[branchless]

The system of usury against land ensures that land costs adapt to absorb all available income after food/clothing/energy costs have been accounted for.

Why is silicon valley more expensive to rent in? Because people came with money and the banks agreed to loan at a multiple of the new wage ceiling.

If wages increase x4 guess what will happen?

We need to stop banks creating debt to issue against land otherwise it will always absorb all income. And therefore all productivity gains flow to the land owner.

[mahyarm]

Also known as supply vs demand...

Bay area is infamous for many housing supply constraints in regulations. As far as loans increasing the demand side, banks can be pretty strict with %20 down payment restrictions. Which is why once houses go out of the dual income high earner price range ($1-1.5 million), you start seeing it overflow to other less desirable regions in the bay area.

[branchless]

But the creation of credit costs nothing therefore rent extraction can scale up to match productivity gains in a heartbeat.

[Tsagadai]

Which given that land is limited (you can only go so far out before you are in another place) then the price of the building will increase. It is possible to end up in a situation where even very wealthy workers cannot afford to rent within hours of a city. Sydney, Melbourne, London and Vancouver are examples where this is starting to happen.

it has not happened yet but it is certainly pricing many out at lower ends of the income scale.

[branchless]

Exactly. Go work on your productivity. The rentiers are waiting.

[hueving]

>Why is silicon valley more expensive to rent in?

Because supply and demand. High salaries attract a lot of people to the bay and communities systematically refuse to build new housing to meet the demand so the price goes up.

You can do whatever you want to the banks but that won't change the fundamental of 2X people trying to live in X houses.

[wangchow]

Silicone valley is mental. I wouldn't want to live there just because of the gentrification..

[branchless]

No, many hot-spots have large rentier presence including people "owning" and renting out multiple residencies which causes huge supply pressure.

Credit also typically increases ahead of wages which squeezes people further.

This isn't supply of people vs supply of homes, this is supply of credit. If you neutralise this you will see prices fall and be paying less of your labour to banks.

2008 - the credit taps ran dry => huge crash. Before that near unlimited credit saw land prices increase hugely. Neither on the up or the down did we see wages have such volatility.

[newjersey]

I don't know why it is outrageous to say the solution to high rent is to build more.

We shouldn't worry about "squeezing" people out. Ours is a HUGE nation. We have A LOT of natural resources and there is no reason why we can't let people build more (outside of protected areas, of course).

People who are "priced out" should move to places where rent costs less. I keep hearing about property owners having enough political clout to block further development, depressing supply. They placate existing residents with tiny portions of rent-controlled apartments.

I fail to see how "gentrification" is a problem at all in the bigger scheme of things.

I don't think people renting out more places is a problem. If landlords hold supply out of the market to prop up prices, we can discourage such actions with a more dynamic property tax that places a realistic tax burden on under occupied or unoccupied property.

All that being said, we definitely need to figure out some way to peoperly educate people about personal finance.

[branchless]

I'm not arguing not to build more I'm simply arguing with the notion that the main problem is one of supply and demand. It is not, there are other problems in the mix including taxing labour not land.

https://www.amazon.com/Progress-Poverty-Industrial-Depressio...

[newjersey]

> there are other problems in the mix including taxing labour not land

I agree to some extent. Property (land) taxes have to be high enough to discourage people from leaving it unused. I have no problems with fully replacing personal income tax but I'm not an expert and I have no idea if we can realistically raise the same tax revenue from land tax alone.

[branchless]

We can. Land ownership is far harder to hide. Land value tax is the establishment's worst nightmare.

[TrickzOnU]

>> People who are "priced out" should move to places where rent costs less

It is a huge nation, but one where 70% of the tech jobs are stuck in SF/SV. I can move to Lincoln Nebraska and pay $400/mo in rent, but I sure as heck wont find an employer seeking a python job.

[nl]

Of course you will[1][2]. Lots more in Omaha[3] of course, but people underestimate just how widespread programming is.

[1] http://python.jobs.net/jobs/lincoln,nebraska.aspx

[2] https://www.linkedin.com/jobs/python-jobs-lincoln-ne

[3] http://www.indeed.com/q-Python-Developer-l-Nebraska-jobs.htm...

[branchless]

And you move, that job falls through, then what? It's far more comp!ex than you very basic approach.

[whoiskevin]

Water? Nation has natural resources. Valley does not.

[Retric]

California has plenty of water for people, it just wastes most of it on crops poorly adapted for the area.

[danieltillett]

Rents can only increase if the supply is limited compared to the demand. Anything that decreases supply why demand is high will only increase prices. The solution is to either increase supply or decrease demand for housing.

[branchless]

I guess they didn't get the memo on this in all the pre 2008 countries where supply was being added like crazy and so was credit and prices rose before a huge crash.

It's very naive to think that this is simply any one factor, especially supply and demand alone.

Why are economics conversations so limited?

[danieltillett]

The complication with the supply/demand story is speculation. What happened pre-2008 was demand was artificially boosted by speculators (i.e. a bubble). The true demand for housing didn’t change much, but the speculative demand for housing driven by rising prices and cheap money increased massively. The downside of all speculative bubbles is when they pop.

The best way to avoid speculative run ups in prices (and subsequent crashes) is effective taxation. Of course taxation of land is not popular with the rich and powerful as it can’t be avoid.

[branchless]

Exactly. Forcing supply below demand through zoning restrictions does help, but once speculation begins this hurts supply also.

It amazes me on HN where on most other complex behavioural problems if someone came along and shouted "it's because of X" they would be laughed out to cries of "it's more complicated than just one thing".

Yet when it comes to millions of people with varying priorities interacting with government and the banks anyone who comes up with anything more complex than "it's supply and demand" is told "no, I've done econ 101 thank you".

Hacker news can't be bothered with Georgism, they've done econ 101 syllabus (provided by their establishment).

https://www.amazon.com/Progress-Poverty-Industrial-Depressio...

[bayesian_horse]

You are running into the fallacy that you can know what is a bubble and what is not, before the fact.

[danieltillett]

Not at all. We know in hindsight that the pre-2008 run up in prices was a bubble, but at the time this was debatable. I am just trying to explain to the OP that prices are set by supply and demand, but that demand may not always be rational.

Personally I do think it is a good idea to try and avoid speculative bubbles in assets and the best way to do this is via taxation.

[Retric]

Markets can stay irrational for a while, however the crash was a direct result of over supply. Land is plentiful and city's only have reduculys prices through poor infrastructure or artificially reduced development.

[branchless]

Land is plentiful. Land with the correct planning permission is not.

Credit however is not constrained except by a willingness to borrow and on the up this is near-unlimited. Fortunes are made not by doing but by speculating and then at the end the workers pick up the tab.

[branchless]

Would love to know how anyone could downvote this!

Come on, let's hear how rents are not tied to wages in a thread about remote working providing higher wages than the local area but lower wages than the hot-spot.

Let's hear it HN.

[metafunctor]

This seem to be exactly how it works. A lot of states and countries have tried to fix the problem by introducing housing benefits – but guess who, in the end, gets that money?

[branchless]

Housing benefit is the worst thing you can do. It's landlord benefit. Land value tax is the way forward.