They need more money. Again, that makes everything you buy more expensive. It seems to converge on a point where there's very little economic activity.
One reason I like NYC is that even though prices are generally high there are options for lower-income people. Sure they might not be Manhattan below 96th street (well, probably 125th at this point) but you can still leave much cheaper in the outer boroughs. You'll note that the article said "Manhattan" not "New York". That's not an accident.
Compare this to the Bay Area where all the nurses, firefighters, teachers, all the tech company ancillary workers (bus drivers, cafeteria staff, security and so on) are living 2+ hours away because that's all they can afford. Honestly, the Bay Area is just one giant middle finger to the poor.
As for solutions, it's not rent control. It's not outlawing investment properties either. People seem to forget that to rent a place to live someone else needs to own it.
I actually think the Swiss have done the best of developed countries here. The Swiss tax property speculation punitively (it may have changed but at one point it was 100% capital gains tax if you owned for less than 2 years) and made it somewhat more difficult to simply park money there in property.
That's a big problem in NYC, SF, LA, London, Sydney and the other major developed cities: capital is now global so it goes and parks in the form of real estate in major cities. That does absolutely nothing for the city.
Things I would be in favour of:
- Higher property taxes for nonresidents
- Higher property taxes for owners of unoccupied properties
- Restrictions on foreign ownership of property
- Owning property in NYC makes you a resident of NYC so all your income is taxable by NYS and NYC
- Higher capital gains on non-principal residences with a teiered structure like the Swiss where the rate goes down the longer you hold it.
- Withholding state and federal taxes on all rent earned that you can only claim back against other US expenses.
You didn't mention increasing density by constructing more and larger buildings, which would help a lot and is a lot more practical than trying to treat people as residents merely for owning property (which I can't imagine would hold up in court).
Hudson Yards gets undeservedly shit on, but it's adding thousands of new units of housing and a lot of retail and office space to the city, all on what is essentially reclaimed land. Build a lot more of that level of density and you'll be making serious dents in the real estate market.
Yeah, planning restrictions are their own problem and the Bay Area is a special breed of even that. And NYC is certainly much better than that but not without fault: we build too much ultra-luxury housing here and that's really because of all the money-parking that goes on here.
Sounds like if you didn't want to pay NYC taxes they'd repossess the property and it would be sold to someone that would pay them.
Who owns property in 20 cities by the way? If you're an individual I don't think I care if you would hypothetically lose property in NYC if you didn't pay taxes there. However the obvious consequence of this would be the wealthy creating a company to buy and own the properties they live in so you'd have to be very careful about closing loopholes in this hypothetical regulation.
Same as you do now when you work in one state and live in another: pay taxes in one. Get credit for those taxes in the others. Net effect: you pay the highest of the tax rates.
Tax is withheld at source and the only thing that offsets it other US taxes. This is substantially better than current situation that allows transfer pricing to move profits to a lower tax jurisdiction.
It is extreme but I don't think it's unwarranted or unworkable.
New York should be for New Yorkers. The city dies if it just turns into a place to park money for the ultra-rich who don't live here. Having nonresident landlords mean the only thing they care about is cashing rent checks. They don't have to live with the consequences of their actions on the city.
I'd be all for a system where the vast majority of landlords in NYC themselves live in NYC.
I'm pretty sure most workers in NYC live 2+ hours away too, unless they're in a rent controlled or rent stabilized apartment (of which there are many). Subway commutes have gotten hellishly bad in the last few years so even people with previously more moderate commutes often have much longer ones now.
I disagree, I think outlawing investment properties would be a good first step in the right direction. People need these homes, they shouldn't just be sitting empty.
1. This is false, and
2. Even if SF doesn't have this issue I know for a fact that NYC does. Someone told me you can go to central park and just look up at the skyline and entire buildings are just black because they are just parking cash for money laundering operations. It stands to reason if this is happening in NYC it can very likely be happening in other high housing price areas.
3. Why would my argument benefiet from setting up a strawman in this situation.
4. Do you know what a strawman is? Its where you set up a logical argument on a false premise and then knock it down yourself. My logical argument was that there are houses being used purely in SF for investment. What am I knocking down about that argument?
Au contraire, the estimates on empty housing units in SF varies between 15,000 and 30,000 (SF Tenants Union claims this IIRC). I've seen estimates as high as 1 in 8. Some blame this on rent control. Others on parking money in real estate. Vancouver and Oakland have reacted by enacting an empty house tax. SF I believe is also considering it.
I think the ~30K number comes from the American Community Survey, run by the census department. At present, the most recent numbers are for 2017, and list 31K "vacant" units. https://factfinder.census.gov/bkmk/table/1.0/en/ACS/17_5YR/D...
Combining apartments not currently occupied (including just transiently between leases), condos which haven't sold, AirBnBs, etc, I don't think this number is crazy.
I'd be in favor of a tax on unoccupied units, and it should be painful. If we want to change policy to build more housing stock to house people, surely that policy choice is less effective every time some speculative investor buys a house or condo, and chooses not to rent it because tenants will drag down their resale price.
Don`t know about London or Ny, but I see people complain of high rents in SF area, but they don`t want to fight stupid zoning laws that don`t allow the construction of tall buildings, because it would "disfigure" the city.
I say, take the politics out, and let market decide what to do.
It may be a dream but I hope that a tech like Hyperloop could expand the range of a reasonable commute much loke the introduction of the automobile did in decades past. Being able to live in Utah but work in California would do wonders.
Everywhere I look I see the same story unfolding and hurting the productive parts of the economy (productive as opposed to rentier ones). Jobs move in a place. Cost of living (largely dominated by rent) is reasonable. Workers move in. Cost of living starts to rise and rises till the point where a lot of the workers actually pay most of their income just to get by. Pockets of them (e.g. married high earning couples and singles that are lucky to have a place) still save a lot but the proportion of people that actually makes no sense to live and work there any more is getting too high.
In my eyes this is a highjacking of the productive capitalism by the rentier parts of it and it is demoralizing, unproductive (by definition) and destructive. An apartment does not produce value. It is a mere necessity. The people living there may produce value if they are allowed to. But sinking all their energy and finance in just securing a roof over their head leaves less and less for any productive risk taking.
Disclaimer: Living the renting/housing drama in Ireland.
I don't know exactly where people get this idea that landlords just sit on their hands and collect money for doing nothing. maybe it's a result of the "divergence of incentives" other posters have mentioned in highly regulated markets.
where I live, mortgage payments are significantly less than typical rent for comparable structures, but I am quite happy to pay my landlord the difference for taking the cognitive load of caring for a house of my shoulders. anything goes wrong with the house and I just shoot him an email and his guy fixes it by the end of the week. when we came to see the house for the first time, he was there with his guy scrubbing the floors on his hands and knees.
what I'm saying is, maybe an apartment doesn't produce value, but it doesn't maintain itself either.
Why does the author look at each city as a closed system?
If we improve one city's community and rents go up due to increased demand, that necessarily means rents went down somewhere else in the US. So, net-net, landowners didn't necessarily get richer.
Furthermore, when the non-upgraded city eventually decides to invest in improving their neighborhood, people will move back, and the system as a whole will equilibrate.
I work for a bootstrap startup and my solution for not being able to afford the rent in California has been to just move to Mexico. So far it's been working out great since I have actually been able to save a little bit of money. Only problem is occasionally it smells bad and once every few months the water doesn't work. Which is the problem I am dealing with today.
So much time oxygen is burned trying to get San Franciscans to change their ways. Why don't businesses shop around for cities more? Make it in the city's incentive to solve these problems? Why does San Francisco deserve a monopoly on high paying tech jobs? It is pretty clear that nothing is getting done because no one is worried about the big businesses moving away?
Outside of having top notch universities, the biggest indicator of a city's ability to have a big tech industry is the size of the VC community.
VCs are largely already wealthy, and SF is a pleasant city to live in if you're already wealthy. As such, they have little incentive to move, and so founders will continue to flock there to start their companies.
I completely agree that shopping around for cities should be easier, so that city governments like SF are forced to get their head out of their ass and make their city competitive.
However, until SF becomes unpleasant to live in for rich people, not much is going to change.
VCs are largely already wealthy, and SF is a pleasant city to live in if you're already wealthy. As such, they have little incentive to move
And apparently, little incentive to improve their city and environment. What the wealthy need to realize is that human nature is hard wired to notice relative wealth inequality. Crime and social unrest are directly related to perceptions of relative wealth inequality. Past a certain point, life expectancy is directly correlated with relative wealth inequality, not absolute wealth. [b]
([b] Ichiro Kawachi, 2000. Income Inequality and Health. In Social Epidemiology. Eds. Lisa Berkman and Ichiro Kawachi. New York: Oxford University Press. Pp. 76-94.)
There is nowhere on earth that can't be made pleasant to live if you have enough money to do it. More to the point, I'm always confused how VCs actively encourage pissing away their own money on somebody else's rent. Sure, spend your own scratch on an $8 million 1000sqft half-lot house, but why not actively encourage others to make your money go farther.
No amount of money can fix humidity, lack of sunshine, or lack of mountains/ocean and the corresponding activities possible with them (or whatever other natural feature one prefers). Saudi Arabia and UAE can spend all of their natural resource wealth building shiny buildings, but it's still a desert. Also, no one has the amount of wealth needed to stabilize a whole country to make it politically stable and secure.
To be very honest weather is the least of the concerns. Otherwise other cities wouldn't have gatherings of people.
Nobody is saying they should put all the money into turning a developing country in the USA, but maybe they can, I don't know, try other cities around the valley and not get crammed all together into one city that's naturally restricted in growth
Those other cities around the valley are just as NIMBY and impacted as SF is, and the problem is even worse because the local governance structure is fractured. Mountain View, Palo Alto, and Cupertino are all separate cities with their own mayors and councils and zoning restrictions
If you want to sell software, it's good to be situated physically next to the biggest software companies in the world. I work in the Valley (but live on the East Coast), and having your company immersed in that culture can have benefits. There is a certain perception that persists, a certain level of legitimacy you are granted just for living alongside the Big Boys. Along with the accompanying downsides, of course. The answer to why VCs stay in the Valley is because it's been working for them.
The problem is that outside of a few tech hubs, most companies are unwilling to pay developers salaries that even come close to what they can make in a tech hub. So the best developers move to the tech hubs, where the jobs tend to be more interesting and pay better. Plenty of people would take a 25% pay cut to live in a cheaper city than SF, but the reality is that they might have to take a pay cut of 50% or more, and even when you adjust for cost of living, that sort of pay difference is still dramatic (housing might be cheaper in many cities, but car ownership, healthcare, groceries and your kids' college tuition are largely the same).
You don't even need to move to the middle of nowhere. Basically anywhere else would work. Even San Diego is rather substantially cheaper than the SF bay and the weather there is orders of magnitude better.
Sure, I'm not saying pay people the local prevailing wage. I'm saying pay people the same and let them keep way more of that money, or hire more devs, or have nicer offices, or whatever. Just stop handing it to landlords in the Bay.
Great point, something I've wondered myself. You'd think with the immense amount of money and influence tech companies and VCs wield, they'd do more to out-lobby the NIMBY homeowners and get denser housing approved.
VCs are one piece of the equation, but so is talent. Google could care less about VC money at this point, but they have large presences in Boston and New York where there's a strong local talent pool to draw from. And there's not much talent outside of certain cities, because the best talent from other areas tend to move to these cities.
The rich live in San Francisco, the wealthy live in Napa Valley / Sonoma County. Can't fit a helipad, two tennis courts, putting green, and an olympic size swimming pool downtown.
The wealthy don't live in Napa Valley, new money does. Totally different thing. Napa Valley is to San Fran what the Hamptons are to New York. IE - the place boringly nouveau riche go to emulate the rich of yesteryear.
The wealthy have their own very large islands. Islands that are very likely nature preserves. They don't need Napa Valley. I can assure you though, that the wealthy also have homes all over the world. And I guarantee you that crappy cities that smell like pee, such as London, San Fran, and Paris, are on their holdings list.
That's just the way it is, cool kids want to hang out with cool kids. And when they're not, they want their privacy.
These are just Austin (since I live in Austin, I'm familiar with these stories) and just 3 big tech companies. Other tech companies are also expanding in other cities.
The cost of living has gotten so out of control in the SF Bay Area that these companies can no longer hire and retain good engineers. Also, it took more than 20 years to change this opinion, but companies are finally starting to embrace remote work and remote workers.
They go to Austin though, because they have to be in Austin. Not because they want to spend that money. Same with NYC and NoVA, you just have to be there, they don't want to make outlays to move to NYC. They'd all prefer to just stay in the Bay Area/Si Valley region if they could.
Notice, none of them are moving any important people to places like St Louis, or Omaha, or Little Rock, or wherever. Those places are much less expensive than Austin or NoVA, but the tech companies don't really have to be there.
Silicon valley is leaking, starting with places that have huge amounts of cash and have already hired everyone they can in the Bay.
They'll start by offering a few people to transfer with same pay to a way lower cost of living city with a different/better for them lifestyle. Enough will bite and those people will then spin up the new hires.
They are expanding outside SF. Amazon's HQ seems to have deliberately avoided SF; Google has expanded significantly in Austin, Boulder, NYC. Uber has expanded significantly in Pittsburgh.
The challenge is that remote offices are difficult to work with. Logistical difficulties like time zones and remote conferencing aside, often you get an all-you-see-is-all-there-is effect from senior management who tend to bias towards the area they are in vs. remote offices which encourages the most ambitious people to relocate back to the mother ship. This then trickles down the corporate ladder - the remote offices will have less exciting or visible projects, so employees there have lower chances at promotion, which provides an incentive for them to move too. It's not a question of companies opening remote offices, it's how they can reduce the effect of gravity that pulls employees back.
Gravity aside, the problems described in the article also exist in these other cities too. I'm living in Boulder right now and the NIMBYism is strong here too - I definitely would not be able to afford a house in the city itself.
This question is practically as old as time. Politicians have been trying to relocate labor and industry for centuries now. Ideas have been proposed and tried, and every place that has been successful has a hundred different competing explanations for why it was successful, and the same goes for the places that were unsuccessful. The matter is complex enough, and success rate low enough, to be able to confidently say we don't know really how to do it.
It actually is easier to reform cities than it is to relocate everybody that is made worse off by their poor decisions. And since San Francisco's poor decisions are negatively affecting every city within a 100mi radius, it would make sense for the state intervention to be the tool that brings the change.
It’s not just SF. This article also talks about NYC and the massive problem they’re having with the subways. San Diego (#8 in most populous cities) is having a very difficult problem with homelessness and has extremely high rents, one of the least affordable in the US.
NIMBY and high rent isn’t just an SF problem, as this article notes. It’s just easier to focus on SF because its problems are well-documented.
Every dense city has the same problem. Short of creating a company town 2.0, as soon as the population and density are high enough to work for a knowledge employer, the same NIMBY dynamic takes over.
San Francisco sounds like such a hellscape. Apparently, most of the city is zoned with a 40-foot height limit: https://qpho.fs.quoracdn.net/main-qimg-5843aebefa7517e39d3b4.... That's about the same as the height limit in our neighborhood in exurban Maryland.
The buildings might get 2 stories taller! At least they chose a reasonable time for the meeting.
I don't know what to do in SF other than trying another round of electing supervisors at large. The way the "supervisorial courtesy" works in the city turns neighborhoods into inviolable fiefdoms. I can influence my supervisor, but my district isn't going to be able to solve the various urban decay problems on its own.
> Tech jobs have little to do with SFs housing problem, tech is just a convenient scapegoat.
You say that without giving an alternative explanation. If it's not the tech jobs (and the jobs built around them) that raised demand so much, what else is it?
> In the 80s the blame was finance.
Again, why do you assume that finance was just the scapegoat, not the actual reason?
First things first. There are entire buildings in NY and SF just sitting empty because foreign investors use it for money laundering and long term investment. This HAS to be made illegal, people need these homes. I am even a staunch libertarian and I think it should be regulated to buy homes and just let them sit empty. Does anyone know of any movements in goverment or elsewhere to combat this?
This generates pressure, driving up prices by constricting housing supply sure, but what is preventing SF from constructing lots and lots of new buildings? If there is pressure to increase the amount of available housing, then the government of SF has a Civic responsibility to create an environment where the housing supply can increase. Full stop. Property speculation will always take place.
Because...there is a housing shortage. The definition of a housing shortage is that houses cannot be produced fast enough for people to consume them. Assuming that the supply is what it is, if a large percentage of that supply is being used for investment, then people can't live in them. You have to assume that the economic machine is doing everything it can to increase the supply because then those who benefiet from selling expensive house can _make more money_....
This point of view only makes sense if there is a strong limit on the number of homes that can be built. This is not the case. Both SF & NY can easily build many many more homes simply by building up. The fact that they, for the most part, aren't doing so is a much much much bigger problem than a few empty homes here and there (as a % it's still a very very small number).
I think that if houses could be built more quickly to satisfy both the investment crowd as well as consumers then this would happen because those who benefiet from selling houses would make more money...
Can anybody explain to me why NIMBY is the common explanation for high rent in SF, but in other cities with high rent have tons of development? There's tons of development in NYC, London, but prices are higher than ever.
To me, NIMBY-hating seems to benefit the land developer far more than the renter.
You need to re evaluate your priors WRT “london, nyc are building a lot of housing”. The rate of housing supply growth in both of those cities is near historic lows and below the rate needed to support natural population growth (residents having kids, kids moving to their own place), and your reference frame for judgement is likely comparing to 2008-2013 where there was little construction anywhere due to the financial crises.
At a broad level, housing prices rise because the rate of office space growth/job growth exceeds the rate of housing supply growth. All of the cities you have listed have created far more jobs than housing units in the past 25 years, and office supply growth is probably most of the construction you perceive. Tokyo is the best example of a city that has balanced job growth with residential supply, and it is one of the most affordable mega cities.
There's also the effect that in places where people are most likely to complain about new development you both have less development but you're more likely to hear online about that development.
Different cities different problems. Manhattan is expensive because its covered in tall buildings (minus central park) and more or less 'full'. SF on the other hand, and even more so the bay area in general, has massive amount of open space (parking lots, land preserves, etc.) in addition to large amounts of detached single family homes. Specifically in the bay area, greasing the political and regulatory wheels is so onerous that upscaling these homes and parking lots is expensive, so comparatively few dwellings are built relative to demand (see: Manhattan-esque pricing at some fraction of the density).
Manhattan is nowhere near full. There are huge swaths of the city that don't have tall buildings due to overly restrictive building codes. #UpzoneTheWestVillage
The west village isn't primed for tall buildings (they can certainly be taller than they currently are) and is much denser than most people think it is, since the brownstones are often multifamily. But more than anything else, streets are much narrower there than other parts of Manhattan. I'd argue that the east village is more adequate for upzoning than the west village even though the east village is taller.
I agree with your EV vs WV comparison. I just like the highlight the WV because it's such a rich person enclave with a community board that way way overdesignates buildings as "historic" as a way to stifle development.
I’ve previously been told (I’m not sure if it entirely true or not - it was by a west village resident!) that the west village has ground unsuitable for high rise construction.
There are issues with building the kind of skyscrapers you see in the FiDi or Midtown, but there is till plenty of room to grow. Huge chunks of the West Village have buildings of only 4-5 stories when it's definitely possible to build 3-4x higher.
Manhattan is expensive because of wealth inequality. Every year you see a huge number of neighboring apartments get merged together to have a single bigger unit, where huge numbers of people still can never afford to live there.
I'd also point out that Manhattan would still be a very expensive place to live even with lower real estate prices, as a huge number of the buildings have very high maintenance costs.
There is development in NYC but there could be exponentially more except for the very strong NIMBY movement here. Most of the new development is occuring in Long Island City and Downtown Brooklyn, where there isn't as much organized resistance from old rich people. Chicago built multiples of NYC in terms of buildings over 40 stories in the past decade. NYC has at least equal demand (probably far greater) for tall buildings, yet much of the most expensive neighborhoods in Manhattan are filled with four story buildings.
Californians like to pretend Prop 13 never happened, because homeowners don't want to pay property taxes. The alternative is to blame a lack of housing stock.
"Tons of development" is relative. The cities that have the greatest increases in rent are the ones that have added lots of jobs/people, but haven't increased housing production to match[0].
Those other cities are not nearly as bad as San Francisco; and have far more affordable rents and far more pockets of affordability than San Francisco or the Bay Area.
Does building alone help solve rents? No, but that's kind of the point of the article. NIMBYism just makes it much worse than having less NIMBYism.
Human beings did not evolve to live in a population density of sixty thousand people per square mile. The fact urbanization is increasing even while larger and larger chunks of the economy become location-agnostic as they move online is insane.
Humans evolved to live in hunter-gatherer bands that were functionally anarchies, guided by a consensus established under the influence of respected leaders. If a consensus couldn't be reached the band split. Given all the changes we've made to our living situation going from 6,000/mile^2 to 60,000/mile^2 isn't really a big issue. If you want to live in the countryside nobody is stopping you but many of us actually enjoy living in cities.
> But San Francisco is a “not in my backyard” locale where the amount of new construction just isn’t that high, for legal and regulatory reasons.
I’m so tired of hearing this. It’s not accurate. It’s a simplistic political slogan that the YIMBY crowd keeps repeating and it’s time to correct it.
The SF Chronicle just ran a story on how multiple approved residential construction projects have stalled along the Van Ness corridor, right next to a new hospital. The key reason? Multiple interviews with developers paint a clear picture: Skyrocketing construction costs.[1]
Hmmm, the article doesn't go into where the rising construction costs are coming from and it seems incredibly dishonest not to address it. It could just as well be that NIMBYism is leading to legal/regulatory issues which are driving up construction costs. It could be something else entirely, but we can't tell from the article and without that information, there's no way to draw your conclusion that NIMBY isn't the problem.
Or it could be, you know, all the construction happening in the city. But who knows! It’s probably NIMBYs somehow! Definitely not a massive influx of techies in a boom economy, nope, definitely not anything to do with tech.
Well, that isn't constructive at all. I don't know why the construction costs are suddenly so high. Do you? Or do you just think you know? Do you actually care or do you just want to further your own views, despite any obvious bias?
A few days back there was an article here on HN on Amsterdam's plan to block people from renting out homes that where previously occupied by the owners of the building.
I commented [0]: "Good [...] A city of renters is a soulless city; less people are long-term invested and no one really buys into the community they live in. ¨
And this article seems to agree with me on this point. One sentence in particular captures my thought:
"The political economy problem now should be obvious: Why exactly would non-landowners press for improvements in their cities? The value of those improvements will be captured mainly by other parties."
This article has given me more and better arguments to formulate my stance on this topic. Good post!
The thesis behind this editorial is in direct contradiction to your idea. The reason that people become apathetic is only tangentially related to ownership...it is actually about incidence: who benefits from improvements in public services? In a world where landowners successfully push for land scarcity, all benefits of public services go to landowners, regardless of whether or not they are residents, pushing non-landowner residents to apathy towards public service improvement.
If you don't restrict land uses, allowing everybody to live in the city without being sucked dry by landowners' economic rents, then both renters and resident-owners will be pushing for public service improvements, while the institutional or non-resident owners will be the ones apathetic towards improvements. Renters don't make the city worse, concentrated economic benefits going solely to landowners does that.
You're leaving out a central part of the argument: where housing supply is restricted, a rational renter knows that any improvement in quality of life just raises their rent in balance -- making it no actual improvement. This doesn't hold where housing responds to demand.
> "The political economy problem now should be obvious: Why exactly would non-landowners press for improvements in their cities? The value of those improvements will be captured mainly by other parties."
Because even renters want to live in a nice place?
The problem isn't the rent, it's that we're renting. Even if your economy is strong, if the citizens don't have equity, market volatility puts them at significant risk, which then puts your economy at risk. As more and more labor is shifted to cities, more people have to move to cities, which puts more of the economy in a dangerous position when the market can no longer support those people.
I think we need to increase people's economic security by increasing home equity, and stabilize the labor market to make it easier to get and keep a job regardless of where they live. This will require other changes, such as methods to encourage businesses to spread to neighboring cities, improvements in transportation, and probably legislative reforms to de-incentivize landowners' ability to destabilize markets.
Prices and rents are left to "the market", but construction is not at all.
Strong rent control should be introduced everywhere and ownership for investment reasons should be massively discouraged (e.g. by strong taxation). On the other hand protection of existing landlords should be reduced to encourage new building.
Rent seeking is damaging the economy and the society and only privileged landlords benefit from current conditions.
Unfortunately most economists seem to be biased or are probably benefitting themselves, thus there is no concentrated effort to push for better policies.
This article feels like a strawman to me. Infrastructure improvements are not the cause of SF rents. You just need to walk down any block, or sit on BART (if it's working!) and step in a pile of excrement to prove that.
Having lived in a few places I see rent control and legislation like Prop 13 as major contributors.
When people cite the average rent in SF, that's based on what's currently on the market. What is not counted is the (much greater) inventory that is currently occupied, with rent-controlled tenants paying far less than market rate.
When someone cites "the unaffordability" of rent in order to justify rent control, what you also don't see is the high cost of MOVING that comes with rent control. My SF neighbor had been in her unit since the 90's, paying less than half my rent, and she can't afford to move if she wanted to! If she were to move she'd have to leave the Bay Area. She's trapped. Rent control doesn't improve housing choice in that sense.
To address the last point - if your neighbour can't afford to move because the rent is too high elsewhere then under a non-rent controlled system would the landlord not have raised her rent to a point she would be unable to pay it and would thus be forced to move elsewhere?
(I don't know enough to actually have an answer to this.)
1) move away from rising costs, in literally any direction (pick just about any other place in the world), settle into a home you can afford and move again later if you want/need.
2) Live in a rent controlled apartment, become trapped for the rest of your life in a neighborhood where you can no longer afford groceries, healthcare or a haircut because of the rising cost of living.
I live in a city with rent control and it's great. New York's rent control model is broken no doubt but look no further than Montreal for a better example.
The difference is that all rent prices are subject to a maximum increase of roughly 1% per year, even if tenants change, the lease is locked to within 1% of the previous tenant's lease.
It works great :) Older rental stock remains cheap, and new properties are reasonably priced too.
> This article feels like a strawman to me. Infrastructure improvements are not the cause of SF rents. You just need to walk down any block, or sit on BART (if it's working!) and step in a pile of excrement to prove that.
Huh? No, it's the other way around. SF rents are the cause of lack of infrastructure improvements, according to the article.
Do you think it's more likely that without rent control she would have been forced to move earlier, or that her income would be higher than it is now? Something about this situation seems circular, but your argument doesn't admit to there being a feedback loop involved, which makes me suspicious.
I think the implication is that her having been forced to move at the due economic point would have been less coercive than now being trapped into a single location by economic forces -- leaving her freer to seek happiness in other ways, eg, job mobility. Further, that if all the people of a certain class were forced to move, eg baristas could no longer afford to be in the area, it places a strong economic incentive on fixing the actual political problem, which is semi-masked by her current arrangement.
I'm not sure I agree, but I think there's an argument to be had that she'd have more freedom to leave a job if she were living somewhere that she were also free to relocate, and that at scale, this economic distortion leads to high friction.
It doesn't seem too circular to me. Rent control keeps your rent low despite rising rents around you. So in the case of the OP's friend, her rent is now vastly below market. In a non rent-controlled world she would absolutely have been forced to move earlier due to rising rents.
I think the parent means rent control as in "control of the rent in a particular area everywhere at once", rather than "rent-controlled contract for this particular property"
Rent control is a terrible idea for the exact reason prop 13 is - it reduces mobility and flexibility for everyone, and completely screws over anybody new (immigrants, young people, people who get unlucky and their landlord happened to want to move back into their house, etc).
Even further, it allows a lot of people to completely ignore the high prices, so people benefit from these things, keep voting to block new construction and ignore the housing supply problems and make the jobs/housing imbalance worse, and prices just go up even faster.
In addition to the good policies you mentioned, construction should be encouraged in areas with high rents. The article talks about homeowner NIMBY politics as if it's an inalienable and insurmountable fact of life, but it's definitely possible to upzone areas and/or whole cities. (Shoutout to Minneapolis 2040 removing single-family zoning.) This is more politically tenable in certain areas using inclusionary zoning, basically allowing more units in a building as long as X% of them are reserved for low-income renters, charging no more than 30% of those renters' incomes.
You could design taxes specifically aimed at lowering the appeal of landlordism, for example a high property tax (or LVT) with a deduction for your primary residence. This would encourage people to sell off buildings that aren't their primary residence and turn apartments into condos, increasing the supply and lowering the price.
Graduated wealth taxes solve this even more cleanly.
Who is going to want to invest millions developing new apartments if they know they'll be greeted with razor-thin margins thanks to rent control & excessive taxation when complete? I might as well just go buy some Treasury bonds or something.
> Unfortunately most economists seem to be biased or are probably benefitting themselves, thus there is no concentrated effort to push for better policies.
Economists create the economy about as much as geologists create rocks. Marx and Pigou were economists, JP Morgan wasn't. I think you mean politicians and municipal governments. Economists aren't exactly a powerful legislative lobby, if they were our society would be radically different. Renteirism, monopoly, and regressive taxation are pretty widely viewed as being bad for society in the econ community.
> To see why, step back and consider two 19th-century “classical economists” who focused on high rents: David Ricardo and Henry George. Both built models where land is so scarce that the cost of renting land absorbs most of the social surplus. We are not (yet?) at that point, but these models give insight into where today’s most expensive cities are headed.
The thing is, land is not scarce. There is an incredible amount of land in the US. When rent is high in a city that is the market telling you that you need to develop new cities. There's no reason why people have to be piled on each other like rats in San Francisco and NYC.
> There's no reason why people have to be piled on each other like rats in San Francisco and NYC.
Yes there is. It's where all the economic and social momentum is, not to mention the infrastructure - what steps does someone take to encourage people to flock to a new city that has no infrastructure, no businesses, and no population? What branch of government or enterprising individual builds out the infrastructure for such a project?
No, we evolve society based upon cost / benefit - my argument above is that there is far to great a cost for any benefit. Someone needs to come up with billions in seed money for a high risk potential payoff in centuries?
Austin, TX is 200 years old. While it has grown massively in the last 70 years, that's due to the oil boom. What stands out to you that makes Austin seem like a stand out example?
I don't think by "new cities" he meant starting a new city in an empty field. Take an existing, small, cheap city and go there.
The thing stopping us is the network effects of big cities and tech hubs, but Austin is an example of relatively sudden, rapid growth. (Oil may have played a part, but in recent years it's been tech. My perception is that the oil jobs are in Houston.)
Could we take ten cities that look like Austin circa 1980 and turn them into Austin today rather than continuing to cram into NYC and SF? Would that be better (by whatever metrics we care about)?
Its a mismatch of terminology to say land is scarce. Generally its about the utility of land. Rents are the difference between the least-productive land and any other (Ricardo).
City land is useful not only because people congregate, but also particularly because taxes provide services. When the taxes are levied not on the land, it makes the land more valuable (as it receives benefits it doesnt pay for) and thus creates rents.
> By the same token, the incentives are skewed when it comes to the cost of problems. Say air pollution or homelessness gets worse. You might think that would degrade the quality of life in a city. But don’t leap to that conclusion too quickly: To the extent land is truly scarce, the main effect would be a decline in rents and real estate prices. Landowners would be worse off, but the typical city resident might find that the cheaper cost of living offsets the deterioration in conditions.
There's a seemingly endless legion of morons moving to these mega-cities that can't afford to live there. I don't know what their ambitions are, but it's obviously unsustainable.
Fortunately, I think CA and NY are going to tax themselves out of existence in the next generation or so. Everything is cyclical, and I believe these cities are anomalies reaching end of life.
It's only a losing proposition for those that are borderline retarded and think that driving Lyft or bartending is worth it in the city. Who cares though? They opted to grind it out and provide services to rich people and middle class engineers while making some landlord rich. More power to them if they enjoy that.
Once you're clearing SF costs by $50k+ per year, it could start to make sense, right?
I would only move to the bay for $150k+ and that's the desperate low end. Probably more like $170k is the minimum to have it make sense vs the alternatives available in 2019.
I do think there is a serious lack of accountability for personal choice involved in the recent demands for cities to redo their policies or for states to override city-level policies. Those moving to expensive places know what they're in for. They do it anyways because they want something they can't responsibly afford. And then the incumbents are demonized for not giving up the smaller-city life they desired and sought out, because newcomers are upset. It doesn't make sense to me.
Rent controls could be another alleviating factor. As could indirect competition from subsidised/social housing.
I'm not really comfortable with how the article attempts to frame municipal social improvements as something which must implicitly also drive wealth inequality, despite the other potential remedies to this.