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I am fortunate enough like most HN users to be working in tech, and although I can't speak for everyone in this field, we seem to be better off than most. Inflation's hit me hard but knock on wood if anything was to happen, I'd be okay.
However, my brother, who is just starting his career works in IT and has a $50,000~ a year salary. He lives in a Tier 3 city in Florida and the median rent for a studio there is $1,500, up from $600 five or so years ago. After taxes, car insurance, car payment, food, and a night out here and there, he barely can save anything after his student loan payments.
This is ridiculous. I can't imagine what others are facing when it comes to the cost of living crisis that is ongoing here. (And for other folks across the pond in England, it's even worse from what I hear.)
Throughout my travels of America, anecdotally, I am seeing more families making long term accommodations out of motels and we seem unwilling from our governments to even address this. I think it's going to get much worse until it gets better unfortunately...
Why did the rent increase so much? Much higher demand than before?
Interest rates go up, getting a mortgage becomes less affordable -> more people in the market for renting (in many areas, there's also a lack of rental housing stock)
Professional landlords have built empires on low interest rates -> interest rates go up -> landlords pass the cost onto renters (or for smaller landlords, exit the market, potentially reducing supply further)
Rent prices in Florida were skyrocketing long before interest rates started rising. Our last rent increase before we moved was going to be around 25% back when interest rates were still 0. If anything rent increases -- in South Florida at least -- are partly a zero interest rate phenomenon. There are a ton of half full midrise luxury condos that priced lots of people out of previously affordable communities built as the result of access to cheap capitol and money laundering. There was also the massive influx of people moving into the area during covid. All that to say rent prices in Florida are the perfect example of monocausal explanations for complex phenomenon almost always being wildly incorrect.
Tl;dr Florida is weird.
It's insanely city-centric, because the state is literally a swamp or sun-scorched grassland.
On top of that, add a lot of foreign buyers, for various cultural, geographical, and political/economic-stability reasons (e.g. if you're a wealthy Haitian).
On top of that, add a constant stream of snowbirds [0] and retirees.
On top of that, add a huge tourist economy.
At the end, you get a housing market that's really unstable (up and down).
Tier 3 city are "undeveloped/no market" cities. So it could be remote workers moving out of high COL areas. But also a bit of greed sprinkled on top.
Build more homes, lower permitting requirements, prohibit institutional ownership of single family, duplex up to 6 unit buildings. L
>> prohibit institutional ownership of single family, duplex up to 6 unit buildings.
A LOT of it is this one.
During the peak of the home-buying frenzy, in Q1 last year (2022), ONE THIRD of homes in Atlanta were purchased by investors.
https://www.bizjournals.com/atlanta/news/2022/06/29/atlanta-...
On average, 33% of Americans rent. So 33% of current homes are owned by investors and we'd expect to see 33% of new homes being purchased by investors.
> Build more homes
Building more homes... purchasable only by people (corporations) with money... to be rented out.
Yes that is definitely something that hasn't been happening over the past several decades.
Reminds me of a meme where a lady is complaining that she can't approved for a mortgage and is forced to pay rent that's even higher than the mortgage would have been! Yeah, that's going to work!
I think people are starting to learn again that the point to the game of Monopoly was that once someone has cornered the housing market, everybody else goes bankrupt. Now you're just watching it in real life. It's a human tragedy, but the market doesn't care.
The rest of my post would address that point. Prohibition on institutions investing. If needed put a cap on the number of units a person can own in one jurisdiction. Housing could be for use not investment if we wanted such a policy landscape. There may be unintended consequences but it’s a worthy experiment.
Yup, this hits a bunch of the basics.
There are details, of course, but just like every "housing crisis" in the past, the parameters that need adjusting are fundamentally the same.
Which way to adjust always changes. And, in part thus, always becomes the basis for the next crisis.
For example, zoning requirements were mostly positive and useful at a time when some jerk might open up a steel mill right next to my house just because I happened to live on some useful waterway and near some rail that had been built...* and, this fostered development of land that was arguably underutilized in the economic landscape of the time (... "suburbia").
Of course, as happens with markets in general (and, especially, when you produce "professional businesspeople" and have laws regarding "fiduciary responsibility"), once primary development of new markets / "opportunities" is largely exhausted, then, the less net-positive behavior starts. I.e., when you hit a degree of "market saturation". The resistance of market participants to change in what they have "staked out". So, all the NIMBY crap. Some, for reasons most might empathize with. Some, by the greediest and most psychopathic (including in "big corporate" contexts), to stop any further development simply to maximize prices of assets they "own".**
Right now, I'd say we're in a period of unusual disruption, even as disruptions go. Maybe more of a 1:50 year or even 1:100 year disruption. Changes related to the sudden significant increase in population that can potentially work from just about anywhere ... etc. Quite an upending of a relative status quo of, really, centuries ... and, of course, not having nearly as positive an impact on certain communities that formerly suffered more from people leaving than from people clamoring to move in ...
In any case, as pressure increases, changes will be made - more and more rapid and large-scale. Unfortunately, it always takes years (and will basically guaranteed set up the next "trouble(s)"). But, fundamentally - more houses, change in permitting requirements towards "lower", rebalancing (decreasing) "institutional ownership", etc.
* https://youtu.be/9mLu5jOUmws
** Own in quotes because that's a whole other area of sort of human absurdity that I'm not even going to get into - but, just interpret in whatever way you usually do
I think one of the cause is we don’t tax the landlords higher for the investment property. That’s why lot of upper middle class and HNIs have lot of investment properties around the country. It’s so easy to buy and rent out properties without even seeing them ever. One of my friend who works at Microsoft in Seattle, owns 4 properties around US(3 in WA and 1 in TX). It was so easy to get cheap mortgages between 2017-21 if you had 100-200k lying around.
Higher or lower taxes doesn't change the market rate for a given unit. If your landlord has to pay higher or lower taxes, they still can charge what the market will bear. However, increasing the supply of rental units will lower rents or at least slow the increase.
That is one instrument to deincentivizing accumulation of more than 1 property. Increasing supply is definitely another one but as I mentioned that earlier most of those rental units get acquired by richer landlords. One can also make those investment property mortgages much higher.
States need to step in and rezone cities and their immediate surrounding areas to allow for more housing.
I fully agree, but it's a tall order given how unpopular it is both among voters and politicians. Governor of CO just tried it and every single municipal lawmaker was howling for his head. The bill some of his allies introduced to the state legislature got gutted beyond recognition and then dumped unceremoniously, and the majority of state citizens were glad for it.
Not surprising, since it's the municipal lawmakers that are part of the existing problem.
This seems like it’s due to a triple threat of at least three things:
- Real estate speculation driving up prices
- Lack of new housing being built
- Wage stagnation
Each of those also having multiple underlying causes. And that’s without even getting into things like drug addiction.
I tried to go lower on the price of a house once because nobody else was bidding on it during the pandemic. The owners decided to just leave it empty and move to another country. They probably made 400k by leaving the house empty.
Every time I look at houses, I hear the same story: There's a lot of people who have been waiting to buy houses from the previous year, so there's a lot of competition now. The problem is this will always be true if there's more people looking for houses than houses.
This is not a left-right problem. The right and left will equally say we should not build housing. NIMBYism is common across the political spectrum. The most left places like New York have let the housing situation get so bad that now anyone that arrives there is instantly homeless because there is simply nowhere to live[0]. This is New York, the place everyone thinks of when you say "the land of opportunity" and the location of the statue that everyone cites whenever Trump says something about migrants.
A lot of stories I read these days I think about The Housing Theory of Everything. Why is everything so expensive? Why are employees so expensive? Why are these expensive employees not able to pay their bills? It seems like a large part of this is that we have structured our economy to pour all of our money into land. Not landowners, land. When you're working for a faang but paying a 5-10k mortgage for a condo, how rich do you really feel? How would it feel to be the ones that didn't get a place to live? How can there ever be a middle class when those that don't make above a certain amount just end up homeless?
When there is more housing than people, then people have freedom to ask for better or cheaper housing. Until then, we will be like crabs in a barrel, pulling other people down for a place to live.
[0]: https://www.nytimes.com/2023/08/10/nyregion/migrants-homeles...
Hotel California. You can check out but you can never leave. The policies of the state hollow out the middle class so you get the very rich and the desperately poor.
The devil's advocate here!
One would think there isn't enough land in America for people to build houses (of any type?). Or, are you going to tell me that laws made by men (and women, but mostly men) make it illegal to be housed and poor at the same time, no matter the amount of land? And, that changing the laws it's an uphill battle? I understand the concept, America is not the only country like that. But if memory serves me right, America is the result of people from Europe (and Asia, and Africa, and South America) escaping from exactly the same problem?
So, here is my proposal: build new nations people can escape to. There is Greenland[^1], Svalbard[^2], Antarctica, the Sahara[^3], the oceans, the Moon, the space habitats and Mars[^4]. We have the technology to build livable spaces[^5].
[^1]: Which is Danish, but can be rented from them for a (high) price.
[^2]: Ident, but from Norway. Rent is going to be more expensive.
[^3]: Rents and labor are cheap.
[^4]: A bad idea, even according to my client.
[^5]: Anybody who has been in Las Vegas knows that humans are perfectly adapted to live in big dens of concrete with no vegetation nor walking spaces[^6]. Anything better than that.
[^6]: Yes, there are golf curses.
Spend some time looking at county zoning maps. There are huge legal barriers to developing affordable housing. Zoning, minimum offsets, covenants, height restrictions, usage limits, land use regulation, etc... If you want to re-classify some land you will need to go through extensive legal procedures and you will never get through them without HUGE amounts of capital. In addition, large swaths of land in the most popular states is owned by the federal government. All of this is in opposition to one or more of the most powerful lobbies in the United States.
There is a reason the only homes you see being built these days are massive single family homes and luxury apartments. It just isn't economical to build low income housing. If people could move to Greenland, Svalbard, Antarctica, or the Sahara they would have. But those places just don't support human life. If we used technology to make them livable, they would cost an order of magnitude more than living in California or New York.
There's a lot of comments about building more homes.
That's only part of the problem. Another part is the fact that rents are a thing. Make it unprofitable to rent and you'll find a lot fewer people forced to rent.
After capitalism comes Rentism (Feudalism 2.0): the rent economy.
The rich hoard the resources and means of production and instead of creating new value, they rent it to the rest (Landlords, etc). You'll own nothing and you will be happy.
Remember that this is a policy choice: we chose to enrich Boomers who own houses, at the expense of these people.
We could build more homes on golf courses, we could build affordable housing, we could build up, we could get rid of parking mandates. All of that would cost The Boomer, and so is forbidden.
California passed Prop 13 way back in the 70s that locked property taxes at 1% increase when nationally inflation has been 1.5-2%. It doesn't require a math degree to see that after a few years if you already own the discounts compound in just a few years. So newer, younger buyers have to shoulder the burden of paying for and providing civil services. Even when the shortcomings are pointed out it remains popular. The people that benefit from it vote to keep it in place and the ones that don't realize they'll have to move to Arizona or Nevada.
We could build homes no golf courses and it still wouldn't matter because only the rich could afford to live in them anyway.
I've heard the other side of this argument - basically the original argument focused on fixed income retirees. And I can see the logic and sympathize.
The law simply needs to be updated - though it's basically political suicide to attempt it - to only include primary residences of a certain relative value. If you have three houses and a mansion, you should be paying way more tax.
People keep arguing about the left without thinking that this degree of income inequality is unsustainable. Liberals should be ashamed of what they have become. There’s no liberty when there’s a de facto Royal class, which are the extremely wealthy.
How is this a left/liberal problem? If anything, it seems like people on the left are more likely to talk about this problem, and - rightly or wrongly - advocate wealth distribution to fix it. Let's keep the conversation here curious, and leave the low-effort partisanship elsewhere.
I dont believe there is a partisan solution to the continuing trend. The curiosity I have is which of the non-political solutions America will pick.
How long till the unstoppable wealth elevator strands enough people at the bottom who are both armed and capable of building effective resistance? Course such things wont effect this group on this site, so best to stay curious, sip coffee and watch.
How is it not a left problem? Despite many issues in right leaning areas, red states basically rank way better on housing affordability. The article cites high housing costs as a causative factor in homelessness.
What aspect of the current problem is the lefts fault? I’m not fully sure what your argument is.
Usually when left and liberal are used in the same sentence, liberal means center left (clinton/obama) and left refers to progressives (sanders/AOC). I could be wrong but I believe this person is faulting the center left for not being left enough.
I'm not understanding the causation here. Some people are very rich, yes, but how does that harm the people who aren't rich?
Wealth translates directly into political influence - just look at Alabama!
Also - consider that a good amount of wealth is locked up in real estate. Whoever falls in that bucket has political influence and no interest at all that more housing will be built, because that will diminish their wealth.
It's not envy, it's rational self-interest.
Personally I think absurd wealth inequality indicates at least two issues:
1) A lack of re-investment of positive economic activity into the “common good” (infrastructure, education, social services, etc) that were almost certainly instrumental in creating the environment for that wealth to grow in the first place.
2) An undemocratic concentration of political power in a small number of individuals
Because the rich and the home owning middle class votes for restrictive zoning to become even "richer".
I'll take your "very rich" and primarily include billionaires and the extremely affluent in my following statement:
Billionaires shouldn't exist. They shouldn't. We should re-implement proper progressive tax rates (like the US had in the 50s), and ensure that that type of wealth can never happen again.
When the government shut down the country for a few years and started sending out "covid pandemic checks", economists warned that the economy would crash. I'm not sure about the true cause and effect here, but the economy sure has crashed.
I think perhaps the effects of a pandemic which killed upwards of 1m Americans may have had a base level of economic impact regardless of the mitigation measures.
Perhaps people forget that things like air travel, restaurants, and going into the office were shutting down naturally in the US even before government recommendations to do so.
And there were actually very few US-wide mandates or anything resembling a government forced “shutting down the country” outside of restrictions on international air travel.
Are you really talking about the couple thousand dollars that people received during the pandemic? In most of the country that might have paid your rent for a month or a few weeks of groceries or if you're fortunate maybe one luxury good.
It's more like when you flatten production, but steady consumption, by having people get paid for work without producing anything, you produce a mismatch between the dollars and the goods they are chasing that results in Inflation.
If you drop money out of helicopters and people spend that money instead of working you get inflation