[HN Gopher] Record rise in U.S. rents
___________________________________________________________________
Record rise in U.S. rents
Author : paulpauper
Score : 103 points
Date : 2021-08-22 17:06 UTC (5 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| paulpauper wrote:
| Not a surprise at all. Salaries for nice city jobs, such as tech,
| legal, banking,and finance jobs, tend to exceed inflation,so its
| reasonable to assume rents will too. Rents in major metro areas
| such as SF have been expensive forever. No reason to expect this
| to change. I knew that the narrative/media hype about Covid
| depressing rents would be short-lived and rent prices would come
| roaring back with a vengeance as soon as the economy and stock
| market rebounded.
| iammisc wrote:
| This is due to the moratoria.
| post_break wrote:
| I forget where I was reading it but people were leaning on the no
| evictions policy hard. Buying boats and other fun toys while
| skipping rent.
| vanattab wrote:
| Who would have thought that banning evictions for 2 years could
| raise rents?
| sparrish wrote:
| Risk increase == cost increase.
| missedthecue wrote:
| thats how it works in essentially every market. Think about
| 18 year old drivers compared to 45 year old drivers when
| shopping for insurance. Why the difference in quotes?
| twelve40 wrote:
| There are probably bigger factors at play, but yes, renting out
| to anyone even remotely evictable becomes very unattractive.
| sooheon wrote:
| This is unsurprising. Take a step back and squint enough and you
| can see any wide-scale fiscal stimulus will be absorbed by land
| rent. This is the inverse of the Georgist observation that "all
| taxes come out of rent." All stimulus is absorbed by rent.
|
| Winston Churchill on the topic:
| http://www.andywightman.com/docs/churchill.pdf
|
| > Some years ago in London there was a toll bar on a bridge
| across the Thames, and all the working people who lived on the
| south side of the river had to pay a daily toll of one penny for
| going and returning from their work. The spectacle of these poor
| people thus mulcted of so large a proportion of their earnings
| offended the public conscience, and agitation was set on foot,
| municipal authorities were roused, and at the cost of the
| taxpayers, the bridge was freed and the toll removed. All those
| people who used the bridge were saved sixpence a week, but within
| a very short time rents on the south side of the river were found
| to have risen about sixpence a week, or the amount of the toll
| which had been remitted!
|
| > And a friend of mine was telling me the other day that, in the
| parish of Southwark, about 350 pounds a year was given away in
| doles of bread by charitable people in connection with one of the
| churches. As a consequence of this charity, the competition for
| small houses and single-room tenements is so great that rents are
| considerably higher in the parish!
|
| > _All goes back to the land, and the land owner is able to
| absorb to himself a share of almost every public and every
| private benefit_
| hn_throwaway_99 wrote:
| The issue, though, is that if you look at most causes of
| significant inflation, while people like to blame "money
| printing", it is actually almost always a big supply shock that
| is the root cause.
|
| With rental housing, there are 2 major supply shocks:
|
| 1. Much new housing was put on hold during the pandemic.
|
| 2. Critically, the eviction ban over the past 18 months has
| absolutely killed many small time landlords. Any prospective
| small-time landlord would certainly think twice about getting
| into the business now, and many existing small-time landlords
| are doing everything they can get out. It doesn't help that
| landlords are basically demonized by a large section of the
| political class. The end result is this:
| https://www.reuters.com/business/finance/selling-out-america...
|
| So, at the end of it, it comes down to basic supply-and-demand,
| and the supply side got crushed.
| xxpor wrote:
| I don't see why small landlords are relevant to a supply
| shock here. If supply has been effectively destroyed by
| people not paying rent but also not being evicted, that
| should affect everyone right? In other words, it'd only
| matter if the bottleneck is the amount of capital buying
| houses to rent coming from small landlords. We all know
| that's not the case though, the bottleneck is the actual
| supply of housing.
| gbronner wrote:
| The pandemic made it relatively cheaper to use rather than
| rent space. So some units are off the market and are in use
| as guest units/ extra bedroom/whatever
| hn_throwaway_99 wrote:
| Small landlords are relevant to the supply shock because,
| after seeing the effect of the eviction moratorium, many
| will opt to either (a) not rent out existing space they own
| at all, or certainly find less risky ways to rent it out,
| like STRs, or (b) find something else to invest their money
| into in the first place.
|
| Also, there is evidence that small time landlords are much
| less aggressive when it comes to evictions (see
| https://www.atlantafed.org/-/media/documents/community-
| devel... from the Atlanta Fed). This means that small-time
| landlords provide a greater percentage of the supply for
| "marginal renters", i.e. renters who are more likely to
| miss payments. When that supply goes away it means there
| will be more competition among these marginal renters to
| find a place to live.
| ldoughty wrote:
| The problem actually goes much further back than the
| pandemic... The housing bubble/crises lead to a massive
| supply of homes being foreclosed on and purchased by
| wealthier groups. It also lead to a large exodus of home
| building professionals as the demand dried up. This resulted
| in the US building 500,000+ fewer homes per year than the
| typical demand of the growing population normally demands.
| The US is now > 7,000,000+ homes behind were we should have
| been at this point, which means home prices skyrocket making
| them unavailable to entry level workers. On top of this, it's
| a common strategy among the wealthy to but a 2nd, 3rd, or
| more homes, which they rent to rent out at their mortgage
| rate or higher because the system allows it... So someone who
| can't get a $1200/month mortgage (for an example) now has a
| $1200 rent paid to someone for their second home... Though
| generally they pair up with others or other couples to live
| together and afford the rent...
|
| This also ignores the trend of _businesses_ engaging in the
| activity.. buying homes in mass for rental properties instead
| of the typical apartment /townhouse apartment developments.
| ZoomerCretin wrote:
| This is a very reductionist look at rents. There are more
| factors at play, the most important of which is the vacancy
| rate.
|
| https://smcorridornews.com/steady-as-she-goes-texas-apartmen...
|
| San Francisco:
| https://twitter.com/AlecStapp/status/1331832907003015168
|
| Blackstone: "We believe we will continue to experience below-
| average levels of new housing supply in our markets which will
| support future rental rate growth and home price appreciation."
| https://twitter.com/AlexFischCC/status/1402770234730160132
|
| Does putting more money into people's pockets make rents
| increase? All else equal, this does occur in the short-term. In
| the long-term, housing developers want to build more housing to
| get a cut, which increases the supply of housing and slows rent
| growth. This hasn't been happening because of segregation-era
| zoning laws which outlaws denser housing in areas where they
| are needed.
| sooheon wrote:
| Absolutely. Outdated zoning laws are public enemy #2 for
| livable cities, just a hair after outdated tax laws. The root
| of both issues is misalignment of incentives.
| Supermancho wrote:
| > This is a very reductionist look at rents.
|
| The fact that there is a belief "the invisible hand" will
| lower it back down, is separate from the increase due to the
| general welfare (stimulus). Availability/a market supply
| increase, is another factor for pricing, not part of the same
| change. Less so, since it simultaneously exists only in the
| mythical future.
|
| > All goes back to the land, and the land owner is able to
| absorb to himself a share of almost every public and every
| private benefit
|
| Seems like an accurate look to me.
| irrational wrote:
| This is one of the benefits of owning (or having a mortgage)
| since your monthly housing costs are fixed, so your stimulus
| doesn't go to rent.
| thrower123 wrote:
| In most jurisdictions, your property taxes and insurance
| costs always go up year-over-year.
|
| Once in a great while, you might get a reduction, but it's
| really rare
| irrational wrote:
| My insurance rates have never risen (I was in my last house
| for 17 years). You might need to look into a different
| insurance company.
|
| Property taxes do go up, but they haven't gone up too much.
| Again, in my last house they went from $2500 to $3750 over
| 17 years.
| tablespoon wrote:
| > This is unsurprising. Take a step back and squint enough and
| you can see any wide-scale fiscal stimulus will be absorbed by
| land rent. This is the inverse of the Georgist observation that
| "all taxes come out of rent." All stimulus is absorbed by rent.
|
| So fiscal stimulus should be paired with some kind of rent
| control/regulation, then?
| andrekandre wrote:
| > So fiscal stimulus should be paired with some kind of rent
| control/regulation, then?
|
| (i am not an economist, nor the op) but i have heard that
| argued in some left economic circles... same in the case of
| ubi i might add...
| ars wrote:
| > So fiscal stimulus should be paired with some kind of rent
| control/regulation, then?
|
| I helped someone find an apartment in a rent control area -
| instead of higher rents you need to pay 4 months "brokerage
| fee" to make up for the lower rent. (If you don't want to
| pay, demand is so high someone else will.)
|
| Rent control doesn't work, it makes things worse.
|
| The correct solution is more supply. You can't fix high
| demand any other way.
| WalterBright wrote:
| > rent control/regulation
|
| No government, ever, has managed to repeal the law of supply
| & demand. Not in 4000 years of trying.
|
| Even in communist countries, where housing is "free", it
| applies. It's just that the cost is in terms of something
| other than money, often a network of favors. The same goes on
| how military base housing is distributed.
| R0b0t1 wrote:
| Multiple options:
|
| 1. Stimulus given faster than it can be absorbed into rents.
|
| 2. Progressive taxes on dwellings that are not primary
| residence.
|
| 3. Decrease the cost of new housing.
|
| Of those, I think the last is the most realistic. It is the
| only one that does not lead to a housing shortage.
| sooheon wrote:
| Option 4, which is unrealistic due to entrenched interests,
| but economically and socially ideal: a higher tax on the
| unimproved value of land, a.k.a. ground rent, in return for
| a lower tax on improvements, labor, capital gains, sales,
| and everything else.
| CalPointBreak wrote:
| Something you guys are all ignoring: Taxes on primary
| residences. Constantly adjusting property tax has already
| lead to many people losing their property over the years.
| A better compromise might be that primary residences be
| either exempted from this new land value tax, or have it
| fixed to the time of purchase, not unlike Prop 12 used to
| (still does?) cover in California. The reason for this is
| that many people wish to settle down in one place. Some
| even take pride in living in the same location generation
| after generation. While many modern digital age people
| either forget, or don't understand that, variable
| property values could easily lose someone on fixed,
| little, or no income their property, livelihood, etc.
|
| As far as commercial, corporate owned, and high density
| residential, along with non-homesteaded agriculture
| properties go, this might not be the worst idea. But at
| the same time it is just as likely to favor corporations
| and venture capital over individual owner/operators and
| their scrimp and save. Efficiency only matters if the
| rewards of said efficiency lift up the collective
| populace of society. If they simply consolidate an every
| larger slice of the pie into fewer hands, they will
| inevitably return us to de-facto feudalism and effective
| serfdom.
|
| As a further consideration: How many of you liked those
| old hole in the wall comic shops, or newspaper stands, or
| record shops? Most of them are gone now, but there
| are/were a few surviving in little corners of the world,
| often because the store owner had been prudent enough to
| buy the property. Those owners could very well also find
| themselves priced out of their hard earned and fought
| properties, even if them being a cornerstone of that area
| or community is what was responsible for the increase in
| unimproved land valuation, since culture and niche
| businesses can have just as much effect as 'high income'
| businesses on an area's desirability. Consider Petaluma
| for an example, and while I don't have a counterexample I
| am sure someone here can show a region that depressed in
| value when iconic neighborhood commerce closed, whether
| due to being priced out of the area, or having eminent
| domain proceedings to give the property to a more worthy
| developer (see Jo Sun formerly down the street from the
| county jail in Sacramento California for an example.)
| pharmakom wrote:
| Yes, have an inflation index linked UBI. If prices rise due
| to the UBI (debatable) then the payments simply get even
| higher. Of course, the richest will fight this since it
| means their taxes will be linked to inflation.
| sooheon wrote:
| Regulation yes, rent control no.
|
| Google "deadweight loss price ceiling rent control" to see
| the detrimental economic effects of that policy. Once you
| understand that, check out the deadweight loss graph of a
| land value tax:
| https://en.wikipedia.org/wiki/Land_value_tax#Efficiency
|
| The type of regulation we need is a tax on the pure
| unimproved value of land sites (excluding buildings,
| factories, farms etc.).
|
| George:
|
| > When all rent is taken by taxation for the needs of the
| community, then will the equality ordained by Nature be
| attained. No citizen will have an advantage over any other
| citizen save as is given by his industry, skill, and
| intelligence; and each will obtain what he fairly earns.
| Then, but not till then, will labor get its full reward, and
| capital its natural return.
| salawat wrote:
| Just to ensure I understand your and this George fellow's
| assertion, you're basically claiming that renting should be
| a revenue neutral activity, not producing profit, but being
| entirely counterbalanced by taxation. I.e. not an
| investment.
|
| I want to make sure I'm actually getting it, because I'm
| not sure I disagree in a sense. Housing/land has too much
| importance in the scheme of being a financial asset to the
| point it is detrimental to actually utilizing the world
| around us. Finance as social control mechanism has become,
| in my opinion, so fundamentally tangible as to be downright
| laughable.
|
| So am I getting it, or am I still missing the point?
| sooheon wrote:
| Yes, good for you for getting to the heart of the issue
| immediately. Though to clarify, renting _location_ should
| be a revenue neutral activity. Renting something that is
| the product of your labor or capital investment (house
| renovations, warehouse with new equipment) should of
| course be compensated.
|
| In addition, such a tax on ground rent should replace our
| familiar taxes on labor, capital, and economic
| productivity.
| nate_meurer wrote:
| What does renting _location_ look like in practice?
|
| Aside, thank you for taking the time to write these
| comments, in this thread and others like it. This is
| fascinating and important stuff, and you have a way of
| putting it together in a way that's easy to digest.
| ItsMonkk wrote:
| The easiest way to set up such a tax is figure out how
| much it costs to build a building. Let's say in SF
| currently there is a house that sells at $1M dollars. But
| that house didn't cost $1M to build, it might have cost
| $200k in materials and labor. Once you have that number,
| you just keep raising the tax on that building until the
| new market cost is equivalent, or $200k. You now have a
| Land Value Tax. If the owner of the building then puts in
| a $200k addition, you adjust that number for $400k. If
| next year a technology is created such that you can make
| that same house for $150k, the replacement costs change
| and that might mean a tax raise.
|
| If a train station is built next door, the demand would
| go up, which would cause taxes to go up. If nearby a
| bunch of housing was built, this would cause supply to
| raise and thus move the supply and demand curve which
| would cause the price to drop, and therefore taxes would
| lower.
|
| What's the best thing to do with this tax money? Give it
| back equally to all as a dividend(similar to [0])! Thus
| the people who use less than the average amount of
| housing would actually receive money when this goes into
| effect.
|
| We need to systematically identify all externalities, and
| tax according to the externality, and just give the money
| back to the population. This fixes the incentives.
| Figuring out where that money is going to go, fighting
| between political parties as to which company is going to
| benefit, the corrupting effect of centralization of
| decision making. Just give it back. Tax externalities and
| return as a dividend.
|
| [0]:
| https://en.wikipedia.org/wiki/Carbon_fee_and_dividend
| sooheon wrote:
| Thank you, means a lot.
|
| Property valuations can be roughly split into
| land/location value and building/improvements value. By
| renting location I just mean the portion of the total
| rent that is attributed to location value, not
| improvements value.
| WalterBright wrote:
| > a tax on ground rent should replace our familiar taxes
| on labor, capital, and economic productivity.
|
| Even better, a tax on economic externalities, like
| pollution.
| sooheon wrote:
| Yes, those would be Pigovian taxes, the very close cousin
| of the Georgist single tax. Not quite the same economic
| elegance, but less bad than taxes on wages, sales, value
| added, etc.
| nybble41 wrote:
| > renting _location_ should be a revenue neutral activity
|
| > Renting something that is the product of your labor or
| capital investment ... should of course be compensated.
|
| Land ("location") is a scarce economic good, with
| different locations being valuable for different
| purposes. Rendering it revenue-neutral would lead to
| misallocation. Land is also capital--a durable good used
| to produce other goods--so land ownership is a form of
| capital investment, and a tax on "ground rent" is a tax
| on capital.
|
| All economic value is the result of human action. When
| the scope of "improvements" is properly understood to
| include all human activity relating to the land--not just
| obvious things like builidngs but everything done to
| deliberately or incidentally increase the value of the
| land--there is no "unimproved" value left to tax.
| imtringued wrote:
| I honestly can't comprehend how you are talking about a
| tax on land being a tax on capital. The owner of the land
| didn't create it, taxing the owner of the land doesn't
| discourage his production of additional land. If you were
| to introduce a 100% land tax no land would disappear as a
| result, instead the value of the land would shrink until
| people can afford to pay 100% of the value of the land
| every single year.
|
| As people who can use the land more productively can pay
| a higher land tax they would outbid anyone who intends a
| less productive use of the land.
| sooheon wrote:
| > Rendering it revenue-neutral would lead to
| misallocation.
|
| Rendering ownership of land revenue-neutral does not
| imply rendering all economic activity on said land
| revenue-neural. In fact it does the opposite, ensuring
| that the returns to labor and capital are allocated
| justly.
|
| > When the scope of "improvements" is properly understood
| to include all human activity relating to the land--not
| just obvious things like builidngs but everything done to
| deliberately or incidentally increase the value of the
| land--there is no "unimproved" value left to tax.
|
| Sure there is. All natural resources on that land, which
| existed before humans ever set foot on it, comprise the
| unimproved value of land. There is also the value of
| location arising from the community (infrastructure,
| proximity to labor, proximity to customers) which is not
| attributable to any improvements upon the land.
| tryptophan wrote:
| Renting LAND should be revenue neutral. Renting use of
| the building on the land should produce profit.
|
| This creates good incentives, because the more you invest
| in structure on your land (ie more housing), the lower
| your effective tax rate is on the profits you generate
| from renting. $100 land rent, taxed at 95%, vs 100$ land
| rent + 500$ rent from housing 5 people is taxed at ~16%
| overall( 95 / (100 + 500)). Although ofcourse being able
| to house 5 people would require an investment into
| buildings, so it is not free money, and there is also
| competition from others who may be able to house 6 for
| the same building cost and thus maybe only charge 95$ per
| person.
|
| Also here is a link of a book review that explains these
| ideas really well.
|
| https://astralcodexten.substack.com/p/your-book-review-
| progr...
| colinmhayes wrote:
| No, owning land is a revenue neutral activity. Owning
| housing is not. Landlords charge rent above the rental
| value of the unimproved land. The difference is their
| revenue. That revenue is greater than the cost of
| building and maintain the building so landlords make
| profit.
| pydry wrote:
| >Google "deadweight loss price ceiling rent control" to see
| the detrimental economic effects of that policy.
|
| One of the supposed detrimental effects of the policy is a
| lower rate of homebuilding which exacerbates the problem
| yet New York's fastest rate of homebuilding (the 1950s)
| still coincided with the highest level of rent control.
|
| It's a topic of study (like the minimum wage, corporation
| tax, etc.) I'm also not really sure I trust most economists
| on since there's way too much $$$ (e.g. think tanks, koch
| money -> universities) invested in usefully wrong results.
| criticaltinker wrote:
| What do you think about regulation that enforces a maximum
| limit on the number of dwellings or properties any
| individual can own?
|
| _> At what point is someone 's wealth acquisition too
| much-$1b, $10b, $100b, $1t?_
|
| _> Limitarianism is the view that no-one should enjoy more
| than an upper limit of some valuable goods or resources _
|
| _> Plato 's Socrates identifies the 'endless acquisition of
| money' (Plato, 1997b, 373d) as the main cause of civil
| unrest and war. _
|
| _> In his last dialogue, the Laws, Plato gives a more or
| less complete limitarian account with a specification of
| both a lower and an upper threshold. According to this
| account, 'extreme poverty and wealth must not be allowed to
| arise in any section of the citizen-body' (Plato, 1997a,
| 744d). _
|
| _> Plato provides a detailed description of the lower
| threshold which each citizen should meet: everyone should
| obtain one dwelling near the centre of the country and
| another one near the outskirts. The size of the pieces of
| land on which these dwellings are built will vary according
| to the fertility of the land and its distance to the city _
|
| [1]
| https://onlinelibrary.wiley.com/doi/pdf/10.1111/ejop.12535
| IkmoIkmo wrote:
| I think it's hardly enforceable in a world where real
| estate can be owned by legal entities, which can be set-
| up on paper in seconds.
|
| Besides, in a free market it should not matter to prices
| whether I own two properties, or me and my brother
| (acting individually) own a property each, the market
| will set prices and neither of us can with one or two or
| 200 properties.
|
| Of course there's a limit to this logic, which is when
| you own so much you have a monopoly, but there's no
| entity that I'm aware of that has a monopoly in
| residential real estate or anything close to it.
| R0b0t1 wrote:
| It's easily enforceable. Avoid applying the tax to
| primary residences. If it's not a primary residence, tax.
| sooheon wrote:
| When it comes to economics, I don't believe in hard
| limits. Policies should not be brittle numeric rules ($15
| minimum wage, $800 maximum rent, 1 child policy). Think
| gradients that affect incentives at every point in the
| map, not hard step functions with wide open loopholes.
|
| Plato's ideas seem well intentioned but somewhat ignorant
| of higher order economic effects of such "1 child policy"
| like rules. Much better to have a tax policy that's well
| aligned with the incentives we want to promote, and let
| the market figure the rest out.
| nickthemagicman wrote:
| I've always wondered why taxes were percentage based but
| many govt benefits were hard numbers.
|
| It seems like a clever govt trick.
|
| Allow the outgo to be reduced by inflation but allow the
| income to adjust to accommodate inflation.
| ransom1538 wrote:
| Rent control = higher rent. Every. Time.
| 988747 wrote:
| Higher rent for the newcomers, of course. And shortages,
| since very few new apartments get built (mostly the luxury
| ones). And slow degradation of existing apartments since no
| sane landlord would invest in any improvements if they
| cannot make up for the cost in increased rent.
| imtringued wrote:
| You're supposed to tax non reproducible assets that are an
| essential part of daily life. Land is pretty much the number
| one priority to tax.
| salawat wrote:
| Let me reframe the economy for you with an analogy.
|
| Imagine wealth as a fluid. When it's in your account, it
| resides in a bulb. Connected to these bulbs are pipes
| connecting you to each person or business's bulb you transact
| with. Each transaction is facilitated by applying vacuum to
| transfer a small amount of fluid from bulb to bulb.
|
| In this thing, you have entities that have many more or much
| larger bulbs than others, with more powerful vacuums that
| increase in size with the amount of capital they have at
| their disposal.
|
| Every time you add a bunch of fluid to the system for
| everyone, you still have all the same networks for extraction
| in place, and no ability to prevent those connections from
| just extracting more.
|
| Rent, in particular, is special. Realistically speaking, the
| pipe that extracts rent to your landlord is not just a
| transaction facilitator, but is an important mechanism for
| ensuring that your landlord's wealth relative to the rest of
| the system is maintained. So in a way, the amount getting
| extracted will always scale once your landlord is made aware
| of a global infusion of working fluid to everyone, otherwise,
| the "value" of their real estate is "diminished" in light of
| the global infusion.
|
| Real estate as financial instrument is weird like that.
| Unfortunately, attempts to control that reactive rent
| adjustment are fraught with side-effects, because when your
| entire basis for free market economics is that greed and
| wealth accumulation (considered axiomatic human vices) can be
| put to productive use by leaving things alone, as evidenced
| by any attempt to do otherwise having undesirable outcomes,
| see the history of centrally managed economies.
|
| At least that's as far as I've cared to read up on the
| matter. After a while trying to get to the bottom of it
| though, you realize once economics abstracts away any
| complexities around money moving => physical things
| happening, it might as well be pontificating on the weather
| for the questionability of measures involved.
|
| This is a sign of me hitting the absolute depth of my
| understanding and needing to do more digging to potentially
| get further but not being capable of devoting the time at the
| moment.
| kapuasuite wrote:
| We would be better off with taxing the unimproved value of
| the land (possibly until the market price of the land itself
| is $0) and rolling back the barriers to building new housing.
| That would result in cheaper, more plentiful and higher
| quality housing.
| Applejinx wrote:
| Or, turn Mao loose on 'em :)
|
| It is possible that landlords inherently run amok until
| enough of them are literally killed, and then they dial it
| back until they forget.
| dang wrote:
| Please don't post flamebait and definitely not ideological
| flamebait. It leads to ideological flamewars, which are
| tedious, predictable, and nasty.
|
| https://news.ycombinator.com/newsguidelines.html
| onlyrealcuzzo wrote:
| It should be especially unsurprising when you pair this with
| dramatically reducing inventory at the same time housing demand
| is at an all-time high.
|
| Almost 1% of renters get evicted per year in normal times.
| Almost 0.5% of homes get foreclosed in normal times.
|
| ^ This makes up a decent percentage of overall new leases /
| purchases. It's not like 100% of renters move every year.
|
| We have a lot of markets with restricted housing measures that
| should make it obvious that reducing supply even a little, can
| cause prices to go up a lot.
|
| You give people the largest transfer of money in history -
| increasing personal income by the largest margin in decades,
| lower interest rates dramatically, AND reduce supply - at the
| same time everyone is going bat-shit insane trying to "WFH"
| with kids and there's no where else for them to spend money...
|
| I will be surprised if there is not some really bad unintended
| consequences from this. But I'm far from surprised that prices
| are going up in the middle of a "recession". There's 30% more
| M2, personal income is up 10%, and payments are ~15% cheaper
| due to interest rates. Why should anyone be surprised that
| rents are up?
|
| Las Vegas had the highest increase in rents. It had the highest
| unemployment rate. People on unemployment were making > median
| wage. Why should anyone be surprised rents went up?
| m0llusk wrote:
| Rents in San Francisco are still way down which makes this
| analysis look really coarse to the point of being sloppy.
| [deleted]
| throwdecro wrote:
| San Francisco is neither large enough nor representative enough
| to be that meaningful in a national context. SF is a small
| enclave of ludicrous pricing, because of the huge amount of
| investment capital flowing into a fairly small city. It still
| has a lot of room to move down even if everything else is going
| up.
| neonate wrote:
| https://archive.is/VGtt4
|
| https://web.archive.org/web/20210820150151/https://www.bloom...
| WalterBright wrote:
| The cost of the eviction moratoriums is inevitably going to be
| borne by the renters.
| heurisko wrote:
| If there was scope to increase rents, then why were they not
| increased already?
| WalterBright wrote:
| Increasing the landlord's costs always causes rent increases.
| It's basic supply and demand. If demand is the same, but
| supply shrinks because of higher costs, then the equilibrium
| price rises.
| heurisko wrote:
| That didn't really answer the question, however. For the
| rent to increase, implies that the landlord was previously
| leaving money on the table. Why would they do this?
|
| I don't think rising costs to the landlord always results
| in rent increases. Rents are constrained to an extent by
| the average salary of the area.
|
| If you incur more costs, but the average salary of your
| area doesn't rise, and you increase rent prices, you run
| the risk of void tenancies.
| WalterBright wrote:
| > Why would they do this?
|
| Because if they did, another landlord would undercut
| them. But with all the landlords facing rising costs,
| another landlord cannot afford to undercut. Hence the
| rents all rise.
|
| This is how supply&demand curves work.
|
| Over the last few years, Seattle has added many various
| laws that are costly to landlords to comply with. This
| corresponds with a decline in affordable housing. I'm
| pretty sure the Seattle Council is well aware of this
| connection. But as the number of renters far exceeds the
| number of landlords, they know where the votes are, and
| they sell the fiction to the renters that the landlords
| will pay.
| twelve40 wrote:
| That's not really how it works though. We've been renting
| out in a lower-cost area in CA since 2018 and in the
| first two years the average Zillow and Craigslist rental
| listing went from $1200 to $1800. Why? There was no
| visible gentrification, that neighborhood really didn't
| change. Most of the tenants are in construction labor and
| management, truck driving, nursing. etc. Their salaries
| surely did not go up by 50%, but the going rate for the
| rentals somehow did.
| teddyh wrote:
| I'm guessing that it's because it's harder to move, let alone
| find a new place to live, during a pandemic and lockdown.
| Landlords suddenly found themselves having a customer base
| which are all isolated and locked down at home.
| boomboomsubban wrote:
| They don't seem to provide the data, but how much has rent risen
| in other recent years? Could some of this just be landlords
| postponing the usual 2020 rise due to the lockdown?
|
| Similarly, I would guess 2020 saw less construction then an
| average year. Wouldn't that alone cause a short term spike?
| balozi wrote:
| Is this increase really caused by demand-side pressures or simply
| that property owners know they can charge more since tenants have
| more disposable coin in their pockets?
| thrower123 wrote:
| Valuation have risen an absurd amount in the past two years. When
| property tax assessments catch up, landlords might be looking at
| 15-20% higher operating costs, and that flows through to rents.
|
| Not to mention property insurance rates have jacked up
| mysteriously in the past year.
| vladgur wrote:
| Not in CA with prop 13
| WalterBright wrote:
| > Not to mention property insurance rates have jacked up
| mysteriously in the past year.
|
| Not that mysterious. The cost of home repairs has increased
| substantially in the last year, due to supply chain
| disruptions. Lumber is a big one.
|
| My hot water heater failed last week. It cost more than double
| to replace it from what I had paid to install the previous one.
| programmertote wrote:
| I can confirm about the rising property insurance rates. My
| Travelers home owners' insurance (for my two bed-room
| apartment) has risen up by ~11% from last year. In the past
| years, it was just about 3-4% YoY increase. When I asked them,
| they answered that part of the increase is to protect for the
| inflation. Inflation hurts everyone especially for people who
| will not see a lot of increase in their paychecks. It also
| seems like a self-fulfilling prophecy and I personally believe
| it'll be sticky (meaning, YoY inflation much higher than 2%
| will be with us for quite a while).
| drewg123 wrote:
| One aspect which I have not seen mentioned is private landlords
| are taking advantage of the current inflated prices & general
| sellers market. They want to take profits and are selling units
| out from renters. They typically want the unit empty to sell, and
| so they are not renewing leases.
|
| My landlord did this. In July, I learned that he had decided he
| wanted to sell my townhouse, and wanted me out. I was fortunate
| enough to find a place to buy that reduced my commute to my son's
| school, but it was pretty nerve wracking.
| RickJWagner wrote:
| Inflation will:
|
| - Help absorb record-high PE ratios in the market
|
| - Allow people with heavy investments in equities to continue to
| prosper
|
| Will also:
|
| - Let the government pay off massive debts with smaller dollars
| (later)
|
| - Badly hurt the poor and especially those on fixed incomes
|
| Personally, I don't like inflationary times.
| scumcity wrote:
| Would be cool if the US economy could be driven by supply and
| demand. Housing is needed - more houses are built. Not sure why
| that can't be the case. This isn't Tokyo.
| jancsika wrote:
| > Housing is needed - more houses are built. Not sure why that
| can't be the case.
|
| You arrive in a room with no inspectors. To the North is, "Of
| course we'd still have inspectors." To the East is, "Privatize
| all the inspectors." To the West is, "Let's build a disruptive
| app to facilitate illegal barn raising."
|
| To the South is, "Let me revise my initial statement..."
| cronix wrote:
| As a fun exercise, try to get a house built in any metro area
| with a pop > 750k and see what you have to go through and how
| expensive and time consuming it is to jump through all of the
| hoops. You will find the answer to your question.
| missedthecue wrote:
| In most cities and towns across the US, you have to retain half
| the state bar association simply to get the permits to do the
| environmental and traffic pattern studies that must be
| submitted to the approval council before you can get permission
| to build.
| xx511134bz wrote:
| Neal Bawa explained that rent prices follow housing prices with
| about an 18 month lag. There is a set of would-be homeowners,
| richer than renters, who have been since been priced out of the
| home buying market, so they outspend the previous set of renters,
| driving prices up.
|
| REI074: Data-Driven Real Estate Investing W/ Neal Bawa
| https://www.youtube.com/watch?v=tzeTx1KE600
|
| A major takeaway from this podcast is that 4-plexes are the best
| economic investment because they are liquid, ie. 5-plexes incur
| more scrutiny from the bank, the downside of multiplex is you may
| need a property manager, so after scraping zillow and doing some
| machine learning to deduce the most profitable market, Mr. Bawa
| builds seas of 4-plexes with all administered by a single
| property management office.
| cronix wrote:
| > Neal Bawa explained that rent prices follow housing prices
| with about an 18 month lag.
|
| I'm assuming that has a lot to do with leases and rental
| contracts? If you have a 2 year lease I can't raise your rent
| until it expires even if the property increases in value 10x
| during that time.
| xx511134bz wrote:
| This came up. He is no longer renewing 1-year leases, he
| expects to increase rent twice in 2022, so he is moving to a
| six-month lease. He also said 2022 will feature the largest
| rent increase in American history.
| clomond wrote:
| That's a theory, utilizing reversion to the mean as it's basis
| but it is not a rule. With different market conditions, housing
| prices could also correct for rental prices.
|
| Meaning if rents stay down after decoupling from an increase in
| housing stock value, the house prices could adjust down in the
| event there is over-supply and the market at the margins
| decides to rent rather than buy because it's cheaper.
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