{"items": [{"author": "Howie", "source_link": "https://www.facebook.com/jefftk/posts/10100115386127112?comment_id=10100115393387562", "anchor": "fb-10100115393387562", "service": "fb", "text": "\"These large increases have been a windfall for landlords.\"
Is there a reason to think that the rent increases were unexpected?
Would you agree that it only makes sense to call them a windfall for the landlords if they were unexpected?
If they *were* expected then shouldn't they have been priced into the cost of the property when the landlord bought it (and therefore also into the mortgage)? Let's say I buy an asset that's expected to pay out $X/year today and rise to $1.5X/year in 8 years but instead it keeps paying out $X. I think this would mean I'd take a big loss on the asset, my mortgage goes under water and I struggle to pay it.
I think the windfall would go to whoever owned the building when there was an update on *expected* rents, which is probably often not the current owner.
I guess it's still the case that rents are substantially above (non-mortgage) upkeep costs and eventually the building should be maintained ok. But seems plausible I have a liquidity problem and can't pay for it myself. Maybe the property gets foreclosed on and a new landlord with a fresh mortgage does the upkeep but that doesn't sound like a great scenario. Maybe we should expect the mortgage to be renegotiated and the bank takes most of the hit?
Anyways, likely I'm missing some important things and I'm not sure of this story but it seems like things will be more complicated than the landlord just losing windfall profits while maintenance doesn't take a hit.", "timestamp": "1570800849"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/10100115386127112?comment_id=10100115393387562&reply_comment_id=10100115395448432", "anchor": "fb-10100115393387562_10100115395448432", "service": "fb", "text": "→ Howie house prices have gone up alongside rents, which makes me think the increase was not expected? Otherwise house prices would already have been high?", "timestamp": "1570802284"}, {"author": "Josh", "source_link": "https://www.facebook.com/jefftk/posts/10100115386127112?comment_id=10100115393387562&reply_comment_id=10100115423587042", "anchor": "fb-10100115393387562_10100115423587042", "service": "fb", "text": "→ Or, maybe \"expected\" in some general feeling that housing prices often go up and the economy is good and people are optimists in general; but not in a way that affected prices. Like, I suspect that when people buy a house, they would almost always say that they expect to be able to sell it for more than they paid for it, and very few would say \"yeah, I figure that the price of my house will go down over the next N years\".", "timestamp": "1570816527"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/10100115386127112?comment_id=10100115393387562&reply_comment_id=10100115428641912", "anchor": "fb-10100115393387562_10100115428641912", "service": "fb", "text": "→ There are also going to be some landlords who bought at high prices assuming they would be able to make their mortgage via charging high rents. But that's a risk you take making real estate investments.", "timestamp": "1570818648"}, {"author": "moses", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#Ae6kD97XcHHLthaex", "anchor": "lw-Ae6kD97XcHHLthaex", "service": "lw", "text": "If you build more units, more people will move into the city. The equlibrium is one in which the population is on aggregate paying through the nose, one way or another. I don't think there's a good solution that doesn't require a change in the economic system.\n", "timestamp": 1570801010}, {"author": "ChristianKl", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#fasMzYghN8x3aN9yt", "anchor": "lw-fasMzYghN8x3aN9yt", "service": "lw", "text": "→ At least with the present immigration laws there's a limit of how many people could move to a city. The bay area has a population density of 335/km2 while Manila has one of 20,785/km2. If you increase the density of the bay area to that of Manila you could house every US citizen in it.
If you grant that some people actually want to live in other cities like Boston, there's enough city space for people to live in even without having to go to the density of a place like Manila.
You just have to be serious about cities needing much more density and you can fit everybody in them. ", "timestamp": 1570806169}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#CWLZb4AC8vKM9GYme", "anchor": "lw-CWLZb4AC8vKM9GYme", "service": "lw", "text": "→ → Something got garbled with \"The bay area has a population density of while Manila has one of 20,785/km2 while the Bay area has one of 335/km2.\"\n", "timestamp": 1570813177}, {"author": "ChristianKl", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#RKpC9n8LQkGCSLNiP", "anchor": "lw-RKpC9n8LQkGCSLNiP", "service": "lw", "text": "→ → → Fixed it.", "timestamp": 1570877970}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#po2fybbWadcpK4mJn", "anchor": "lw-po2fybbWadcpK4mJn", "service": "lw", "text": "→ What do you mean by \"on aggregate paying through the nose\"? That rents will always be high?\n", "timestamp": 1570814390}, {"author": "Viliam", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#KCg9sP392QSwnYuti", "anchor": "lw-KCg9sP392QSwnYuti", "service": "lw", "text": "→ → I suppose it means that -- assuming infinite flexibility of humans -- as long as the life at some place is better than at other places, people will keep moving there. (Here, "better" includes quality of living, costs, job opportunities, etc.) The movement will only stop when the balance is achieved, that is, each place is equally good. Or when there are artificial barriers.
In other words, imagine Bay Area with cheap rents, and ask yourself why wouldn't at least 5% of USA move there.
Currently the answer is: because they couldn't afford the rent, or at least their potential income minus the rent isn't worth moving there. There are many potential answers for the future, but many of them would also apply to people already living there, such as you. (For example: collapse of transit, or high crime.)", "timestamp": 1570825249}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#qJa4DNLmcyfTv7FeT", "anchor": "lw-qJa4DNLmcyfTv7FeT", "service": "lw", "text": "→ → → I would expect that getting rents down would generally let people to move from rural areas into cities, and within cities into denser downtown areas, because high rents currently keep people out. But:\n\n\n
Some people don't want to live in cities. Proximity to nature, not wanting to have to worry about neighbors, liking having lots of open space, working in farming or another fundamentally rural occupation, etc.\n\n\n
Different industries are big in different cities. Software in SF, TV in LA, finance in NYC, commodities in Chicago, biotech in Boston, insurance in Hartford, etc. Depending on what sort of work you want to do different cities make sense. Similar patterns apply for subcultures.\n\n\n
Some people have strong roots and wouldn't move just for better economic opportunity. A big reason I'm in Boston!\n\n\n
Cities compete, and the fastest growing cities are ones that are trying to make themselves more desirable.\n\n\n
So \"the movement will only stop when the balance is achieved, that is, each place is equally good\" doesn't mean \"everywhere is terrible\" but instead \"everywhere keeps getting better, for the people who decide to live there\".\n
Overall, though, since the Bay Area already has 2.4% of the US population, getting to 5% with lower rents sounds pretty reasonable. They would need to build better transit in the areas that became dense, but they would have the tax revenues to support it.\n", "timestamp": 1570891970}, {"author": "moses", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#2mD2g8MJMMfwqH7fM", "anchor": "lw-2mD2g8MJMMfwqH7fM", "service": "lw", "text": "→ → I mean something like: in the equilibrium, all consumer surplus is extracted by rents.\n
I'm saying \"on aggregate\", because it might often not be the case in individual cases; landlords are not capable of doing perfect price discrimination on individual basis, only at the level of something like neighborhoods, roughly speaking (people sort themselves into neighborhoods by income, so the landlords can price-discriminate based on \"how affluent a neighborhood you wanna live in\"; people also want as short commutes as possible, so you can price-discriminate based on the distance to the nearest megalopolis).\n
This is made very complicated by the distinction between land and land improvements, i.e. the bare plot of land itself, on one hand, and the infrastructure and buldings built on top of it, on the other. When I talk about lands and rents, I talk about the former. The supply of land improvements is somewhat elastic (you can build more floors); the supply of land itself is absolutely inelastic.\n
I unfortunately don't wanna go into the mechanism by which consumer surplus is actually extracted by rents, because I already spent some time thinking and writing this comment and I originally wanted to do something else with my Saturday.\n
Viliam hinted at the mechanism: land is a positional good, so, to quote him, \"as long as the life at some place is better than at other places, people will keep moving there.\"\n
Compare with other positional goods: e.g. all sports clubs' profits will eventually be extracted by players and their agents, unless a league instantiates a wage cap, precisely because players are a positional good: you don't care how good your players are, you only care how good they are in comparison to other teams' players.\n
In the same vein, you don't care where you live, you care how far you are from the center of gravity of where other people live (roughly speaking).\n", "timestamp": 1570871655}, {"author": "ChristianKl", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#uxWkh39hJeym2opdX", "anchor": "lw-uxWkh39hJeym2opdX", "service": "lw", "text": "→ → → Very few people rent bare plots of land. What's rented (and what was referred to in the OP as rent)lot of land itself, on one hand, and the infrastructure and buldings built on top of it, on the
It seems like you are withdrawing to the motte. Very, few people rent bare plots of land. What's rented (and what was referred to in the OP as rent) is rather floor space in apartments. ", "timestamp": 1570900629}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#rXx5SmdJtX2TNeCmJ", "anchor": "lw-rXx5SmdJtX2TNeCmJ", "service": "lw", "text": "→ → → Why are you modeling land as a pure positional good, or even mostly positional? My goal isn't to be closer to the middle of things than other people, I want to be near my friends and near my work. What's positional about that, given that we can build up?\n", "timestamp": 1570901337}, {"author": "Said Achmiz", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#8gaiLN7gDEoWpGfdv", "anchor": "lw-8gaiLN7gDEoWpGfdv", "service": "lw", "text": "→ → → → \n
My goal isn\u2019t to be closer to the middle of things than other people, I want to be near my friends and near my work.\n\n
What exactly do you think \u201cthings\u201d are, if not your friends and your work?\n
Everyone wants to be close to their friends and their work; that\u2019s precisely the \u201cgravity\u201d that moses was talking about.\n", "timestamp": 1570906046}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#Scz3uwGG7v8CJLDmp", "anchor": "lw-Scz3uwGG7v8CJLDmp", "service": "lw", "text": "→ → → → → Right, but it doesn't matter whether I'm closer than others (positional good) but whether I'm close enough that I can easily get between them (absolute good). If the world were a chessboard and only one person could live on each square then these would be the same, and it would turn into a positional good because of competition for desirable locations. But it isn't, and we can build up enormously, which means lots of people can have a short commute and be near their friends.\n", "timestamp": 1570926611}, {"author": "lexande", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#ZDB3B6G5KgQYu2Rzg", "anchor": "lw-ZDB3B6G5KgQYu2Rzg", "service": "lw", "text": "→ The world population is not infinite. If somebody moves to San Francisco that means lower demand and lower rents wherever they came from (and conversely many other US cities now have housing crises caused by exiles from San Francisco). The desirable cities should be allowed to expand until there is more than enough room for everybody (yes, everybody) who wants to live in them to live in them, at which point landlords will no longer have the leverage to keep rents high.", "timestamp": 1571260636}, {"author": "Dave Lindbergh", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#zhToiBkb9YpsJxgvo", "anchor": "lw-zhToiBkb9YpsJxgvo", "service": "lw", "text": "I'd think that at some point before now, the super-high profits to be made from renting apartments would create political pressure to allow building more housing - after all, developers want to get more of that lovely profit.
But, it seems, no.
Same thing (even worse) has happened in the Bay Area - insane rents, yet no political will to permit building more housing.
Seems strange.", "timestamp": 1570813830}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#Xgy2shT6NHHhScQRb", "anchor": "lw-Xgy2shT6NHHhScQRb", "service": "lw", "text": "→ CA did just pass AB 68 + SB 13 + AB 881, which requires municipalities to allow people with single family homes to build up to two accessory dwelling units: https://carlaef.org/2019/10/09/how-to-make-your-home-a-triplex/\n", "timestamp": 1570818931}, {"author": "MakoYass", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#uNr45BjbQRKhapt7F", "anchor": "lw-uNr45BjbQRKhapt7F", "service": "lw", "text": "What are some (recent?) historical cases of urban land decreasing in price?
My current model is that this can't really happen, because land owners have something that a lot of people gravely need, will pay basically anything to get, and until we implement a radically different civic mechanism for allocating urban land, urban life is generally going to stay close to the worst that people will tolerate rather than approaching the best that the market can provide.", "timestamp": 1570862545}, {"author": "jkaufman", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#XwRcn8Hs3iXtkvneo", "anchor": "lw-XwRcn8Hs3iXtkvneo", "service": "lw", "text": "→ Urban land doesn't need to decrease in price, just urban housing. If you allow building up then it's profitable to keep building units even as their rent falls.\n
Recent historical cases of urban land decreasing in price aren't ones to emulate; they're cases like Detroit where a city has become dramatically less desirable over time due to an industry dying. But Seattle has recently built enough new housing that they've seen a small decrease in rents: https://www.oregonlive.com/business/2019/01/apartment-rents-dropping-in-seattle-landlords-compete-for-tenants-as-market-cools.html\n", "timestamp": 1570890531}, {"author": "ChristianKl", "source_link": "https://www.lesswrong.com/posts/gwKLkjsiKca2eGuh6#cuP8xd6k9HuuXXfPW", "anchor": "lw-cuP8xd6k9HuuXXfPW", "service": "lw", "text": "→ The first city that came to my mind was Tokyo. I looked it up and the urban land prices decreased from 885k in 2009 yen per square meter to 758k yen per square meter in 2012. Prices also fell in Tokyo after the bust in 1992.
In completely unrelated matters, Tokyo is also the city without zoning laws...", "timestamp": 1570896432}, {"author": "Ken", "source_link": "https://www.facebook.com/jefftk/posts/10100115386127112?comment_id=10100116630054272", "anchor": "fb-10100116630054272", "service": "fb", "text": "Well, a problem in LA is that there are many vacancies in apartments (around 50% downtown), but also a lack of affordable housing. This is because many developers and landlords seem to want to building and renting out high value, upscale, luxury apartments. The sort where it doesn't matter if you can't fill 40% or 60% because it's such a windfall.
This might make sense not only in the sense that short payoffs are higher for higher rent places, but also because the people who pay more might also be less likely to engage in activities that would damage the apartment they're living in.
It doesn't seem like there's much incentive for affordable apartments anywhere in LA. On the contrary, there seem to be building codes that seem to prohibit just such apartments from getting built in much of LA.
I dunno how the prospects are for the greater Boston area, but around here things look bleak.", "timestamp": "1571289876"}]}