[astrocyte]

It's simple ... Everyone got 'hip to the game' of extorting other people's productivity vs. being productive themselves (aka rent at elevated prices)

> The housing bubble that blew up was re-inflated to keep tax revenue alive and keep the economy afloat (High entry cost warranting high rents)

> Fed rates have been kept low attracting speculation

> Tons of investment firms got into property management/real-estate

> Money seeks easiest method of return.. My father once said "People will always need a roof over their head"

> The U.S is pumping immigrants in hand over fist to offset lowered U.S birth rates (to keep the hamster wheel turning)

> Housing is a need and, as such, there is a ton of room to exploit people... (Markets they call it)

The funny thing about people highlighting wealth inequality is that those in the middle exploiting the crap out of each other for their own gain don't get the huge role they are playing in the over-all outcome. Meanwhile, it's those at the top who are making the lion's share of the profit while the dummies below eat each other. Of course, this eventually ends in tears but myopia causes one to ignore that and get what you can while the good is still gettin'. Bay area landlord "I heard your salary went up.. Your rent has just went up too"

A true zoo.. and to think what American society would be like if we were trying to elevate each other as opposed to coming up with creative ways to exploit and keep others down. Instead of focusing on academic or economic interpretations, the biggest thing manifesting is : greed/selfishness/lack of comprehension of a greater whole

[zardo]

We also set up regulations to make building truly dense affordable housing impossible. Where it is possible, it offers lower returns than low density luxury housing.

[pc86]

> [affordable housing] offers lower returns than low density luxury housing.

Not true - as a RE investor you're always looking for around 1% of the property's value per month as rent ($1 in rent per month for every $100 the property is worth). Much below that and you're not going to have sustainable cash flow.

It is much, much easier to get $1k per month in rent from five $100k properties than it is to get $5k per month from a $500k property. Especially in areas with high property values (California), you're lucky to break 0.4-0.5%, which is not going to support any meaningful level of investment, only speculation. Which in turn helps drive a cyclical market, which helps pump up the higher end home values, which further hurts cash flow, etc etc.

Lower value housing may offer lower returns in an absolute sense but as a far as ROI it's much easier to make it on the lower end of the scale.

[gnopgnip]

The 1% is based on those costs. If the costs to build affordable housing are greatly inflated due to permits, city fees, professional services, zoning waivers, subsidy to BMR, and additional construction costs, the ROI will be artificially lower than single family detached luxury homes.

[sliverstorm]

In addition to building, it is harder to buy. If I had bought a large SFH, I could have put 3% down (FHA loan). Instead I bought a smaller townhouse, and 95% of lenders would not accept any less than 25% down.

[rm_-rf_slash]

It does make intuitive sense: build profitable luxury housing and the affluent will move in there, and while it ought to depress prices on cheaper places, a bunch of new condos does wonders for property values, which in turn drive up taxes, and therefore rents.

[shas3]

> The U.S is pumping immigrants in hand over fist to offset lowered U.S birth rates (to keep the hamster wheel turning)

What is your evidence for your claim that the US is 'pumping immigrants'? Like immigrants are sludge? It strikes me as a particularly absurd conspiracy theory with debasing connotations.

[pacquiao882]

The entire town I live in is single family homes owned by a few slumlords renting $400k-500k houses which they bought 5 years ago for $200k-300k. The rent has gone up 20-30% in the past year; however, the demand to rent is still high since no one can afford to actually buy anything.

[HeyLaughingBoy]

Where do you live that a $500k house is considered a slum?

[akjetma]

"Slumlord" is sometimes used to refer to any profiteering landlord, regardless of the property

[abalashov]

Oh, plenty of places. SF certainly. Stamford, CT, and lots of other places.

[HeyLaughingBoy]

Oh yeah, Stamford.

Where $900/mo got you a 1BR apartment over someone's garage 20 years ago. Wonder what it gets you now? I forgot how bad Fairfield County was after I left.

[zardo]

You can afford to just be homeless every other month.

[breischl]

Your thesis seems to be that landlords have massive pricing power that allows them to exploit people by raising prices. But in most (not all) places it seems like that shouldn't be the case...

- There are many landlords in an area, ranging from large to mom-and-pop's with one unit (ie, lots of competition) - There's virtually no barrier to entry - Information is freely available via Craigslist, Zillow, Padmapper, etc - Switching costs are reasonably low (yeah, it's a pain to move, but it can usually be done for about a month's rent, or cheaper if you do more work yourself) - There are substitutes readily available, such as renting in a nearby area, larger/smaller/better/worse units, buying a house/condo, moving in with friends/relatives, etc

About all landlords have going for them is that it's a moderately illiquid market (due to year leases), and units are not completely fungible. So this all looks to me like it should be a reasonably efficient market, with landlords having little ability to push prices away from the supply/demand balance. And indeed that what's I remember from renting, and what I've seen from being on the landlord side.

How exactly is it that you think landlords can ignore all of the above and charge unfair rents?

(Note, all of the above only applies for markets that are large enough. If you live in a market with only 3 landlords, then welcome to the oligopoly and prepare to get screwed.)

[pixl97]

>There's virtually no barrier to entry

Wouldn't having the upfront capital to buy another house be the first barrier to entry? Buying a second house these days is much more difficult than say 10 years ago.

>How exactly is it that you think landlords can ignore all of the above and charge unfair rents?

Because if you don't have a down payment you can't get a loan to buy a house. So you rent, but you are also competing for a rent house from the other 1.2 million Americans that lost there in 2008 and are not likely to be able to buy a one since then. This pushes the balance of ownership to the rentor, they can now build up large down payments for second, third, or more houses that the people with higher rents can no longer save to reach. Renting farther away or worse units isn't necessarily a reduction in costs, for example driving farther is, in fact, not free in time or gas.

>Information is freely available via

To both parties. Which means, and has been happening that one landlord decided to go up in price and the others followed because that person was successful in doing so. Most renters will stay where they are even if prices go up because moving has large physical, monetary, and opportunity costs. Even if 50% of the rent is what would be considered cheap it will remain at 100% capacity and rarely show up on the market.

[breischl]

Buying a property does take some capital, but large amounts of financing are much more easily available for property than for nearly anything else. There's also lots of tricks like getting a near-zero-down FHA loan, live there for a couple years, then move and turn it into a rental. Anyway, all that is looking at the individual person. If landlords were actually getting outsized returns, you would see outfits with tons of money going into it. There has been some of that, but not a ton, and that has the effect of increasing supply and reducing returns.

>>but you are also competing for a rent house from the other 1.2 million Americans that lost there in 2008

You seem to be assuming that those houses they lost were bulldozed or something. The amount of vacant housing increased by the exact same amount. Those houses were available for other people to buy (perhaps instead of renting) or to increase the stock of rental housing.

>>one landlord decided to go up in price and the others followed because that person was successful in doing so.

If there's sufficient demand for everyone to raise prices, then it was underpriced before, or demand has increased, or supply has decreased. In any case, that's just how markets work - it's not the Evil Cabal of Price Fixing Landlords.

>>Most renters will stay where they are even if prices go up because moving has large physical, monetary, and opportunity costs.

There's some inertia there, certainly. But it's not at all difficult to shop around and see if your new rent is out of line, so it's hard for landlords to get too far beyond the market.

Also, contrary to what tenants seem to think, smart landlords don't casually kick tenants out. Turnovers are expensive (vacancy, repairs, cleaning), time consuming, and risky (the new tenant could be worse than the old one). Tenants that pay on time, don't wreck the house, and don't piss off the neighbors are like gold. Smart landlords only raise rents on good tenants when they're pretty far below market. Of course, bad tenants are a whole different story.

[wj]

I don't see how offering somebody a place to live at a price they agree to can possibly be called extortion.

[samstave]

They are agreeing to pay it because they have absolutely no other option.

[wj]

Really? Absolutely no other options?

I lived in LA for many years and I took the bus for a lot of them. I saw people commute for up to two hours across the city to get to work and the same amount home. I agree that is not ideal. But one option is to commute farther in order to pay less for housing.

[samstave]

People always say this...

But imagine that you have a family, youre established have kids - they have school you have you network of family and friends etc...

I think that the only people who actually ever make this argument are young singles with no kids that think "duh, its so easy to just commute farther!"

The rent difference in say Pittsburg CA to Oakland/SF is NOT that much different -- but the commute costs (time & money) are enormous.

What you may save in rent, you lose in every other aspect of daily life.

To make the argument of "just commute farther" is just too simplistic a view.

It reminds me of Bush saying how industrious and admirable it was for a single mother to have to work three jobs to support herself.

[wj]

Actually I have two kids. As I suspect many of the people on the 534 bus in LA did.

"What you may save in rent, you lose in every other aspect of daily life."

What you're suggesting is that you might value the other aspects in life over the money saved on rent. I agree with you there. I love spending time with my kids. But know that other people are also trying to place that same value themselves. When a majority of the people are reaching the same conclusion then the housing prices will go in the direction demanded by the majority based on supply and demand.

If the majority of people decided that commuting farther was worth the trade off then housing prices would ease up. And then more people could afford them. Eventually a market price would be established.

I feel like bringing Bush into the conversation is a red herring as many people will have a strong reaction to that in one way or another and lose sight of the conversation we are having.

[ectoplasm]

Communities function better if people work and live in the same place.

[Kalium]

Not having options is not the same as not having options you like.

[samstave]

No, options are situations that which work with all factors weighed in.

Got kids and have them at daycare like the person I replied to (and me)? You MUST pick them up by a certain time, but lets add two hours to my commute, and even if I can pick them up later now they get dinner later, bed later, my after hours work or routine gets later.

The commute farther argument is naive for many many situations.

You're only looking through a simplistic lens.

[cryoshon]

Agreed as far as stealing others productivity goes.

There's also another explanation: millenials prefer to live in cities, where there is a higher density of jobs and similar people. Millenials grew up in the suburbs in large numbers, and are migrating to the city as soon as they can afford it comfortably. Affording city rent comfortably means that there's room for the rent to rise, so it does, until they can't find someone to pay.

[pixl97]

>millenials prefer to live in cities, where there is a higher density of jobs and similar people

lets focus on something else here too...

A millennial is very likely to be working in an job that high speed internet service or connectivity in some manner. It is much more expensive or impossible to get these in rural areas. For example 'digital media worker' > 'large files' > 'good internet service' > 'urban area'. If you've ever been out in the country and had 1.5Mbit down 768Kbit up DSL and tried to work on it, it's extremely frustrating. Even though the rents much cheaper, you'll go broke trying to live there.