I live in Denver and just resigned my lease without much in the way of increased negotiation power. I run into two main issues here:
1). Extreme information asymmetry. While many of the properties are owned by different investors, many of those same properties are managed by a significantly smaller subset. Those property managers have a cartel like effect. For instance, they can strategically hold back supply to keep a rent floor and 'establish' extremely draconian lease terms under the guise of 'market forces.'
2). Draconian lease terms. This is a subset of the 1st point, but it's extremely difficult to price the market when you're required to give (move-out) notice well in advance of the actual lease date. Because the market here is so fast, you're basically jumping in blind-folded at what might be available when you go to look for a new lease. Great for landlords you can fill a spot in a moments notice, but horrible for a tenet who's trying to understand the cost of such a decision.
My understanding is that these price crashes are largely happening in the VHCOL (very high cost of living) like NYC and SF. One of the dynamics at play in the VHCOL cities is that the rent is so expensive that the cost of moving, even if only for a few months, is fairly trivial in comparison. If you are paying $4k for a 1-bdrm apartment, packing your stuff up, putting it in storage, and moving into a short-term rental in a lower COL area is likely to be net positive in term of cash flow. Financially, this make less sense in more moderate COL areas unless the pandemic/lockdown goes on for much longer, or if you can work remote permanently.
So cities like Denver and Austin are probably not seeing as much outmigration, but are also probably seeing some immigration from the VHCOL areas.
It seems subtly different (and more correct) to use outmigration, based on what the definitions here suggest. Emigration seems to suggest leaving the country, whereas outmigration seems to suggest leaving for a different part of the same country.
Every lease I have signed converts to month-to-month after the initial 12 month period. From my understanding, that is pretty common. The only places that I have seen that require 12-month renewals are the newer buildings with professional management. But that is just my anecdotal experience. Another thing to consider, the lockdown has been going on for over 3 months now, so 25% of the population that was locked into a 12 month lease has hit the end of their lease term at this point.
Also, there have been some reports of record amounts of lease breaking. Considering that that behavior was probably close to non-existent before the pandemic, the 'record' amount is probably only a few % of leases at most. But it kinda makes sense. If you have access to free or cheap housing (i.e. staying with parents/family, etc...), and if that housing has a better 'pandemic quality of life' (i.e. more square footage, access to outdoors, etc...) than breaking your lease is somewhat rational. Worst case, they force you to pay the remainder of your lease. Best case, they re-rent it or let you get out without paying. Either way, your are improving your QOL, and you are not any worse off financially then you would have been if you stayed in the rental till the end of your lease.
It's pretty common in my experience for landlord in areas with many students to require renewing for a full year, because the rental demand is so spiky. (In Urbana IL, a college town, everything ended 8/1 give or take with absolutely no hope of a part year renewal, here in Cambridge 9/1 is quite common even though there are a good number of working professionals here too. )
> 2). Draconian lease terms. This is a subset of the 1st point, but it's extremely difficult to price the market when you're required to give (move-out) notice well in advance of the actual lease date. Because the market here is so fast, you're basically jumping in blind-folded at what might be available when you go to look for a new lease. Great for landlords you can fill a spot in a moments notice, but horrible for a tenet who's trying to understand the cost of such a decision.
What do you mean here? Just that trying to avoid a month of double-rent means you lose negotiating power cause you have to pick something quickly enough to set up the move and be done in 30 days?
I would absolutely not give up my current market without having the next one lined up, but yes, this means if I'm moving purely to save money, I'm going to have some overlap. But usually I haven't had to have more than 2 weeks, thanks to non-immediate move-in dates.
Just to be clear, I think move-out notice is only one area where landlords use economies of scale to their benefit. Anywho...
If you're looking to price the rental market and you have a 60 day notice, you're probably look at rentals that start 60-90 days out. In a hot market this is an extremely small cohort. If you're required to give 30 days notice that range can extend from 30-90 days, capturing significantly more options.
The net effect here is that tenets lose leverage. In a 30< day model I can look significantly wider without wasting time. in a 30> day model I run the risk of exhausting my runway (and probably taking the first option available).
This is where regulation helps. California requires that notice periods equal rent periods at a maximum. So if you pay rent monthly, you can always ditch a place with a 30-day notice. So you don't get landlords flexing their power by demanding 60-day notices because the government, so dysfunctional in many ways, was effective enough to protect the tenants.
I find most landlords aren’t willing to push back the move-in date on a new place more than a couple weeks in SF. So if I find a place to move into in 14 days, I’ll then give my 30 days notice and end up paying double rent for about half a month as you said. I wish that weren’t necessary, as I usually only need a couple days overlap for moving.
When I was younger and living paycheck to paycheck, I couldn’t afford the overlap and would have to give notice and then start looking closer to the actual date... very stressful! I’m sure a lot of people have to deal with this.
> This is a subset of the 1st point, but it's extremely difficult to price the market when you're required to give (move-out) notice well in advance of the actual lease date.
In many jurisdictions that term would be void or ineffective (I don't think it's technically illegal to have such a term in California, but the landlord has an affirmative duty to attempt to mitigate damages by trying to rerent the unit and there only claim of damages would be for the actual period and amount of lost rent, so anyplace that has a hot market, especially where they can rent both quickly at an an equal or higher rate to a new tenant, there's little meaningful cost to late notice lease breaking.)
Of course, that doesn’t mean the landlord won't demand more, but you can tell them to pound sand, with relevant citations, if they do, and they’ll almost certainly back off.
Tentnants aren't the people who have real negotiating power to drop prices; as a tenant normally the only options are "follow the market" or "offer more than asking price to get a first look".
Panicked landlords are the party with price-dropping power, because their choices are "follow the market" or "undercut the market to get first look".
A landlord might hold out for a few months, but if they are rational and their property isn't tenanted they'll sack the agent.
As a tenant in Australia, I’ve successfully offered less and also even had agents follow up and offer a price reduction, and try and find other properties for me.
In two weeks I move out of my $2,800/month, 3 bedroom apartment in Boston, MA. We're moving to a lower cost-of-living city.
Our upstairs neighbours, who share a 3 bedroom apartment are also all out. One moved to Denver (job opportunity), the other two are finding a more affordable alternative outside the city. These are young professionals who enjoy a patio and drinks on a Friday.
Our landlord originally listed our unit back at $2,800/month but I see it's now at $2,500/month.
As high-cost cities that refuse to allow adequate housing to be built force residents out, the jobs are eventually going to follow. Established companies may stay to an extent, but the new ones will grow up in Denver, Phoenix, Austin, and so forth. It's a shift that may be impossible to arrest if or when it really gets going.
Then we'll see thousands of articles about how SF, Boston, and so forth can't pay for the public services the cities want to pay for, and how terrible it is that companies are leaving. Those stories will contrast with the ones we've seen over the last decade, about how companies are evil and driving up the cost of housing.
Edit to add, the other question is eviction. Right now SF appears to have banned eviction: https://sfist.com/2020/06/10/sf-supervisors-extend-eviction-.... If or when that ends, we'll see what the market clears at. I assume courts will eventually forbid an indefinite eviction moratorium, but courts are already willing to go along with rent control, so who knows?
This is a dream that we've been hearing for decades and has never materialized. We have consistently seen cities like Boston and San Francisco survive and thrive despite their central industries fading or collapsing. New industries just take their place. Why? Well one very reasonable explanation is the quality of the workforce [1]. These areas are highly educated and there has always been a large amount of skilled workers, probably due to the density of high quality education. I see no reason to believe that this will be the time that the 'Silicon Valley is dying' people will finally be right.
The biotech IPO bonanza occurring right now is unreal. I think we're entering the next phase of tech if biotech get us out of the pandemic. This should add to SF and Boston cache even more than before.
A lot of existing biotech companies seem to be selling stock too. I wonder how much they can push it, if investors don't really care about dilution as long as they feel like they're saving the world.
People often say the stock market is disconnected from actually funding companies, but it seems like not in this area.
I wonder how much loose Fed policy is funnelling into these IPO and 2ndary offerings. Honestly, that or like infrastructure is fine by me for things freshly printed money to go into. Investing in science always pays off in the long-run. Our leaders should re-read Science The Endless Frontier, by Vannevar Bush (https://nsf.gov/od/lpa/nsf50/vbush1945.htm)
It doesn't make sense to me to blame the Fed; obviously everything is not attracting the same investment. When the stock market bounced back recently, it's not the same stocks. There was a huge amount of reallocation of anticipated future value due to the epidemic.
I believe biotech is the best area in the long run, but the fundamental cause of a bubble is that people start believing something is always a good buy at any price, and that always means the price has to go up enough to change minds.
The more you believe something is always good, the worse it has to become to change your mind, which is pretty scary to me.
>It's a shift that may be impossible to arrest if or when it really gets going.
>Then we'll see thousands of articles about how SF, Boston, and so forth can't pay for the public services the cities want to pay for, and how terrible it is that companies are leaving.
Good. Stupid should hurt. These cities had 20yr and nearly unbounded money they could have used to become somewhat sustainable. That they didn't is only their fault. And I say that as someone who lives in one of those cities.
Denver is inexpensive compared to California, Seattle, NYC, and Boston. But it is (relatively) urban, dense, walkable, and bikeable, with lots more bike lanes incoming. It has a mass-transit system of sorts, although it really needs a north-south subway connecting Cherry Creek to Downtown and past the freeway, as well as an east-west subway along Colfax. It has relatively good and sunny weather. The airport is very large and relatively easy to get to. The economy is pretty strong. Taxes are not insanely high. I was looking at it as a possible place to move.
Austin has many of those, but without mass transit, and Phoenix has some, but it's less urban and the traffic is horrible.
Also notable: virtually isolated from natural disasters: no earthquakes, tornadoes, hurricanes, wild fires (in the urban areas), volcanoes, floods, tsunamis, land slides, avalanches, or sink-holes.
Also, climate modelling says that it's going to get wetter which would make its land more arable.
While I agree that more both north-south and east-west transit lines are needed, the geography of the area makes subways prohibitively expensive. The soils in the area are expandable soils, and run deep. Any subway tunnels would have to be dug much deeper than is typical, down to a depth of year-round consistent humidity and temperature, so not to be destroyed by seasonal soil shifts.
An elevated line would be more feasible (and is indeed in place for some portions of the existing rail lines), but again, you still have to sink your supporting piles deep due to the soil, and that raises the costs. This is why the existing rail transit in the metro area largely follows rail corridors that existed beforehand.
Finally, botched project management has eroded public will to support more rail lines.
I want more transit rail too, but getting it is going to be an uphill battle.
The cooler weather in Denver and huge focus on fitness / outdoors beats the pants off Austin for me on any given day. I do indeed want to be healthier and spend time outdoors!
Others have mentioned it but having lived near there its a great place. Tons of outdoor things to do(Rockies near there, trails everywhere). Clean urban area with many sports teams and restaurants/bars. You want urban living you have plenty of condos/appts. You want Suburban living its there as well. Pace of life is great, not a work-til-you die slog like the bay area. Weather is pretty mild compared to the east coast/mid-west. Denver is part of a larger area called the front range which goes from south(colorado springs, to Denver/Aurora, out to Boulder area and north at Fort Collins). That whole area is booming and could be a major tech hotspot in the next 5-10 years.
It has many of the advantages of the Bay Area (outdoor activities, craft brewing scene, bike paths). Denver and Boulder have very nice, walkable downtowns. Cost of living is lower than the Bay Area or NYC (but Boulder is approaching fast).
I live in downtown Denver and I just want to point out all the good food is spread out across the metro area, it’s only walkable in a very weak sense. There’s also zero bodega/corner store/corner deli/food carts downtown, aside from two 7-11s and a CVS. Boulder has much better food and stores close to where people live.
It's a reasonable facsimile to the west coast urban cultural environment and is cheaper than the big three metro areas. I don't know that there's much more to say about it than that. Portland is en vogue for many of the same reasons.
Then it will be "those evil companies came here, drove up rents and then left when their employees couldn't afford it anymore" - because it will never be the city planners fault!
> Then we'll see thousands of articles about how SF, Boston, and so forth can't pay for the public services the cities want to pay for, and how terrible it is that companies are leaving.
Perhaps, but I've also gotten the impression those companies weren't paying that much to begin with. But perhaps it is they were paying a lot, but not nearly as much as they should have been if they weren't able to buy their own legislation?
Because of bad tax policy in California (Prop 13), the biggest source of taxes in California is personal income tax, and mostly by high earners, who are likely employees of these companies. There's already an effect on revenues when the stock market goes up and down, so I imagine companies leaving California would have an even more pronounced effect. Just because corporate tax is low, doesn't mean the money isn't taxed, it'll just be taxed when it's given to employees as salaries.
Additionally, I don't get the impression that companies are able to buy legislation in SF. Otherwise, we wouldn't have policies like Gross Receipts tax, which most of tech companies in SF opposed [0].
In general, I think this obsession with "making corporations pay their fair share" isn't the right way of deciding a good tax policy. We should tax things we want to incentivize as little as possible, and tax things we want to discourage as much as possible. Maybe that leads to higher corporate taxes (I suspect it wouldn't), but the mindset should not revolve around trying to get a pound of flesh. Additionally, it isn't even guaranteed that the tax burden will fall on the corporation just because they're the ones writing the check. So even if our goal is "make corporations pay", tax incidence can just lead to us making labour and customers pay instead.
[0] - FWIW, I don't think gross receipts is not a very efficient tax, since it just encourages vertical integration and discourages multiple companies working together; ie. less competition. Unfortunately, Prop 13 prevents the economically efficient and fair source of revenue
> FWIW, I don't think gross receipts is not a very efficient tax, since it just encourages vertical integration and discourages multiple companies working together; ie. less competition. Unfortunately, Prop 13 prevents the economically efficient and fair source of revenue
They could just use VAT, which gives no advantage to vertical integration.
SF already has a fairly high sales tax (~9%), so I doubt they could raise it anymore (I'm considering sales tax and VAT to be the same for this discussion, since they lead to the same revenue for the government, and same cost for the consumer).
I think VAT/sales tax is bad in other ways, since it's a regressive tax (the poor spend more of their income/wealth on consumption vs. the rich), and it also reduces transactions being made, which just creates dead weight loss. Our goal should be to keep money moving around, not add barriers to new transactions.
If I had to pick, I think I'd prefer the gross receipts tax, but I haven't studied the underlying economics to come to a conclusion on which is better/worse.
> If I had to pick, I think I'd prefer the gross receipts tax, but I haven't studied the underlying economics to come to a conclusion on which is better/worse.
Gross receipts tax is just sales tax that doesn't show up on the customer's receipt. They like to pretend that it's then the seller who pays it instead of the buyer, but that's not how it works. It gets paid by whoever can't pass it on. In a competitive market that's the consumer, because the seller already has thin margins and can't absorb the cost without going out of business. (In a monopolistic market it's the monopolist, but that's just as true of sales tax -- in a monopolistic market the customer can't absorb higher prices because they're already paying monopoly prices.)
> SF already has a fairly high sales tax (~9%), so I doubt they could raise it anymore (I'm considering sales tax and VAT to be the same for this discussion, since they lead to the same revenue for the government, and same cost for the consumer).
Denmark and Sweden have 25% VAT. The EU requires it to be at least 15%.
> it's a regressive tax (the poor spend more of their income/wealth on consumption vs. the rich)
People always use this argument to justify income tax over VAT even though everything about the income tax doesn't actually work like that. "Progressive income tax" but not for FICA, which is like half the income tax ordinary people pay, and hey let's disguise that fact by alleging that it's being paid half by the employer even though that's not how it works. Let's put a cap on that too, so the wealthiest pay proportionally less than regular people. And then we'll have a bunch of means-tested benefits so that even for the "progressive" income tax, in practice lower income people are paying the highest marginal rates due to the benefits phase outs. Meanwhile we'll have income tax on the "profit" of international corporations, but only on paper because they don't actually report their profits in your country.
It also doesn't work when comparing VAT to property tax, because the rich generally don't use a disproportionate amount of their wealth to buy real estate -- unless it's rental properties in which case the property tax ends up being passed on to the tenants.
If you want to make VAT progressive then use it to fund a UBI. All of these other games only give people with accountants more holes to hide in.
From what I've read, the land tax is the most progressive tax.
All taxes except the land tax cause some sort of dead weight loss, which just leads to lower spending and economic activity, which leads to more unemployment.
> because the rich generally don't use a disproportionate amount of their wealth to buy real estate
Most valuable land is owned by the wealthy, and most poor people rent, so I don't see how a land tax would fall on the poor more than the wealthy.
> the property tax ends up being passed on to the tenants.
A land tax cannot be passed onto a tenant, since the supply of land is fixed, and so taxing land doesn't changing the supply-demand curve (leaving the equilibrium price the same).
> All of these other games only give people with accountants more holes to hide in
Actually, land tax has the least loopholes. Capital, businesses, high income individuals etc. can simple move to a jurisdiction with lower taxes if they want to. But they can't take their land with them, so the tax will always be paid (either they keep it, and pay the tax, or sell it to someone else, who can then use it).
Land and property taxes are absolutely passed on to tenants. If the tax is higher than the rent that can be extracted, that just means you have improperly priced the land/property. You can prove it by trying to sell the property at which point, no investor is going to buy the land for a price that won't be profitable so the price will fall decreasing the effective tax until it is profitable to rent it out when factoring in the taxes.
> All taxes except the land tax cause some sort of dead weight loss, which just leads to lower spending and economic activity, which leads to more unemployment.
Land tax does the same thing. If you try to generate all tax revenue from land tax then land tax is really high. Land tax is set based on the value of the land, so land in the city center becomes even more expensive than it is already and you increase the incentive for sprawl by not allowing the owners of the best land to recoup its value themselves, which deters investment there. (Property tax does this too, and moreso, because it taxes the investment in buildings as well; but trying to get 100% of tax revenue from property tax would be problematic too. It's bad enough as it is.)
> Most valuable land is owned by the wealthy, and most poor people rent, so I don't see how a land tax would fall on the poor more than the wealthy.
Rents are always proportional to ownership costs. If it cost much less to rent than own then the existing owners would sell their properties to by non-real estate investments until property values fell to parity. If it cost much more to rent than own then investors would bid up property values or build more properties in order to get those returns, until that wasn't the case anymore.
If you increase the cost of property ownership, you increase rents, and vice versa.
> A land tax cannot be passed onto a tenant, since the supply of land is fixed, and so taxing land doesn't changing the supply-demand curve (leaving the equilibrium price the same).
Tenants don't buy land, they by housing units. You can build more housing units or not on the same land.
> the tax will always be paid (either they keep it, and pay the tax, or sell it to someone else, who can then use it).
This is the basic flaw in the land tax theory -- that somebody has to pay the tax.
A piece of undeveloped land in the city center starts off as very valuable, so it has a very high land tax. Anybody who wants to buy it had better be getting a very large return. It makes it more profitable to buy one plot of land and build a 100 story building on it than to buy ten plots and build 10 story buildings. So enough people do that and break even from that to saturate the local demand for real estate.
But then there are those other 9 plots which are now empty, or still have 5 story buildings on them, next to the 100 story buildings. There isn't enough local demand to justify any more 100 story buildings, but they're paying the same land tax as the 100 story building next to them because the land is of the same type and in the same approximate location, so they're completely bankrupt. The land is worthless because the tax is more than the returns you can get from it -- you can't build another 100 story building because the rental market is saturated and its existence would lower rents to below your cost, but nothing else brings in enough revenue to pay the land tax either.
So you abandon the property, or donate it to a non-profit which doesn't pay the tax, and the tax is thereby avoided.
So in the most desirable locations you end up with a handful of very tall buildings next to a larger number of abandoned lots. That is not efficient land allocation.
Meanwhile in the suburbs the land value is not very high because it isn't as scarce (compare how much land is in the city center to how much is in the suburbs around it), and affluent people like to live there anyway, so everybody with money is living there and paying low taxes. And even there you might get the same thing -- a few 20 story buildings that completely fill a plot of land where people live, surrounded by empty lots.
Implementing a VAT at the state level is difficult when goods can easily move across state borders. You'd need a federal system of collecting sales tax.
They already have the big online retailers collecting sales tax. People can't save money by driving hundreds of miles to another state to buy small ticket items, and big ticket items like cars and boats get taxed on registration.
Being produced out of state doesn't get you out of it. If you import something from out of state, the act of importing causes VAT to be due on its value. If you then add value in the factory, you owe that too. The total VAT is always equal to the sale price. (If you like to promote exports you then give a refund for products not sold in the state.)
That gives a heavy incentive to lie about where it was produced. That’s fine when imports are tracked across a border, but not in the system we have in the US.
I am thinking that forcing tens of thousands of employees to show up at office buildings and live in apartments is somewhat ridiculous, especially considering issues like food. Duplexes and fourplexes are probably a good compromise.
On the flip side, I live in a very rural valley in North Central Washington State that is a prime location for climbing, skiing, mountain biking, etc. We are about 4 hours from Seattle in the summer when the pass is open. Housing prices have spiked in the last 6 months with many going pending in a day with cash offers. It was never like that before. The good builders are already booked through 2022 for new construction.
People are moving out the city (or getting second homes) - that is exactly the trend you are seeing. The urbanization tide has reversed. For how long? Who knows...
I've been watching a number of different markets and it's crazy. In Flagstaff and Chattanooga, for example, many houses get offers within hours of being listed.
Millenials are demographically numerous and are also now bunched in the "make a family or don't" slice of time. Unless someone makes $300,000 or more a year, as almost no one does, that's very difficult in California, New York, Boston, and increasingly even places like Seattle. COVID may be accelerating preexisting trends and pressures.
>Our landlord originally listed our unit back at $2,8000/month
With a landlord demanding rent that high, how could you NOT move? :) Either way, this gives me a flicker of hope that maybe I can negotiate my rent down a bit this year.
Depends largely on the city. A few years ago, I owned a 4 bedroom, 2400+ sq. ft. home in Houston for less than half that per month, and it doesn't look like prices have gone up much (there) since then.
The landlord provides the option to live somewhere with significantly less time or financial commitment than would be required if buying. The number isn't the landlord's parasitic decision, it's just economics.
I hate these prices as much as the next guy, but if every other apartment charges that much, and they get rented... the landlord would absolutely be crazy NOT to charge that price.
You would know that landlords often seek to increase rent, without adding value to the home, while the fittings in the home age, as the amenity and wealth of the surrounding community increase.
The value of the home is increased mostly by the location of the home, and relative availability of other alternative nearby homes, much less its physical trappings.
Very little around the Boston metro is "cheap" but move 45 minutes to an hour out and prices can be a lot lower depending upon the town. Of course, you no longer have anything resembling urban amenities even if you're still in range of a day or night in town.
Sine I'm European, when you say urban amenities, what exactly are you referring to? Here our biggest problem with moving out of the city center tends to be the lack of sewage system so you have to pay to truck your tanks away which can get costly( and septic tanks are illegal).
Walking to places, transit, good restaurants, etc.
I don't have town sewer but I have a septic system (tank and leach field) and that's pretty normal in more rural areas. I'm not sure I've ever heard of someone with a cesspool that needs to be pumped on a regular basis although I'm sure that exists. Septic tanks should get cleaned out now and then too but that's an every few years thing.
I do also pay for trash disposal and some things like that which are paid for by taxes in most cities but that's hardly a problem.
I think some of this is temporary. My friend just left NYC. They loved it there, but since everything is closed, there was no reason to stay. The bars, clubs, and restaurants were the main reasons they were there.
They figured they might as well save money and move back home with their parents until everything opens again. Then they'll probably go back.
I suspect things will pick up in SF as the bars and clubs and restaurants open again.
I live in NYC. The number one reason people I know leave is affordability vs the suburbs or next tier cities. I know a handful of people who aren't/weren't cut out for life in the Big Apple. The vast majority would stay if they thought they could. If you think we are in a world of permanent pandemic then yeah things could really change. If you think 12 months out things mainly normalize then lower prices will definitely draw people back in and re-establish equilibrium.
When you live in a city, there’s an unspoken agreement between you and the city that you’re paying for access to amenities and services that would be hard to get in the suburbs. It’s an unspoken agreement since “the city” isn’t actually a party that you can negotiate with.
During the pandemic, this agreement has been broken, which has created a feeling of being cheated out of an agreement (despite the caveats above). It’ll be interesting to see if people will be excited to return to normal once this is over, or if people will re-evaluate whether they’re getting a good deal.
Were people really living in the city for the recreation? I always thought most people either lived in the urban core for work, or because they're from the urban core and used to it.
But then again, I suppose I'm biased by living in Boston, which... kinda hates fun and wants to make sure you go home early.
All my evidence is anecdotal of course, but in 20+ years of working in the Bay Area, I've asked maybe 30-40 people who live in SF and commute, why the do so. Most of them were young single people (or young couples) and enjoyed the cultural aspects. They were happy to endure long commutes (often on company shuttles) just so they could enjoy those things on nights and weekends.
When I worked in SF, one left the city when they had kids, and one bought a house, but they just enjoyed urban living, being able to walk places, have lots of services nearby, etc.
A few were part of a family where their kids were born there and were in school there, or the grandparents were nearby.
San Francisco has the lowest percentage of kids of any major U.S. city. 13% under 18 vs 21% in NY and 23% in Chicago.
This was particularly eye opening: “For every 100 apartments in the city sold at market rates, the San Francisco school district expects to enroll only one additional student, the report said.”
All of these trends are temporary. Once the current residents die, either new singles move in, or maybe families if the city makes policy choices that are friendly.
The most important reason that I've heard of is that SF won't let you choose a school close to your neighborhood, so you can end up with kids in multiple schools across town, or in schools you don't like.
personally I live in SF and commute because when I'm at home I want to be able to get around on foot and transit. also I like the feeling of living in a reasonably dense area.
I moved to a medium-sized city primarily because I prefer being in a medium/large city. I've always worked remotely, so I could have stayed in my small town with a very cheap cost-of-living.
Reasons I moved:
- restaurants
- bars
- concerts
- larger dating pool
- greater LGBTQ acceptance
- close proximity to international airport
- can walk almost everywhere
- I find most american suburbs to be depressing
So, the virus has wiped most of those amenities out. Living in the city is a lot less fun now.
Ok, so what I'm getting from the extended responses to this thread is that I need to get the hell out of Boston, because I've just been doing it wrong for all of my late 20s and into my 30s.
If you don't feel you're getting those things in Boston, I would consider it. I'm in Denver, which is somewhat similar to Boston in size, and Denver definitely is not a 24/7 city like NYC. But I'm OK with that. I grew up on the east coast and I do prefer the culture of the western states more.
I am in my mid 30's and moved here about five years ago and I wish I had done it in my 20s. I hope you find a place you can enjoy!
San Francisco has great restaurants and food, and I'd argue that "from the urban core and used to it" basically just means "I enjoy having these amenities like nice restaurants to go to".
Lots of reports on the food getting much worse over the last decade. Turns out cooks cant afford to live there, so you have to start scraping the bottom or hiring people with no training to just make salads.
All of my young, single, and educated friends who previously lived in low cost of living areas (eg more rural areas or smaller cities) have moved to major cities within the last few years. All of them cited lack of things to do, highly suboptimal dating environments, and / or lack of pre-existing friends nearby as prime motivations for their moves.
Yep. I moved from my rural hometown to a small city after college (still work in my hometown, which is nice as I've got friends there and can stay at my parents any time I need to), but I'm already wanting to move again to somewhere bigger where there's just more to do.
A lot of tech workers endure long commutes to other parts of the Bay Area from SF because they wanted to live in SF so badly. I'm sure it's a lot less attractive now because everything is locked down.
Definitely! I moved to Chicago specifically to work remotely and enjoy the restaurants, art, parks, etc. It may be a generational difference but many of my peers have done the same.
Lot of young people like to live in cities like SF and NYC especially for a vibrant social/recreational life. SF also attracts outdoorsy people because of its access to nature like beaches, hiking spots and so on.
Sure, but none of them give you the best of both worlds which is SF's selling point. Personally, I'm not the city type which is why I don't live in SF. But I know quite a few who like the social + outdoors life the city offers.
Why live in FiDi if you're here for recreation though? It seems like a pretty dead area outside of office hours? Thought I admit I haven't spent much time there.
New building with a view, pool, rooftop, gym etc. Only comparable buildings are on 42nd st (which is another distinct area that I’m not a fan of). Personally I like the energy, lots of good restaurants, close to trains. You can get to Brooklyn in 15 minutes!
I once met someone who was a lawyer who lived in Manhattan and worked in Princeton, NJ so his daily commute was Subway to Grand Central, Train out to NJ, bus to his work.
And look at all the people who live in SF and commute out to the South Bay for work.
Personally I'd never suffer that kind of commute and I live in Manhattan precisely to get my commute to walking distance but to each their own.
NYC is open 24/7 on paper. In reality, I was surprised to find the nightlife at night very poor. Except few bars/restaurants and McDonald's, there are few people. But maybe I was spoiled from Bangkok, Tokyo and the other Asian cities who are hardcore at staying late.
Tokyo stays up late because of their train schedule. The last trains are mostly around 1AM which is too early for a night out, so most people just end up extending their night outs to 5AM first train back home. Taxis are too expensive.
Yeah, Boston wants you to be going home at 12AM, when the last trains are leaving their stations, and they force bars/clubs/restaurants/etc to be closed by 2AM, period.
It makes me miss the random industrial city in another country I lived in for my MSc. Admittedly, that's one of my favorite cities period, but it had night-owl bus lines, including BRT. You could go out at 20:30, stay out until 04:30, and get home at 5:45.
Preach. Boston is damn near overly hostile towards young people. They hyper regulate all activities and services that young people want to participate in or use as you point out, do nothing to reign in housing prices, and then are shocked when they have a hard time retaining talented people after they get their degrees. It's absurd.
>and then are shocked when they have a hard time retaining talented people after they get their degrees.
I mean, come on. Are they shocked? Or is this how the townies want it? My impression is that quite a lot of the "natives" who think of themselves as "True Bostonians(TM)" (ie: not just those of us who've lived here for years, married someone raised here, and own property here) want this place to be the world's most populous (but rather restrictive) college town.
Why would they want more people around to ruin their city by walking around doing things? Come, spend your money like a tourist, fuel their businesses, get your degree if you're one of those workaholic nerds, and get the fuck back out. You can come back eventually if you manage to make the tenure track!
>Boston is damn near overly hostile towards young people.
Massachusetts is overtly hostile to anyone who does not step in line the way a good well behaved cog in the machine should. Making it hard for people to stay out late and get drunk is just a specific instance of that.
When you picture the state as being run by a committee of stodgy puritanical authoritarians who live in Lincoln and Lexington it all makes sense.
This is a tech-industry news site. Half of the people here are on real names and/or provide links for networking. Yeah, I make my professional self "out there" for people to get in touch with on here.
It is the use of the derogatory term “stalking” towards a person who’ve visited the links you put there yourself that I find peculiar, rather than the links.
Ah, I think that might just be an age or social-clique thing. At least among my friends, we've generalized "stalking" to just generally include seeking out someone's real-life identity via their online breadcrumbs, even when the "breadcrumbs" are signposts put down on purpose.
Vegas is a con. Went there and probably will never return.
Smoking, gambling and open liquor is about the extent of Vegas. It gets boring after a weekend there. Obviously if someone is dependent on any of the three it is the best place ever.
If you're like me who doesn't smoke, hate the smell, gambling is just $100 for entertainment value and drink beer while eating dinner it isn't the place to be at. This is generally what I hear fellow millennials once they visit.
I've spent a lot of time in Vegas and while it does get old it takes a lot longer than a weekend.
There's clubbing, lots of high end dining, shows galore, Red Rocks for hiking and climbing, each casino on the strip is a spectacle, old Vegas, shooting ranges, etc. Most of those things costs a fair bit of money but are well worth doing.
Miami (FL) doesn't close. When I lived there not long ago, there was a period where I was between jobs where I came home after sunrise every day of the week. If you're trying to stay out past 2am in Miami and not able to, you're not trying... at all. Bars/clubs usually close at 5am, but I believe are only required to close for 1 hour a day, so there are afterhours spots.
I live in SF and before covid used to commute outside the city. Maybe I'm an outlier (or just in my late 30's...) but the reasons I live in SF are actually better with the lockdown: I love walking and biking the neighborhoods, I love Ocean Beach, Glen Canyon, and Fort Funston, Crissy Fields and the Embarcadero, the Presidio, biking across the bridge. This city has so much to love that has zero to do with bars or restaurants, and after 10 years living here, frankly I'm tired of paying the premiums all those activities entail.
A few single people I work with in the Bay Area moved back in with their parents and terminated or did not renew their lease, some even left the US temporarily to return when things are back to normal.
Another factor to consider is that many people move to a big city for work and higher earnings.
There will probably be some shift back, but I think after all this remote work will be a more permanent option for a lot of roles.
If you're able to get the same higher salary, but remotely somewhere with a more affordable cost of living, and aren't in that area specifically for in-person amenities, why wouldn't you?
My point is that most of the people that live in the city do it for the amenities. The people who are in it for the higher salaries tend to commute from cheaper places nearby.
My landlord tried to retroactively raise the rent on me during the COVID crisis, so I got pissed off and rage-browsed the rental web sites, and found a great deal I couldn't refuse:
I just moved from a 1 floor flat to a 4 floor house with 90% more space, backyard garden on a canal, an indoor garage (for bikes and storage since I don't have a car), near public transit, for 20% less rent!
They had to lower the rent 500 EUR a month to compete with all the AirBnB's that were suddenly dumped on the long term rental market.
My previous butt-hole landlord was shocked I was leaving on such short notice, and apologetic for the dick move that he tried to pull, and asked how he could convince me to stay, because he liked me as a tenant. I told him he'd have to at least give me the entire flat upstairs for free, to even get in the ballpark, and anyway it was a moot point because I'd already signed the contract.
Now I am much better prepared for the COVID crisis to last an indefinitely long time, and actually have enough room to get a chest freezer for the garage, for cooking and eating at home, and set up a big separate office instead using my bedroom, for working at home.
If you are trying to rent right now the going rate seems to be 2 months free for a 12month contract. So almost 20% off.
I think the reason for the 2 months free is to avoid various rent controls. If they actually gave 20% off they couldn't put the price back up 20% in the future as easily.
They're wrong. The new rent control law (effective Jan 1, 2020) specifically excludes temporary discounts from the base rate calculation. See section 1947.12:
This is a state law and it still allows for stricter city level rent control. If the unit is bound under the stricter SF city rent control, the city rent control law may treat discounts differently?
That doesn't really govern SF rent control. This clause does not override San Francisco's limit, which applies to all pre-1979 buildings and which limits annual increases to CPI inflation. Under SF's program "A rent reduction is permanent and cannot be restored if a new agreement is created between the parties at a lower rent due to market conditions."
Note that SF-style rent control was outlawed statewide in 1995 by Costa-Hawkins. Only cities with existing program at that time can continue them.
Well you kind of have to read the whole thing, but specifically section a1: “That rent which is charged a tenant upon initial occupancy plus any rent increase allowable and imposed under this chapter”
Non-controlled buildings that have other limiting provisions e.g. max 10% annual increase also don't want that nominal rent to go down, so that they can still charge $4500 in year two even if the effective rate in year one was like $3250 due to discounts and gift cards.
I actually think that the tax treatment differs as well - the 2 months free can be treated as a marketing expense, whereas the reduced rent simply results in the lower revenue.
For financed buildings it also keeps the nominal value of the building at the same level - it's still technically "rented" for the same rate, keeping future cash flow projected the same.
Even without rent control, the "2 months free" offer earns them more revenue, assuming you stay over an year, so I doubt they would just give you the full discount.
Or if you stay less than a year! Since you usually have to pay back concessions ON TOP of any early termination penalty, if you want to break your lease.
Seeing lots of evidence indicating that prices are falling in cities and it’s very hard to sell.
Meanwhile in the suburbs around cities the market is booming in certain segments. Lots of people who vowed they were always city dwellers are suddenly keen to live in the burbs. Hearing lots of stories of houses in desirable suburbs getting multiple competitive offers the first day they go on the market.
In the rental space in suburbs and vacation communities heard lots of stories of places being rented at above market prices sight unseen by people just looking to get out of the city for the summer/year.
Things will probably pick up in cities once things start to return to normal, but like a lot of things it’s likely going to be a very long time before things get back to where they were before all this started.
Apartments in the city center are desperate to sign leases. But houses are actually a little more expensive this year, and they sell within a few days of hitting the market.
And it make sense. New urbanism is dead at the moment: parks, cafes, and theaters are closed. There are no events. Nobody wants to take transit. But in single family neighborhoods, life is basically normal. Not to mention there is no traffic and gas is dirt cheap.
For what it's worth, I recently moved apartments in downtown Seattle and the there's little in the way of downward price movement... yet. I shopped around at most of the buildings down here (2BR prices) and didn't find too much in the way of desperation, but this is all anecdotal I suppose.
We stayed downtown for my wife who supposedly would be "back in the office" later this year (she doesn't drive), but I really wish I had gone with my gut and pushed for us to move further out. There is absolutely no benefit to being in Seattle proper right now, and it would not surprise me to see more people leave (I've considered just becoming rent-responsible on the lease and eating the cost, it's annoying me to death).
(If you're talking about anywhere near Cap Hill, nobody wants to sign a lease there after they tear gassed the entire neighborhood a few weeks ago)
Also because, you know, a goodly chunk of Seattle was ransacked, covered with graffiti, riddled with gunfire, responsible for at least 5 shootings in a month, looted, boarded up, and deprived of any protection at all.
This is needlessly dismissive of why those events occurred to begin with. SPD themselves (as evidenced by numerous videos) caused more than enough of the anguish and problems, and Durkan's actions speak for themselves.
There are many reasons to not want to be in Seattle right now, but casting it as a warzone without "protection" (from the very aggressors themselves) is a bit much.
I see people bring this up all the time for Seattle. However... I've literally lived in the radius of the oft-demonized stretch of 3rd and Pike/Pine for the past 2-3 years.
I can assure you that while it's bad, they generally don't bother people and simply need a system that actually helps them. More police won't solve anything here - I'm confident in this statement as they sit outside my window daily and do absolutely nothing as it is.
You must live on a high floor. The homeless outside my window are annoyingly noisy. Too often they wake me up at night or scare my dog when I'm out walking. I'm tired of spotting needles in the bushes and I'm worried someday I or my dog will step on one without a cap. The other day, I watched one guy threaten another with a knife.
Call me callous, but I'd like to build drugs-allowed shelters so that they leave the streets.
I live pretty close to street level, actually - sometimes people on the corner by the Kress are playing music too loud, but this is a city: you're going to hear some noise.
I walk two dogs here a few times daily and while the litter has been worse post-COVID, it wasn't always this bad due to the city cleaners.
In general I agree with your shelters idea, Seattle does not do nearly enough to help these people.
Without knowing what part of Seattle you're specifically referring to I can't really explain more. If you're referring to Pioneer Square... well, I won't fight you on that one - that area needs help.
Where I live, it is _noticeably_ cheaper to buy a house in a suburb 20 minutes away from the city center, than renting an apartment half the size, that would cut such car trip by 10 minutes. Given the current situation, it's a no brainer.
It's not hard to sell. There are so many buyers out there right now. In Chicago houses are on the market 3 days tops. Hearing similar from other cities.
Same in Providence. We are house shopping right now and the market is very hot -- so hot that I'm considering stopping our search altogether on the theory that it might be better to wait and see what happens over the coming months.
I remember reading an article that said, while people who want to buy really want to buy, many of the sellers have gotten cold feet. When people imagined that the market would dry up and property values would go down because of the epidemic, they weren't thinking about the asymmetry.
I watch SF rents like a hawk. A decent 2ba/2br is $~4200 which is lower than a year ago. Also! I am seeing apartments come on the market - that haven't been on the market in 10 years: Views, custom kitchens, 1200 sqft, parking (wtf??). A handful of listings are starting to give out 1 or 2 months free (this is because they can't lower the rent due to rent control issues). But if you are looking in SF - grab something that hasn't been on the market for a decade - these are unique treasures.
Not the poster, but I do identical surfing in NYC and use Zillow. It’s all about the right filters (posted in last 24 hours, prices, neighborhoods, amenities). You can set up email updates, but it’s more tedious to read the emails than it is to browse their app.
My anecdotal data in NYC is identical, btw. I used to see a great apartment maybe once a week. Now, it’s closer to 5-8 per week. And they’re all “under” priced by 10-20%. I saw a rent-controlled parlor floor brownstone in Brooklyn heights recently. It’s unreal.
It’s just a bit sad to think how many of these households were lived in by actual victims of the coronavirus.
I live in the Bay Area and this has not been my experience. Looking at Craigslist and Zillow the rents are stable. Perhaps the rate of increase has slowed down slightly. That is all.
Yeah as i stated above if you're actually looking call them up and they'll suggest 1-2months free.
Source: I'm looking right now and pretty much everyone will say yes to 1 or 2 months free. They just don't want to drop their listed prices. Perhaps to avoid renewals in the same complex citing the lower prices and negotiating or perhaps to avoid rent controls locking in rates when this ends.
Are you looking mostly at large apartment complexes?
This is not the case with single family homes for rent - as far as I can tell. The single family homes and in-law units are vanishing as fast as they ever have in the desirable areas.
I just left a place where the landlord wasn't able to find anyone to replace me with two months notice and a 20% reduction.
Lots of places aren't reducing the monthly rate outright, but are giving 1-2 months free. So a $3100 rate would actually be $2841 or $2583. This benefits them because it affects property valuation. There's other factors involved too, but this seems like the primary one.
Agreed. I (unluckily) signed a new lease in March, not thinking this was going to go on for quite so long. Before I actually moved in, I was able to negotiate a free month, but it looks like my building is now offering 6-8 free weeks, but the base rent hasn't actually changed.
What happened to San Francisco is that public transit is vastly degraded, and you can't use the bathroom at most private businesses, even if you buy something. Thus, you are leashed to the bathroom distance from your house. Thus, you must drive everywhere, which makes city living much much less attractive vs. being in the suburbs. Add to that that remote work is the norm now, and there seems to be a higher crime rate in the cities with all the rioting, and living in the suburbs makes a lot more sense.
The parent comment is referring to conditions that have changed due to COVID (most businesses close their bathrooms now), not how available bathrooms were historically.
“300 landlords who own more than 10,000 apartments”
Wow, that’s allot of concentrated wealth. Anyone have some insight on these fine folk?
If each landlord owns 100 apartments renting for $4k each(average) that’s $400k a month gross. That’s allot of potential venture capital money to capture monthly, over $20M in five years.
Something to keep in mind is that once you own a few rentals, it's easy to pull equity out for a down payment on another rental, and buy the rest with a loan. Leveraging is easy when there you are buying physical assets that retain value.
In other words, even if you own 10 rentals, you are probably wealthy, but the bank my still own a majority % of those assets.
The goal is not to own the rentals, the goal is to own the cashflow through the control of the properties (whether that's mortgages, leases, or option agreements with the owner). To your point, you want to be stripping equity whenever possible to accelerate asset acquisition. Very similar to private equity LBO operations.
If you're highly levered (as a smaller landlord), and funneling that income into retirement accounts protected from creditors (varies by state for IRAs, 401ks are federally protected), it's all upside with no downside. Heads, you walk away with appreciated real estate you eventually cash out of. Tails, you walk away from your investment properties while your retirement assets are protected with credit blemishes that are quickly forgotten by lenders. It is rare to be pursued by lenders in recourse states, as being (mostly) judgement proof and the option of bankruptcy are significant hurdles.
Home equity loans or cash out refinances. What you pick is determined by your financial models based on interest rates, origination fees, etc. Typical carrying cost math.
Once you have enough properties to bump up against Fannie or Freddie GSE underwriting guideline limits (~10 properties), you transition into commercial lending, where you build a relationship with a bank and they lend against your combined portfolio.
Sure, if they own outright, rather than having borrowed money to buy the apartment complexes, and if they don't have to pay maintenance, insurance, landscaping, and so on.
It's not just free money. They're making money, sure, but considerably less than your calculation.
Not sure how much you know about the SF market. We only get glimpses, but it gives you an idea of how much wealth these landlords capture.
The building at the corner of Fillmore and Waller was bought for $1.05 million, 20 years ago. It has 6 retail storefronts and 18 apartments upstairs. Just one of the retail doors rent for $10000/month, or it did before this rent strangled the tenant:
The building is assessed for $1.4m, so the taxes are around $15000/year (which the tenants pay under NNN terms) but the gross is probably well over $50000/month. And there's no landscaping, obviously.
These people are absolutely stacking cash. They are just parasites.
They are providing a service. You arrive in a new city with no money. Where will you live? The landlord is assuming the risk of owning and maintaining the building and all you have to do it put in a deposit.
The main reason they are "parasites" is prop 13. Without that, their building would be assessed at a reasonable level, and most of their profits would be property tax payments.
If you live in California, make sure to vote yes on the two partial repeals of Prop 13 this November:
Landlords may provide services, but they primarily extract economic rent, essentially profiting from their their monopoly on that particular piece of land.
How can they profit from the unproduced value of the land when they had to buy it? It seems to me that you're assuming landlords owned the land since before high property values in SF or wherever were a thing. It seems unlikely this situation accounts for much of the real estate.
They are providing a service in the act of owning and maintaining the building.
What service are they providing in their role as a landowner? Land (in the sense of it being in a specific location) doesn't require any maintenance or risk. It's also not like they created the land.
The majority of rent in SF comes from the land value, so this is the more relevant part to consider.
The reason why land is expensive is because there is high demand for it. Landlords can't set prices arbitrarily. Every tenant has voluntarily agreed to the rent they pay.
How is this relevant except for a hypothetical person who owned land since before there was a city? That person would indeed be profiting unjustly from value created by others, but that doesn't seem like real life. What am I missing?
> Let me give you concrete scenario of where the current system breaks down. Let's say I own an apartment building on the edge of town, and the city decides to build a new transit line to the community. Rents in my apartment building will go up; let's say by $100. Renters are willing to pay an extra $100 because they value living near a transit line more than the being far from one. But why should that extra $100 go to my pockets, while the government has trouble even paying for transit system? It's not like I was the one who built transit system, it was funded by the income taxes of the people who work there, and then built by the government.
This applies to all infrastructure spending of course.
As I said in another comment, this is why there are property taxes. I don't think it's any different than income taxes. You own real estate, the society around you is a multiplier, so you owe a percentage. You make a salary, the society around you is a multiplier, so you owe a percentage.
In practice the percentage could be off, but the basic way the system works makes sense to me and I don't get the people who are sure that it's terribly wrong (whether because they are against taxes or against owning property).
If property taxes are normal (not capped like in California), some of the effect is mitigated, but the property value increase is still greater than the tax increase. Real estate investing as an industry only exists because of the existence of property gaining value.
Most infrastructure spending requires income taxes and transfers from the federal government, so clearly there is wealth transfer happening to the landlords.
Well, maybe it just isn't true that real estate is a perpetual money machine. If it was, yes, that would be a problem because it would eat the world. But people always exaggerate the permanence and universality of any bubble.
You can dismiss it as anecdotal evidence, but I live very far away from SF, in a place built in the early 90s, within city limits, and it has not increased in value faster than inflation in all these years.
Sorry, I replied too fast to see your part about raising rates. Yes, that's roughly in line with I propose. We raise the tax on the land to exactly how much rent you land derive from the land. And then you don't tax the structures on top at all, since we want to incentivize people building on top. This is the Georgist policy of a land value tax.
I don't doubt there are places where rent-seeking from land is not occurring. But we still need to address the places where it is a problem. And this will remain a problem as long as people require land to live, as long as centralization to cities keeps occurring (which we want more off, given its benefits).
My point is not that being a landlord has no risk or guarantees absurd returns. Rather, I'm saying that the returns from land do not come at all from the value that the landlord provides, so we should make sure those returns go back to the community that created them.
The land is still a scarce resource. What do you propose, that the government own all land? Let the property owners just own the buildings?
We tried that before, it was called feudalism. It's where the King owned all the land and the peasants were allowed a small piece of land to work and enjoy the fruits of their labor.
People own the land, they just pay a "user fee" of sorts to the commons.
Actually, the current situation is already like feudalism. Under feudalism, people other than the king also held land (the nobility). These landed gentry also drew the benefits of free rent, from the poor labourers.
Those with land currently can hold it indefinitely, extract a profit from it, and then pass it onto their children. That sounds a lot like the landed gentry under feudalism to me. The property tax tempers it slightly (which is why prop 13 is so bad), but it's easy to eliminate it all, while still keeping private landownership and market mechanisms for allocation (I definitely don't trust the government to own and allocate all land efficiently).
If you make anywhere near an average IT salary in the USA there are a billion or so people in the world who would feel that you were absolutely stacking cash, and are a parasite.
In the case of the salaried employee, you're earning as a direct result of you doing productive work. You can argue that the pay is too high, the but the fact you have to put in work to earn it means it is at least not parasitic.
In the case of a landowner, they need to put in no such work. They didn't create the land. All of the rent comes from the fact that they have a monopoly on a scarce good that cannot be produced further, and one that everyone needs. See Adam Smith [0] and David Ricardo analysis on rent for more on this (the Ricardo's law of rent is a really neat concept).
Now the fact that land and buildings are rented together complicates this a little bit, but this definitively applies to the rent that comes from the land.
Simply claiming two actions are equivalent because they both lead to lots of money is not a useful mental model. How you earn your money matters.
[0] - "The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give." — Wealth of Nations, Book I, Chapter XI
Comparing land to capital misses some important differences, that economists have recognized.
Land is a scarce resource with a fixed supply. If I want to rent land in SF, I don't too many options. And the demand is increasing, since everyone needs land to exist, and the population (at least in cities) is increasing. This gives the landlords a monopoly (see the law of rent: https://en.wikipedia.org/wiki/Law_of_rent). In the case of loans, if I don't like your rate, I can simply go to a different lender.
Secondly, can you point out what we lose if the landlords doesn't exist?
If lending doesn't exist, there's businesses that would have started, but can not anymore, since they may not have enough capital to get off the ground.
If landlords don't exists, the land is still there, and we lost nothing, since land can't be created or destroyed.
> Let me introduce you to some landlords who went bankrupt in 2008.
My point is not that being a landlord has no risk. Rather, I'm saying that the returns from land do not come at all from the value that the landlord provides, which is not the case for lending, or other productive activities.
If landlords don't exists, the land is still there, and we lost nothing, since land can't be created or destroyed.
If landlords don't exist, people couldn't have a place to live unless they could purchase themselves. I think landlords are great - I can get a nice place to live and have none of the risk the landlord does. Property prices go down? I don't care. House burns down? I don't care. If I want to pick up and leave in a year? Great, here's notice. No real estate fees, paperwork, etc.
You're conflating land rents and building rents. The "landlord", in their position as the building owner clearly provides a valuable service: the upfront capital/labour to construct the building and the maintenance. I'm not saying this shouldn't exists; it definitely should. They should capture all the profits that come from the rent you pay because of the building. My point is simply that they shouldn't be able to profit from the landownership itself.
> people couldn't have a place to live unless they could purchase themselves.
> Property prices go down? I don't care.
The only reason land has a purchase cost in the first place is because you can extract a rent from it indefinitely. If land did not allow you to extract a rent from it in perpetuity [0], the purchase price would go to zero.
[0] - we can achieve this through a land value tax equal to the rent you could extract from the land.
Some people buy land to live on indefinitely, with no plans to rent or resell. How would you decide who gets to live in North Beach and who has to commute from San Bruno, if not price?
The idea is that we charge a land value tax (https://en.wikipedia.org/wiki/Land_value_tax) equal to market rent value of the land. So you're free to own the land if you pay the tax.
This tax would obviously be higher in desirable areas, so there would still be a price mechanism to ensure that the land is allocated effectively. If I bought a parcel of land in North Beach, but then didn't use it productively, I probably wouldn't be able to pay the tax and I would have to get rid of it. Additionally, since the market value of land reflects its most productive use, it would incentivize using the land in the efficient use (ie. densely in a high value area, since that lets you split the tax over more people).
You don't seem to understand what the term rent means. It's the act of giving someone temporary access to something and charging based on the amount of time it has been used. That's a pretty useful service if you don't have enough money to outright own your house or apartment.
Do you really think I don't understand what rent means? I pay rent every month, I better go figure out what it is I'm actually paying...
I'm not proposing we do away with rent as a concept. In the current situation, when you pay rent, you're really paying two rents combined.
The first rent corresponds to renting the land the building is on. This rent is why an equivalent apartment has a higher rent in SF than it does in Detroit or Houston.
The second rent corresponds to renting the building/unit itself. This rent is why a 2 bedroom apartment has a higher rent than a 1 bedroom apartment.
Now, the first rent is entirely uncorrelated with the value the landlord provides. It is essentially paid due to the landlord owning a monopoly on scarce good, which is only valuable due the community and government putting the effort to make the area valuable. Someone who owns land in downtown NYC didn't make it valuable, it became valuable because the government built the infrastructure to make the city livable, and the other residents made the city into a place where people want to live. Therefore, it's only fair that this rent goes to the commons rather than the landowner, where it can then be used to fund the government, rather than through other taxes.
What I propose is a land value tax equal to this land rent, so it is returned to the commons. The owner is still free to keep the rent from the building. This ideology is https://en.wikipedia.org/wiki/Georgism, and is pretty well supported from both an economic and fairness perspective.
Awfully convenient reasoning for engineers. Making half a million dollars a year optimizing the invasion of people’s privacy, for a company that dodges taxes, after four years of government subsidized education is real work and if you get rich in a liquidity event you earned it; assembling $1 million twenty years ago when people were fleeing SF, spending two decades maintaining marketing renting servicing paying taxes on and chasing rents on the property in the meantime, keeping up with and complying with city and state regulations — that’s always just parasitism and if the city you chose turns into a boomtown it’s good luck you have not earned.
Not a fan of landlords as a rule but you are slicing your analyses of privilege way too thin.
> spending two decades maintaining marketing renting servicing paying taxes on and chasing rents on the property in the meantime, keeping up with and complying with city and state regulation
Literally none of that matters in deciding who profits from land and who doesn't, and that's my entire point. The landowners in SF who didn't put this work in were still able to capture the rising value, and those in Detroit who did put all these effort in, didn't get anything to show for it.
Land doesn't rise in value because the landowner put in effort to raise the land value. The community and the government increased the value through building a city people wanted to move to (through building public transit, art scenes etc.). Why should the landowner capture that wealth?
Also, your tax point is moot, because California caps property taxes at essentially the level you bought the property at, so all the gains are free.
> the city you chose turns into a boomtown it’s good luck you have not earned
Yes, this is exactly my point.
Let me give you concrete scenario of where the current system breaks down. Let's say I own an apartment building on the edge of town, and the city decides to build a new transit line to the community. Rents in my apartment building will go up; let's say by $100. Renters are willing to pay an extra $100 because they value living near a transit line more than the being far from one. But why should that extra $100 go to my pockets, while the government has trouble even paying for transit system? It's not like I was the one who built transit system, it was funded by the income taxes of the people who work there, and then built by the government.
I guess my question to you is, why are we so attached to this system? As I pointed out, almost all economists agree that land rents "not at all proportioned to what the landlord may have laid out upon the improvement of the land". So why do we want to push forward a system where the reward is completely uncorrelated by the value you provide? Isn't that antithetical to capitalism?
Edit: To address your points about engineers, I'm not claiming that engineers do "real work" or "if you get rich in a liquidity event you earned it". I'm simply stating the reality of the fact that engineers actually produce something (code), while landlords don't (what could they even produce, more land???). If my landlord didn't buy the land I live 20 years ago, it would still be there, no worse for wear.
>Land doesn't rise in value because the landowner put in effort to raise the land value
Let's have some perspective - that's why there are property taxes. Now, maybe the property taxes are too low, but the fundamental issue is recognized by society and the mechanism exists to balance things.
I don't get the impression that the issue is completely recognized by society though. We see articles all the time in the news about how the real estate market is going up. Clearly, most landowners currently have an expectation that they should get some return on their land ownership.
That's why so many advocate for restrictions on building in their communities.
People expect the stock market to always go up too. I don't think that is possible.
I'm not saying it can't be a local, situational problem, I'm saying it's not a universal fundamental wrongness in the way society is structured.
It's like, a certain number of heart attacks happen each year. We may see a trend in heart disease over time. There could be some environmental reason for it. But extrapolating the current trend indefinitely and drawing the conclusion that there is something fundamentally wrong about the human heart's workings that requires a new mechanism is probably excessive.
If they owned it before it started increasing in value at the beginning of time, but how can you make money by buying something that is increasing in value in a perfectly predictable manner? Isn't the seller going to charge you enough to balance out the potential profits, on average?
>>They didn't create the land. All of the rent comes from the fact that they have a monopoly on a scarce good that cannot be produced further, and one that everyone needs.
If we go by your logic, we must also ban reading books, exercise, good relationships etc.
Pretty much any investment including things like education work very similar to land investments. There are only fixed college seats, is it fair to everyone?
Firstly start with understanding you can't give any thing to any one they don't want to earn. At the same time you can't stop people from going after these things and earning them.
How could the building you describe be assessed at only 1.4 million? In my city, a single condo that rents for $4k/mo would be assessed higher than that.
I'm so glad you asked. In 1978 Californians passes Proposition 13, written for and sponsored by the Los Angeles Apartment Owners' Association, which says that property assessments may not increase by more than 2% per year or CPI, whichever is less. Property tax rates may not exceed 1% of assessed value. So the max theoretical assessment of a building bought for 1.05 million twenty years ago is 1.56 million.
I don't understand how you can call providing dense housing being a parasite. The parasites are people with frozen property taxes who refuse to sell their land so that it can be used to build denser housing. After all the problem with the housing market is that there are not enough units for everyone so only the highest bidders can successfully rent an apartment.
Rule of thumb estimate for operating expenses for multi family is 50% (doesn’t include mortgage), and that doesn’t differ much just because rents are high. That means almost everything on your expenses column is more expensive as well.
Don’t get me wrong, real estate is a great investment, just not quite that great.
You tax all the rent they earn due to holding the land [0], since all the reasons rent is high in SF are not due to contributions by the landowner (ie. the community put in effort to make SF desirable, yet the landowner gets all that value).
Singapore owns all the land, and then they lease it out at 99-year terms. So an individual can own property for their whole lifetime (and then a little bit more, perhaps to pass onto their children), but the can't pass it forever.
The problem they recognized was if they had indefinite landownership, and they could pass it onto their descendants, given that they're a small island nation, within a few years, all the land would be owned.
After that, future generations would have no more land to buy, and those who are lucky enough to be born to landed family would be able to charge rent those who didn't have the privilege to be born to a family with property.
Some would, yes. But the land value would be high enough that most people trying to enter the market wouldn't be able to afford the costs of buying property. Under this approach, the government can sell property at a subsidized rate to new buyers once it reverts back to them.
I think the government also wants to allow property owners to be able to profit somewhat from the growth of the value of their property, since 80% of the population owns property in Singapore.
Now, I agree that these 2 goals are in conflict, and tax policy would be the better fix. But I guess their approach does at least fix the problem somewhat.
@neilparikh's comment was not what I was referring to.
Singapore has government substantiated condos that are quite good. You have to be a citizen to get the benefits, but if you can benefit from it, someone working min wage can buy a decent place to live.
I'm pretty sure the building is worth much more than $2m. With 18 apartments, it has to be at least $5m.
Heck, the crappy apartment complex I lived in in the peninsula that was built in the 1960s was worth close to $9m and it only had like 8 small apartments.
I'm pretty sure the building is worth much more than $2m.
Assuming all the units are under rent control, it might not be worth much more than $2M.
A good example is my place in SF. 3 unit building in a very desirable neighborhood. If the place was empty? It would likely fetch $5M based on square footage.
With 3 tenants who have been there 10 years and have rent control? My realtor tells me they base it on cap rate and with only $7000 in rent being collected, the landlord would be lucky to $1.5M for it.
Rent control saved me $300,000 over 7 years. If I wanted to stay in SF for the rest of my life, you think I’d move out for $500,000? The lifetime value of rent control is more than $500,000.
Anecdotal experience: I rented an apartment where the bathroom was literally rotting away on itself. The landlord would do cosmetic fixes only as the walls sagged and warped.
The incentive wasn't there for her to make a large capital expenditure on maintenance because the land appreciation was what she was banking on and rental demand was such that she could always rent the apartment.
While this example is extreme I've seen similar deferred maintenance behaviors repeated over and over again by the most successful (read: largest portfolio holding) landlords.
The costs you mentioned are associated with the building itself. However, in a city like SF, much of the rent is driven by land value, which has no such holding costs [0]. So they still have a lot of "free" income coming in, as owners of a government granted monopoly in perpetuity (sounds a lot like feudalism...).
[0] - Except property taxes, but CA caps their increase, so if you've owned the property for a while now, the tax isn't in line with the rent you can charge.
How do people not know this? Commercial landlords seriously have no risk. Taxes and insurance are passed straight through to tenants and the bank is carrying the capital risk.
Their risk is when they can't find a tenant or a tenant quits mid-lease. Then they owe the bank from their pocket. Commercial real estate is much more susceptible to the economy. Bad economy or good, people need a place to live. But in a bad economy, businesses just close up, declare bankruptcy, and leave.
When "they" owe the bank in a bad economy, "they" is a disposable corporate entity, not a normal person who might have to suffer consequences for their reckless behavior with debt. The actual people involved spent the last decade stuffing their pockets with rents and setting up asset protection strategies.
That's nothing. A single individual owns Raj Properties and Everest Properties which together own more than 1000 apartments in the much smaller city of Berkeley.
Technically it's different individuals who own each, because the owner of Raj properties had to turn them over to his family when he went to jail for sex trafficking and slavery.
But when he got out only eight years later, his family "loaned" him a bunch of money to start up Everest properties.
But yes, in reality, he is probably still in control of both.
The whole story is just amazing. I find it sad that our system of justice doesn't have a way to force the disgorgement of gains made from, seriously, enslaving teenage migrants. It's like sure we got our seed capital from sex slavery but the rest of these gains are totally above board. Makes no sense.
Part of the fascination for me is that the Reddy headquarters is this absurdly tacky mansion[1] in Kings County, in the middle of nowhere, surrounded (at arm's length) by abject poverty. Supposedly a branch of the family is the most successful vascular surgeon in Hanford (this makes ~zero economic sense) but the giveaway is that according to public records all of the Raj tax bills are mailed here. So it's really the seat of their weird real estate empire.
Honest question, wouldn’t the 80/20 rule in these cases still imply large majority owners in most cases? Wealth concentration figures I have seen (0.1% own 20% of the nations wealth for example) seem to support this view?
You realize "landlords" are not all individuals? I've lived in a run-down multistory building owned by a stereotypical slumlord, but also in apartment complexes where the people I dealt with were employees of a company that managed it, and other similar places.
I hope many of the cities that have seen rapid growth in the last decade get a similar reprieve from the strain of growth. As an example, Seattle has changed in ways that have reduced quality of life - worsening travel times, neighborhoods that look/feel completely different, visible blight everywhere, over-subscribed/crowded city amenities, etc. The culture of the city has also been overwhelmed by transplants, and with it, the old PNW spirit has effectively been smothered. The politics of the city is also completely different from what it was 15 years ago. I'd welcome an exodus here, even if it means reduced a reversal of economic growth/houses prices/etc.
At the same time, I think these changes will be healthy for those who do move out. Some are moving back in with families, and the cultural continuity of multi-generational homes is an important part of human society historically. I also hope it encourages people to discover cheaper towns in the country that have been ignored and left out of the last couple decades' economic gains. Many of those places have a lot to offer, and I bet those who give them a try will be surprised how much they like it. The economies of those areas will also benefit from the boost.
We recently renegotiated our rent for a 2br apartment in SF about 7% down after having begun our lease in March. Used a 2 prong tactic of mentioning some frustrations that we've had thus far as well as offering to extend our lease. We didn't have much leverage, but offering something in exchange for the rent reduction was probably what convinced them.
I re-negotiated my 2B2B rent down from $4700 to $4200, and honestly could've gone lower (landlord accepted our first offer).
The most important thing for me in this process was doing the research on comparable properties in the city and spreadsheeting it out (sqft, rent, location, and amenities). I presented that spreadsheet, showing there were obviously places I could move to that were much cheaper with similar to better benefits.
Ultimately all negotiation is about showing that you're willing to walk away for a better alternative, and it's pretty clear there were good alternatives given the current SF housing market.
Trying to do this now. They aren't budging on the rent, but are pitching a reduction to removal of parking and pet fees. I don't know if this is because they fall out of rent control regulations. Was aiming for a 10% total reduction, but they've effectively hit a 4% reduction in my case.
Ugh, they interviewed someone from J.Warvo. That company is scummy. They've been renting out literal shithole apartments/studios for above average prices. But barely respond to tenant needs. I hope they collapse
At my office (working in tech in downtown SF) about 30-40% of employees have moved out of the city. Many plan for it to be temporary (why pay SF rent for the months we are all remote). Some are clearly hoping it will be permanent, but I think the chances of that are slim. I think we are on track to offer a lot more remote options than we did in the past - but I think that in 2021 a decision to stay remote will mean a huge pay cut.
I own rental property in suburbs outside Philadelphia, my tenant's lease was up end of May and demand was off the charts compared to previous years. Only anecdotal, but had multiple people mention they just wanted to get out of the inner-city, but still be close.
Suburbs (around here at least) are a lot more millennial-friendly than people give them credit for. I think as millennials age and get over the "must be in walking distance of a social scene" mindset, this trend will accelerate. I also think the inner-city riots/looting/etc will stimulate this across the US.
Well of course millennials can't afford the inner city, being the poorest generation in modern history. Suburbs are usually cheaper (if you forget to net out transportation costs) so that's where millennials will go.
I agree with you, but I don't think it will be entirely about personal finances. Inner city living is a lifestyle that has high-highs (easy work commute if you work in the city, more vibrant social life, nearby public transit) and low-lows (higher crime/violence, unhealthy air quality, terrible public schools). As the highs start to matter less (social life not as active, remote working more acceptable, etc), and the lows start to matter more (they have kids, etc), I think the natural progression is that they move out of the city.
The comments here are all about the rental market, but the opposite seems to be happening in the housing market, at least where I'm at in Providence, RI. We're shopping for houses in the city and the price graphs have gone exponential. Seriously, look at the price graph on Zillow for these two places near me:
The first one of those is in a very trendy gentrifying neighborhood. The second is in an adjacent working-class neighborhood. In both cases the asking price has shot way up from a year ago and has totally disconnected from the prevailing trends of just a couple months ago.
Supply is very low. Rates are very low. And the result is that the market is very hot. Every house we look at has multiple offers the next day, usually above asking.
1. If companies will extend their remote-friendly policies beyond the pandemic.
2. If the rising swell of unemployed Americans will pursue a career in tech, and enough of them are willing to relocate to San Francisco (as the trope goes).
I don't have a good prediction for the first point (some companies will likely dig their heels in on remote work because "we tried it" even though "remote work" is way different than "working during a pandemic"), but we'll at least see some of the second.
There's a fun potential unanticipated consequence if companies continue allowing remote work for "professional" sorta roles.
Imagine a couple of lawyers working for a firm in Houston making $$$$ who can now keep that same job but live in San Diego and not deal with the same weather... especially, say, if their kids just moved away anyway.
You could conceivably have desirable locations being a new sort of "bedroom community" that only the super-highly-paid can afford, regardless of where their employer is based.
Perhaps for other roles, but much less so for lawyers. For one thing, legal practice is local and involves networking that happens locally.
Additionally, if a lawyer moves to a new state, he might have to take the bar exam again in order to be licensed in that jurisdiction. This applies even if the type of law that the lawyer practices hasn’t changed.
This seems a bit crazy, but I actually experienced this as a California lawyer (practicing federal corporate tax) who started spending time in another state where my girlfriend lived. Fortunately she got a job in CA before I had to take the bar in her state.
2. People who are made unemployed by the pandemic who transition into a tech career become recruiter fodder, and will eventually join the candidate pool. That's what I'm talking about, not the sum of all unemployed people.
Maybe, but I think there is already a glut of bootcamp-style developers who represent the majority of career-changing opportunities doing front-end development or mobile development after a 3-12 month training. I don't there there are as many entry-level tech opportunities in the bay area as people think their is. The roles that are really hungry seem to always be senior or cross-discipline devops that requires many years across many types of domains.
> 2. People who are made unemployed by the pandemic who transition into a tech career become recruiter fodder, and will eventually join the candidate pool. That's what I'm talking about, not the sum of all unemployed people.
I really don't think the a significant portion of burger flippers have suddenly decided that a CS degree or pay for an expensive technical bootcamp is what they want to do. As far as I can see, the people losing their jobs are not in the educated class. A lot of them didn't go to college, did go to poorly rated schools, and are underachievers.
Yep, I think the vast majority will. Many companies are allowing remote work for the rest of 2020 with no change in compensation. Once that ends, I'd expect people to come back. I think probably another driver of the decreased rents are the recent college graduates that had no reason to move to SF once the virus hit and everything closed. I'd expect them to move to the city once things get back to normal
On the other hand, there might be a fair number of people who move to comparable but much cheaper locations (and given the insanity of SF, that includes most other major US cities) while still trying to work remote indefinitely.
Yup, I suspect many of those live in SF want to be in a city rather than suburbs, but they're not tied to SF specifically. They just choose SF because that's where the jobs are, and would just as happy in a different urban area.
"over", hah. All signs point to COVID-19 becoming endemic within our (US) population, like the flu already is. Even if we develop a vaccine, chances are it would not grant long-lasting immunity, and chances are even better that some significant fraction of the population would refuse to get it for partisan reasons.
What made SF interesting was pushed out long ago. What's left is an insular monoculture not unlike Cavendish bananas. Unless you've got deep roots there, seriously consider the alternative.
Everywhere else has less monoculture than SF. So just anywhere else in the US. Don’t get me wrong, SF is cool and an easy place to live with the weather and the parks and density level. But the people are as bland and similar as you can get.
I am not sure we have concrete data, but I'm really concerned about what this will do where I live: Bend, Oregon, which is more of a destination for the types of people getting out of the bay area.
A gradual influx of people is good, as over time it leads to more of a local talent pool, people starting companies, and that sort of thing.
But a rapid influx might be the last straw for a lot of people who are not working remotely in highly paid jobs. Nurses, firefighters, teachers, police, and so on.
In the past, I think our prices moved more or less in sync with other west coast markets, broadly, but if there's a real exodus from cities, that might not hold true this cycle.
Same. I’ve been eyeing Laurel Heights and Marina and I haven’t seen those places dip. However Berkeley has plummeted. It’s the only place in east bay that i would consider because there are a lot of ethnic restaurants. Ethnic diverse restaurants are key for me.
Berkeley is a fantastic place to live! Tons of great food (all open for takeout right now), the music scene was really fun when it was open, great fresh produce available at local markets, and most of what we need is walkable from our place, including BART. Also the weather is awesome compared to the city. It's sunny most days now, and the only annoyance is that it's pretty windy in the afternoons.
We been here for 10 months now, and signed for another year at our currently place with no rent increase. I didn't negotiate (our landlord offered us the same rent), but we have the best working relationship with him that I've ever had with a landlord and that's worth it to me. Also he's open to us modifying the property, which is worth something as well — he paid for ceiling fans to be installed and let me build a big garden in the backyard, for example. The place isn't perfect, but for now and especially during SIP, it's great. I expect if and when we move, we will continue to live in Berkeley.
I think some of this will be in the form of 1 or 2 months free, but it should also be noted that Laurel Heights and Marina are somewhat suburban, so to the extent people are moving away from the densest inner city locations, more suburban neighborhoods might dip less in rent.
Yeah, that's what I'm seeing, however, I've seen a dip in housing pricing drop near east bay BART stations, especially West Oakland and Temescal/McArthur Area
I think the better data point to track would be craigslist and local private facebook groups that represent what someone is actually going to charge then whatever the Zillow marketing spin is putting on it.
Yup. I've seen the same. Rents are soft, but they certainly aren't dropping.
That said, there are distinctive rental markets in SF. The massive 100 unit buildings without rent control are an entirely separate market from say a duplex in the Sunset.
Anecdotal evidence, I was able to negotiate $200 off my $3,300 monthly rent in Los Angeles for a 2 bed / 2 bath 1,000 sqft. I think I could have negotiated $300 off but just went with the $200 off for 7 months.
We haven't signed the new lease and are potentially rethinking of signing since cases are starting to spike again and surrounding areas are looking really attractive for similar accommodations at ~$2,500 monthly rent.
I'm moving out of my place at the end of July. Gonna do some short-term sublets for a few months, then move in with some friends coming up from South Bay. We've been checking Craigslist daily for weeks now and it's very exciting to see how prices have come down. We're at a point right now where we're holding out on getting a place since we expect prices to continue to drop.
I moved from a $3000 1BR in downtown to an $1100 private room (4br 2ba 3 roomates) in the outter Richmond in SF. There is no reason to live in downtown SF right now with everyone working from home.
Many facebook groups are advertising significant rental decreases particularly for roomate-situations. They're calling it a "COVID discount" but I suspect its going to stick around for awhile.
World's smallest violin plays for all the landlords and homeowners who may no longer benefit from the Bay Area's absurd restrictions on new housing
In all seriousness, while I welcome the new openness to remote work, what I'd love to see is a push towards something in the middle: distributed offices.
Rather than having to choose between moving to ridiculously expensive SF, or working from home in their current city, employees could go to their local coworking space.
They'd get the benefits of an environment more conducive to productivity, away from the distractions of home, and the mental health benefits of social interaction. I don't think that making a huge shift to working from home is good for the already prevalent issue of loneliness.
Plus, having coworking spaces spread out within the city itself means that even if your company is headquartered in your city, you don't have to make the long commute to HQ if there's a closer coworking space.
It was early into social distancing that big techcos started announcing/enforcing their policies on remote worker salaries... I though: that's fast. This must be reactive. Maybe lots of employees have already moved, or they expect them to.
Mainstream remote work has felt 5 years away for 20 years. We kind of stopped pondering the side effects. Circa 2000 there was a lot of interesting speculation though. Housing markets. Transport markets. If a 45 minute d2d commute represents 10% of a workday, remote working increases productivity by this much. Labour market flexibility and liquidity, for what that's worth. Reversing regional brain drains.
Hopefully this is because of remote work relocations, not just insolvency.
On a side note, this recessing is freaking me out.
I wonder what long term effects there will be with having more remote workers? There are many positive side effects such as more time now that people dont have to commute, cleaner air, happier individuals, fewer automobiles on the road.
But, at the same time, will there be more urban sprawl? More alcoholism since its easier to drink at home? More loneliness or feeling less connected to your coworkers?
It'll be interesting to see how things play out. Maybe there's only a small temporary change and things go back to the way they were once this is all forgotten.
Single family home rentals seem to be going the opposite direction. My lease just came up for renewal. Tried my damnedest to talk them out of a 5% rate increase based on covid and city wide rent declines, but they said that single family homes were facing a massive inventory shortage as people were rushing from apartments to houses. =/
In aggregate, possibly. It's highly location and feature specific. Does your condo have an exclusive-use backyard or deed patio area? That price is jumping by huge amounts right now in SF. Is it in a high-rise only served by elevators, or do you have a private entrance? Shelter-in-place friendly features are heavily in demand right now. The old selling points of Bay views and walk-to-work are getting crushed right now. Some condos are seeing big price drops, others are on the market a few days and selling way above a healthy list. It will be interesting to see how things unfold in aggregate.
San Francisco SFR is still a hot market, especially with a back yard.
I'm selling my condo with exclusive yard access once I can find a place to live in Contra Costa.
> average rent for a one-bedroom apartment in San Francisco fell 11.8% year over year in June, following a 9% year-over-year drop in May.
So, assuming rent was approximately constant in the year up to April, it first fell 9% now in May, and then another 3% in June? Wouldn't that be a better way of putting the numbers?
It's calculated year-over-year by matching months because there are significant seasonal effects, so you can't easily go from YOY to figure how it changed month-to-month.
This is obviously (I believe it is obvious) related to COVID. But is this because of the general economic malaise, or because people are moving out enabled by remote work.
Let's look at other places. Non-tech places which still have good jobs in, say, energy and medicine, in a place like, say, Houston:
Average prices in May are down 7% to San francisco's 9%. It would seem the impact is very similar in very different cities.
This doesn't help us per se because the ability to telecommute may be as valuable in Houston as it is in San Francisco.
However, if you believe the kinds of industries in Houston -- medicine and energy -- are less able to be made remote (and I don't have evidence for this), we might suspect that most of the collapse in pricing is driven by job layoffs.
I’m not seeing it in Silicon Valley. Also: in the accessible sierras (e.g. Calaveras county) rents and house prices are going up as ppl realize they can work from home up there.
Rent is falling across the country...Do you believe unemployment skyrocketing to somewhere between 20-40 million people across the Country preceding the rent price crash is coincidence? Do you have an alternative hypothesis why rent across the Country is dropping? If its not a drop in demand...that would suggest the entire Country increased its housing supply at the same time.
Perhaps a good percentage of millennials moved back in with parents? Perhaps because lots of people are buying instead of continuing to rent because interest rates are so low? Massive amounts of people dying seems like quite the claim indeed.
No, removing rental properties from the market to do short term rentals lowers the supply of rental properties, so AirBnB actually has the effect of raising rental prices. Nevertheless, my understanding is AirBnB and the short term rental market are not exactly doing well during the Pandemic, have you been AirBnBing during Covid?
AirBnB properties have been performing terribly during the pandemic and many of those properties are no longer viable as short-term rentals and are now flooding the traditional rental market at discounted prices or the owners are scrambling to sell them before they default on their loans.
I see, AirBnB properties are being converted into traditional rental units increasing supply.
If true, then this may suggest there is very good reason to have regulations on short terms rentals, like AirBnB, which have increased rent around the country to the detriment of affordable housing.
The AirBnB meltdown is how I just got 90% more space for 20% less rent in Amsterdam. The house I just rented didn't actually used to be an AirBnB itself, but it went on the market at the same time there was a huge amount of competition from properties that used to rent out on AirBnB.
My neighbor's home has been a full-time airbnb for four years, since the lockdowns started they moved back into it and have been living there since they couldn't rent it out. I had never even met them before covid.
I'm certain covid has decimated airbnb income for many, and it must be part of what's driving down rent prices as these units come back on the long-term rental market.
I think that’s the OP’s point, Airbnb pushed the rents up and now during the pandemic and sometime afterwards Airbnb is dead in the water so landlords are all seeking to rent longterm instead. Of course, that is one of the factors, other factors being remote work and unemployment.
I think a lot of airbnb is now technically sub-zero-income property. Glad to hear there is one less airbnb property out there, and congrats on the cheaper rent.
I'll put my other comment here as despite putting anything contentious, the mod here immediately locks my comments on housing related issues:
Correct. So rents fall yet we were told on hacker news over and over that zoning was the problem. That doesn't help, but airbnb was a huge, huge problem.
There are two sides to the housing equation. Supply and demand. Demand has been high for quite some time, so the only way to alleviate it was to increase supply (aka change the zoning).
But now demand is down. Lower demand will probably be temporary until things open up again. May people live in SF for the cultural aspects (bars, clubs, theaters, restaurants). Once those open people will want to live there again.
Just to be clear, currently demand falls is addressing both global warming and housing prices. But demand is a terrible way to fix things because it means a lot of human suffering at the same time. So yes, taking away everyones money is one way of solving expensive rents, but not the ideal way.
There's taking away people's money but there's also just giving people more flexibility in where they live. If everyone still wants to live in a particular location regardless of any work requirements, that's one thing. But if people are primarily there because they have to be that's another.
Totally agree, and it is a good thing if people who doesn't want to be there doesn't need to anymore. But in general demand slumps are hard to fix and last longer.
I think there are a lot of (especially) younger people who are looking at this through the lens of increased urbanization being inevitable. But the reality is that most US cities were still losing population into the nineties.
When I graduated from grad school in the late 80s, basically none of my cohort lived in Boston/Cambridge--including those whose jobs were in the city. (Pretty much all of the tech industry jobs were in the suburbs/exurbs "Route 128")
So, yeah, if there's a mass exodus, even if somewhat transitory, the restaurants and bars and shops will tend to be gone and it won't be easy to refresh. And the people who moved out will be somewhat older and won't be inclined to return and the younger generation won't really get the appeal.
No, demand is just lower because companies have everyone working remote for the time-being, and so for a lot of people it doesn't make sense to live in the city and pay SF rent while just sitting at home.
Instead, people are just moving to lower cost-of-living cities and working from there, so there's less demand for apartments and landlords have to lower prices to compensate.
> According to Zumper, the median rental price for a one-bedroom apartment in San Francisco fell 11.8% year over year, from $3,720 to $3,280, beating May’s 9% drop. The survey also reports a 1% uptick in national rents, with the average median apartment in the U.S. renting for $1,229 in June.
With even the most hardcore "you must work IN the office" companies switching to remote for at least another 6 months, and many probably staying that way, I don't see how more people aren't flocking out of SF. 3x the rent and a downtown slowly becoming https://en.wikipedia.org/wiki/Hamsterdam there doesn't seem much keeping people there. The old argument of, "but that's where the jobs are" really isn't the case anymore.
I live in Denver and just resigned my lease without much in the way of increased negotiation power. I run into two main issues here:
1). Extreme information asymmetry. While many of the properties are owned by different investors, many of those same properties are managed by a significantly smaller subset. Those property managers have a cartel like effect. For instance, they can strategically hold back supply to keep a rent floor and 'establish' extremely draconian lease terms under the guise of 'market forces.'
2). Draconian lease terms. This is a subset of the 1st point, but it's extremely difficult to price the market when you're required to give (move-out) notice well in advance of the actual lease date. Because the market here is so fast, you're basically jumping in blind-folded at what might be available when you go to look for a new lease. Great for landlords you can fill a spot in a moments notice, but horrible for a tenet who's trying to understand the cost of such a decision.