From National Low Income Housing Coalition: Minimum wage workers cannot afford rent in any U.S. state

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Jaybird

Jaybird is Birdmojo on Xbox Live and Jaybirdmojo on Playstation's network. He's been playing consoles since the Atari 2600 and it was Zork that taught him how to touch-type. If you've got a song for Wednesday, a commercial for Saturday, a recommendation for Tuesday, an essay for Monday, or, heck, just a handful a questions, fire off an email to AskJaybird-at-gmail.com

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230 Responses

  1. Avatar Chip Daniels says:

    What makes this such a dire problem is there are no simple or painless answers.
    It isn’t a pinch point where it’s a result of THIS law or in THAT location; It is pervasive and across all regions and political environments.

    The magic of global markets doesn’t affect all products, only some.

    While things that can be imported like tee shirts and cell phones have seen astonishing price reductions, things that can’t like rent, healthcare and education have seen price escalation in comparison with wages.Report

    • Avatar Jaybird in reply to Chip Daniels says:

      Change zoning requirements.

      Allow more housing to be built.Report

      • Avatar Chip Daniels in reply to Jaybird says:

        Then what happens?Report

        • Avatar Jaybird in reply to Chip Daniels says:

          If Japan is any indication, housing becomes more affordable.

          From the article:

          Instead, it’s because the supply of housing in Japanese cities is responsive to local demand. While the UK saw about 194,000 houses start construction last year, Japan saw 942,000 housing starts last year.

          I imagine that the argument against more housing (rather than raising the minimum wage) goes something like this:

          “But the UK saw almost 200,000 new starts last year and it didn’t do anything!”

          The counter-argument goes something like “It should have been closer to a million, the way Japan did it.”

          I mean, it’s not like raising the minimum wage will result in fewer people jockeying for housing. The thing that will result in fewer people jockeying for housing is either fewer people or more housing.

          The Coronavirus can only do so much.Report

          • Avatar InMD in reply to Jaybird says:

            My understanding is that it’s not only building that has to happen but also the right kind of building. I’ve been told the cost differential between building that which can be rented as affordable apartments and that which can be sold as luxury condos is not high but the profit margin between the two can be.

            Not that we don’t need more supply. One of our greatest advantages as a species is our ability to live in pretty high density. The occasional plague notwithstanding of course.Report

            • Avatar Jaybird in reply to InMD says:

              I think that the difference between 1fold and 5fold is great enough that if we had 5fold new luxury apartments built (granite countertops! fancy showerheads!) in any one of these cities, it would meaningfully address the problem.

              The problem is that we’d need to 5fold in more or less 95% of the counties out there.Report

            • Avatar Brandon Berg in reply to InMD says:

              I’ve been told the cost differential between building that which can be rented as affordable apartments and that which can be sold as luxury condos is not high but the profit margin between the two can be.

              I think this probably confuses cause and effect. When supply is constrained, any new apartment that’s built is going to be expensive, so you might as well not skimp on the amenities. There’s not much point in building a bare-bones apartment when building a really nice place is going to add only 10% to the rental price.

              Allow enough building to saturate the top of the market, and prices will fall enough that it makes sense to start building cheaper apartments and renting them for less.Report

          • Avatar Chip Daniels in reply to Jaybird says:

            Those buildings in Japan weren’t just built by whim or fiat.
            They were built because the overall investment made sense.
            That is, the total investment yielded a return which was better than the other options like commodities or moneymarkets. The money people could pay in rent (wages) was high enough to justify the investment.

            The problem here is that you are assuming a wildly exaggerated effect of restriction; That is, “were it not for zoning” builders would build astronomically more units and rents would fall by a great deal.

            The cost of rent still needs to cover all the costs of construction and land, neither of which is being reduced in this scenario. The ROI on residential capital still needs to be greater than comparable investments.

            Lets stipulate that loosening restrictions as California just did with SB-35 will generate more construction; But the effect on rents will be in a few percentage points, not wholesale reductions.Report

            • Avatar Jaybird in reply to Chip Daniels says:

              I am more than happy to stipulate that there are several things that need to happen to reduce the cost of housing.

              One of them, however, is “address restrictive zoning”. If you do not address restrictive zoning, you’re going to not get the stuff built. Even if you raise the minimum wage. Even if you enact rent control. Even if you engage in social shaming against landlords.

              There is a shortage of housing.

              This can be addressed by building more housing.

              No, more than that.

              No, more than that.

              No, more than that.Report

            • Avatar Dark Matter in reply to Chip Daniels says:

              Lets stipulate that loosening restrictions as California just did with SB-35 will generate more construction; But the effect on rents will be in a few percentage points, not wholesale reductions.

              The impact of SB 35 on housing prices is likely to be minimal due to the standards required to meet streamlining approval.[5] Although SB 35 will increase housing by a few thousand units, the international consultancy McKinsey & Company claims California needs millions of units to meet housing demand and decrease prices.[11]

              Ten developments in the Bay Area – totaling approximately 4000 housing units—have invoked SB 35 to expedite the development process.[20] Developers in Los Angeles and San Diego have yet to utilize the law because of lower land costs.[5] (wiki)

              Looks like SB-35 was “pretending to do something” in terms of reducing regulations rather than “doing something”. It’s been in place for 3 years and has only lightened the regulator load for 10 projects totalling 4k units.

              https://en.wikipedia.org/wiki/California_Senate_Bill_35_(2017)Report

            • Avatar Saul Degraw in reply to Chip Daniels says:

              One thing that Japan does though is make building a more centralized process instead of the American way which allows for probably too much local control/NIMBYism.Report

              • Avatar LeeEsq in reply to Saul Degraw says:

                Japan does zoning at the national level. It’s like if Congress decided the zoning for the entire nation. This means that the sort of cranky NIMBY activism that occurs in the United States is a lot harder to do in Japan. Going to your local city council and bothering people is a lot harder than going to Tokyo to annoy the Diet.Report

              • Avatar Jaybird in reply to LeeEsq says:

                Go to Tokyo for a diet? Yeah, I’d stay away too!

                hahahahahahahahaReport

          • Avatar Oscar Gordon in reply to Jaybird says:

            One thing Covid seems to be doing quite effectively is breaking the old mindset that employees must be co-located in a central facility with minimal walls to enable collaboration and managerial oversight.

            People can get shit done at home quite effectively. They can collaborate effectively. They can be managed effectively (my manager is currently stuck in Pune, India because he traveled there for a family emergency and got stuck there because of Covid). I suspect a lot of office buildings will remain largely empty of employees for, well, ever.

            That’s an awful lot of real estate that could be converted to living space, if zoning changed…Report

            • Avatar Aaron David in reply to Oscar Gordon says:

              But, the new NEW question would be, are they in the right locations now?

              (But I do think this is a great idea)Report

            • Avatar Saul Degraw in reply to Oscar Gordon says:

              I am not fully sure this is true. From what I’ve read tech (and not even all tech) was a strong outlier here and still is. A lot of companies are itching to get companies back in the office as soon as possible. Lots of managers are still deeply suspicious about work productivity from home.Report

            • Avatar Jaybird in reply to Oscar Gordon says:

              If it can be done from home, you can hire 7 people in Jakarta to do it for less than it costs to pay someone to do it in (tech hub) or 4 people in Jakarta for the price of someone living in the sticks to do it.

              Or so I remember being told in 2005ish.Report

            • Avatar Oscar Gordon in reply to Oscar Gordon says:

              Oddly enough, my employer (massive German multinational) just sent out a notice saying work from home has been quite successful and we can expect it to continue in some form or another for the foreseeable future.

              This doesn’t mean we are giving up our office space, but I could very much see such spaces contract with people no longer having their own desks, and the space just being used to meet with customers, or for those occasions when you need a hard line in the office (because the VPN won’t cut it). My office is something like 10K sq ft. If most of us are working from home on any given day, I could see it cut in half, or less.

              Imagine a world where office buildings begin having more unused space than occupied, and suddenly the remaining tenants are told to vacate because the building is going co-op.Report

    • Avatar Stillwater in reply to Chip Daniels says:

      What makes this such a dire problem is there are no simple or painless answers.

      Another reason it’s a problem is that, similar to the problem of police reform, lots of people in the electorate don’t see that a problem exists, while within the community of folks who *do* recognize a problem there are super intense ideological disagreements about how to best resolve the issue. But experts in the field +/- universally agree that loosening zoning requirements would go a long way to helping, yet you’re intransigence on that issue is contributes to the problem you’re currently lamenting.Report

  2. Avatar Ozzzy! says:

    I wonder where all those people live.Report

    • Avatar Jaybird in reply to Ozzzy! says:

      With each other as roommates.

      Eating each others’ peanut butter.Report

    • Avatar Dark Matter in reply to Ozzzy! says:

      My household has two people earning min-wage (ish) and one who would like to. They’re probably in those stats somewhere.Report

    • Avatar Saul Degraw in reply to Ozzzy! says:

      I know a surprising number of people my age (mainly college graduates too) who are still living with roommates despite pushing middle age. Some of these people have good jobs but huge amounts of student loans. Some of them have huge student loans and jobs that probably do not need a college degree for a variety of reasons. Maybe some just hate roommates but someone I know lives with her sister and just got an college aged roommate as well. I would not want a college aged roommate at 40.

      There are all sorts of sociological and economic things going on here but I am surprised by the number of people I know in my age cohort who are not married and/or still living with roommates and/or do not have children at 40. These are all people from college. Maybe it is wrong but it seems to me the people I know in this group are not that distinguishable from their 20-something selves. The people I know with children seem more like adults.Report

  3. Avatar Ozzzy! says:

    I was just poking a little at the pull quote, as It’s not for households. It’s just as an individual. It also uses 30% of earnings as the definition for “can afford”, which sure fine whatever.

    None of that makes the actual point (rents vs wages are spreading apart) less real. It’s just a facile way to put a ready made headline in the report.Report

    • Avatar Jaybird in reply to Ozzzy! says:

      The part that I found interesting wasn’t the 30%.

      It was the “cannot afford a two-bedroom rental anywhere in the U.S. and cannot afford a one-bedroom rental in 95% of U.S. counties” part.Report

      • Avatar Ozzzy! in reply to Jaybird says:

        Yeah, assuming a cap for rent at 30% of income. “Afford” is right there in your quote.

        Am I misreading the study terms? They only mention it once that I saw.Report

        • Avatar Jaybird in reply to Ozzzy! says:

          I’m not sure that “well, if spent 40% or half, they could” really addresses the issue.

          Hey, if they take in a roommate, rent is cut in half. Two roommates? It’s now a third of what it was.

          But there’s nowhere in the country where it’s possible to do it without roommates or moving more than 30%.

          The “nowhere in the country” is the part that I find interesting, there.

          If you ask “Why 30%?”, well, here’s a government report. For what it’s worth, 30% was the rule that I heard growing up too. (It was loosey goosey. 33% was not worth complaining about but 40% was. But 30% was the guideline that I should look for, I was told.)Report

          • Avatar Ozzzy! in reply to Jaybird says:

            It’s definitely a rule of thumb, but it’s not the defining item that I would base all the analysis on.

            How about this restatement: when earning $8 an hour and working 10 hours a day for 25 days a month, rent of a decent 1 bedroom home is just over 50% of earnings a month.

            Is that the same thing as what the pull quote means?Report

            • Avatar Jaybird in reply to Ozzzy! says:

              How long has it been a rule of thumb, do you think?

              I mean, it seems odd that a rule of thumb popped up in such a way that there wasn’t anywhere in the country where you could get a two bedroom and only 5% of the country allowed you to get a one-bedroom using it.

              If I had to guess, I’d say that it used to be a rule of thumb that it was achievable for most of the people hearing it to follow.

              And, since then, housing starts have not kept up.Report

              • Avatar Ozzzy! in reply to Jaybird says:

                I was commenting on the pull quote and it’s underlying methodology, so I think you have muddled up your framing in this response.

                If you are saying more housing supply is a good thing, sure yes. if you want to use this quote to try to get people there cool cool.

                If you think this quote somehow makes Your argument on this more clear, I think the methodology to get to the single hourly earnings number is less than well determined, so the pull quote on its own reads almost non-sensically.Report

    • Avatar veronica d in reply to Ozzzy! says:

      I suspect a 30% cut of minimum wage doesn’t leave much left for enjoying life. On top of that you have food and healthcare — and then what?

      I suppose if minimum wage workers just uniformly rejected consumerism and started holding free dance parties in the street, that might be fine. However, the fact is they exist within a consumerist culture. It would seem rather monstrous to criticize them for wanting to participate in the culture they see around them.

      To do that they need money. They don’t have money, at least they have very little left after expenses.

      Our economy has certain structural flaws.Report

    • Avatar Brandon Berg in reply to Ozzzy! says:

      Also, they’re talking about an apartment at the 40th percentile of rent. Which means that 40% of apartments in the same category are cheaper. How much cheaper? I can’t say exactly, but my experience hunting for apartments in the past suggests a fairly wide spread in prices for one- or two-bedroom apartments.

      If they had looked at 10th- or 15th-percentile apartments, that would probably make for a better analysis, but then they might not have gotten the headline they wanted.Report

    • Avatar James K in reply to Ozzzy! says:

      So, I know something about this because I used to do a lot of housing affordability research.

      The 30% is a long-standing rule of thumb used for housing affordability, so the National Low Income Housing Coalition didn’t pull it out of thin air, Australia and New Zealand both use it too.

      As for where it comes from, well it doesn’t come from anywhere that I’m aware of. The trouble with poverty threshold sis that they are all arbitrary at a certain point. Because, as Adam Smith pointed out the only real test of poverty is social expectations, and those change over time and between places. What this means that all you can really do is pick a line and stick to it for comparability reasons.

      So, while there isn’t some unassailable logic behind 30%, it’s as good as any other threshold, and it is a conventional one – they didn’t pick it for rhetorical purposes.Report

  4. Avatar Pinky says:

    This study doesn’t take transfers (government aid) into account.Report

    • Avatar Philip H in reply to Pinky says:

      Other then Section 8 vouchers, there’s little government aid that directly impacts housing. YOu can’t get utility assistance except in extreme emergencies, and Section 8 is still heavily laden with both stigma and conditions. And I think once you get employed full time it scales out the same way other government support works.Report

      • Avatar Michael Cain in reply to Philip H says:

        I took Pinky’s remark to mean, for example, that if SNAP is covering half your food expenses, and Medicaid is picking up your medical insurance premiums, then the higher portion of income going to rent isn’t as bad. Not good, mind you, just not as bad.Report

        • Avatar Philip H in reply to Michael Cain says:

          Having once been on SNAP’s predecessor . . . Every little bit helps, but those government support mechanisms don’t offer that much relief. Making rent can still be a struggle, even with two full time incomes. Part of the issue is the funds are not really fungible – you can’t use SNAP benefits to cover rent or utilities if you are short hours at some point. Sure, you can still eat, but if you don’ t make up the other lost income you will be eating in your car.Report

        • Avatar Pinky in reply to Michael Cain says:

          That’s a pretty good summary of what I was thinking, at least as regards the impact of all programs on the low-income individual. But beyond the calculation, I’m bothered by the principle of analyzing a problem without taking into account the actual solutions in place.
          It’s like saying, cars need more seatbelts, because if your car doesn’t have one, you could die in an accident. But shouldn’t you calculate the effect of adding seatbelts based on the fact that most cars already have five?Report

  5. I think an equally bad problem is the larger push to make so many jobs barely better than minimum wage (not only entry level but after you’ve been there quite awhile) so even people who have been in the workplace for decades and at the same job for years are making only a dollar or two past minimumReport

    • Avatar Jaybird in reply to Kristin Devine says:

      Preferred Qualifications: Master’s Degree

      Salary: $15/hourReport

      • Avatar Brandon Berg in reply to Jaybird says:

        I’m sure such jobs exist (mostly “cool” jobs that a lot of people really want to do but don’t have much demand), but in reality the 10th-percentile wage for workers with advanced degrees is $725 per week ($18.25 per hour at 40 hours per week). The median is $1512 per week.

        That includes doctorate and professional degrees; if we drop down to bachelor’s only, the 10th percentile and median are $593 and $1187.

        These are based on degrees held by the workers, not on the job requirements. Many (most?) of the workers in the bottom 10% of earners for their educational attainment are working in jobs that don’t require the degrees they have.Report

      • Avatar Brandon Berg in reply to Jaybird says:

        Also, consider that if you see an ad for a job offering $15/hour and requiring a master’s degree, that’s because the job hasn’t been filled. It may run for months or years without ever being filled, and everyone looking for work will see it. There’s a great deal of survivor bias in want ads.

        The flip side of this is the incompetent candidate. A solid candidate will interview at 5-10 companies, get offers from a few, and stop interviewing. That guy whom no one wants to hire? He interviews at dozens of companies. Maybe hundreds. Every company in town gets the pleasure of interviewing him. This is how we get viral blog parts about how 90% of candidates for software development jobs can’t answer simple interview questions. Survivor bias.Report

  6. Avatar Chip Daniels says:

    I keep coming back to the notion of a surplus of labor, except in a wildly distorted fashion where some labor is almost worthless, while other sorts of labor are still valuable, and in different places.Report

    • Avatar Swami in reply to Chip Daniels says:

      Oddly, I might actually be agreeing with you. Insert broken clock metaphor (though no judgment on which of ours is stopped).

      My take on the issue is that some labor and skills are worthless, and other kinds of labor and skills are in very high demand, with the market signaling that people should attempt to transition from the former to the latter, and simultaneously creating the incentive to do so.Report

  7. Avatar Swami says:

    I haven’t read the article yet, but I predict that when I do it will recommend that

    1. People use this warning to invest in education, skills and behaviors required to earn more than minimum wage (which thankfully only a couple of percent of heads of households actually earn in any given year)

    2. People who do earn minimum wage live together in houses or live with their parents or apply for the billions in aid out their for housing, or perhaps move somewhere where their services are more in desire and housing is cheaper.

    3. People spend more than 30% for living expenses until they can work up to a more productive and rewarding position.

    4. Communities rethink their regulations and requirements which drive up the costs and restrict the availability of housing. Among these are mandatory union labor, environmental/zoning restrictions on new growth, and limits on building granny flats and garage conversions (both are widespread now in California)

    5. That states immediately reverse course on their blanket stay at home orders which are creating people who can’t even make minimum wage, because their job is now illegal, even if done relatively safely by people at low relative risk.

    How did I do? We’re all these suggested in the article?Report

    • Avatar ozzzy! in reply to Swami says:

      I’d award you a gentleperson’s C for simply typing out a well-spaced comment, so you’ve got that going for you.Report

    • Avatar DavidTC in reply to Swami says:

      1 People use this warning to invest in education, skills and behaviors required to earn more than minimum wage (which thankfully only a couple of percent of heads of households actually earn in any given year)

      You can’t solve a problem with society by telling people how to make sure the problem only hits other people and not themselves.

      The FY,IGM is so strong that there’s certain section of society that, when faced with a societal problem, will say ‘I am a kind person! So I will help you also get yours and take it for yourself!’…which is taken out the still finite amount of stuff.

      A society set up to damn X million people to poverty is the problem, not random individual people who could claw their way out poverty by climbing on top of someone and pushing them down into it….not doing so.

      2. People who do earn minimum wage live together in houses or live with their parents or apply for the billions in aid out their for housing, or perhaps move somewhere where their services are more in desire and housing is cheaper.

      Good idea. Honestly, that’s such a good idea I’m going to make sure young people know of that. Although really they should have gotten on board with that plan decades ago, and just never moved out of their parent’s house…actually, hold on, I have a time machine, BRB.

      Hey, it worked. In this new timeline I suddenly find myself in, that actually did relieve a lot of financial pressure. (Also: Less lynching of landlords with a ‘Property is theft’ sign hung around their necks. Has that even started happening yet?)

      But the situation still seems pretty bad. But add in the housing subsidies…wait a second!

      Doesn’t subsidizing something that people in generally can’t afford just raise the cost of it? Like has happened in higher education? I mean, this assumes that the subsidies are widespread enough to be effective, when they have made almost no dent in reality…but pretending we did greatly expand them and gave everyone access to them…wouldn’t landlords just raise rents to include the subsidizes?

      Also…does anyone have a number on the amount of _uncollected_ subsidies? Like…it actually seems like there’s a finite amount of cash allocated to this, and it’s all spent, so this actually now turned back into suggestion #1, in that people should try harder to get a finite amount of subsidized housing!

      As for moving somewhere…the thing about moving somewhere is…well, first, they’d need money to do that, second, that makes them have to leave roommates and parents so can’t afford it and don’t have any fallback anymore, and three…isn’t this article literally pointing out there’s nowhere to move to?

      3. People spend more than 30% for living expenses until they can work up to a more productive and rewarding position.

      Aka, how be better at finding employment than other people, so that it’s the other people working the min wage jobs that can’t afford their rent, and not you.

      4. Communities rethink their regulations and requirements which drive up the costs and restrict the availability of housing. Among these are mandatory union labor

      I really want an explanation of how mandatory labor unions drive up the cost of housing.

      Do you mean _in construction_? You do realize the cost of housing is almost completely unrelated unrelated to construction costs, right? That’s kinda easy to notice, considering the absurd variations in housing and rental prices over the last two decades as the market has repeatedly gone crazy, vs. the almost completely static cost of building them.

      environmental/zoning restrictions on new growth, and limits on building granny flats and garage conversions (both are widespread now in California)

      Now, we are, finally, at an identification of one of the important things.

      Although, environmental restrictions have very little to do with affordable housing, considering the places that need such housing are often already pretty developed.

      It is pretty much all bullshit zoning, aka, NIMBY-ism. (It is often, additionally, the sort of low-level racism of white middle-class people in the guise of ‘property values’.)

      But saying ‘Communities rethink their regulations and requirements’ is…not a real solution because…they won’t do that. Just…saying they should doesn’t make it happen.

      So, now that you’ve identified one of the real problems…do you have a solution?

      5. That states immediately reverse course on their blanket stay at home orders which are creating people who can’t even make minimum wage, because their job is now illegal, even if done relatively safely by people at low relative risk.

      This study is about people making minimum wage, not people out of work.Report

      • Avatar Swami in reply to DavidTC says:

        1. You do know that adjusted for PPP that Americans are the richest large diverse nation in the history of the human race, right? You are aware that the poorest quintile in the US have higher levels of consumption than the average person in Europe, right? You do know that people and families move up and down the income quintiles, and that most families go through all five sometimes in their lives? You do know that almost all jobs (substantially more than 90%) pay above minimum wage, and that anyone with a lawn mower and a pick up truck can go into business for themselves making five times the minimum wage by starting a lawn service (I will hire them!)?

        The point is that a minimum wage isn’t a life sentence for anyone with any human capital in the slightest. It is a starting point, and reasonable people with small incomes adjust their lives so that they don’t rent a middle class apartment or house until they establish themselves.

        The fact that you think people get out of poverty by climbing on top of others just shows you believe in the zero sum fallacy. The path out of a minimum wage job is to get or develop experience and productive skills. Consider that free advice.

        2. Are you sure you aren’t in your parent’s basement right now? Come on, be honest. We won’t judge.

        Seriously though, my argument wasn’t for more subsidies, it is that there are already subsidies (some of those I know with rentals have tenants who use them) and the article was leaving this out in their analysis. Moving costs are negligible for young single people looking for a job. The majority of people I know have done it, some dozens of times. Ever heard of U-Haul?

        And no, the article doesn’t prove there is nowhere to move to. Young single people move in with groups of friends, live with parents until they get a raise, rent a converted garage or move to the shitty part of town with all the BLM riots. They don’t look for 40th percentile rentals on a lowest 2% income. That is what psychologists call “being foolish.” (Look it up!)

        3. I already explained that lifetime income trends reveal very few people spend all their time in any quintile. Minimum wage is usually a life stage, often by those working while students, just starting out in the world, or retired and looking for interaction or side income.

        4. This is a blog comment section, used to discuss issues. If you agree with my solutions, then great. Please let your voice be heard supporting something reasonable for a change.

        5. My point is that blanket stay at home orders are doing a heck of a lot more harm and affect a heck of a lot more people than the minimum wage.Report

        • Avatar DavidTC in reply to Swami says:

          The fact that you think people get out of poverty by climbing on top of others just shows you believe in the zero sum fallacy. The path out of a minimum wage job is to get or develop experience and productive skills. Consider that free advice.

          People becoming educated DOES NOT CREATE JOBS. JOBS ARE DUE TO THE DEMANDS OF SOCIETY.

          The _economy_ is a not zero sum game. Any particular _market_ is. The copper market, for example, has a finite amount of copper currently in the market. No matter what that market does, it can’t make more or less copper, all it can do is control who _has_ the copper.

          I swear, half of my conversations with conservatives are me explaining the market to them, because anytime the market leads to a conclusion that they don’t like, they forget immediately how markets work, and think markets make things, instead of being a method to distribute things.

          The amount of jobs that exist are decided by consumer market for products. Which is external to the labor market. Now, labor market can change the cost of labor, but it can’t create or reduce demand for the _products_ of that labor, and hence can’t create or reduce demand for that labor itself.

          The amount of employees needed in any field is a direct result of the manpower that field needs to produce the good required by the consumer market.

          You do know that almost all jobs (substantially more than 90%) pay above minimum wage, and that anyone with a lawn mower and a pick up truck can go into business for themselves making five times the minimum wage by starting a lawn service (I will hire them!)?

          Really? You’ll hire _EVERYONE_ who does that?

          There’s no evidence that providing skilled labor (And lawn mowing is not actually skilled labor) is particularly underserved in society…and in fact, there shouldn’t be, because that would be a very weird market failure!

          There is a finite amount of work that needs doing in each field, and fields can’t magically absorb random new employees. Mostly because the amount of output needed has stayed level over the years while productivity has gone up.

          But, again, conservatives are forced to argue that the situation we’re in is somehow a magical result of something that isn’t the market. That people are _mysteriously_ choosing low paying jobs when they could just go make better ones, which are right there.

          That’s not how markets work.

          Seriously though, my argument wasn’t for more subsidies, it is that there are already subsidies (some of those I know with rentals have tenants who use them) and the article was leaving this out in their analysis.

          The report that articles was about is basically entirely about _the Federal government needs to step in with more subsidies. Like, literally the purpose of this is to say ‘We need subsides’.

          The CNBC article is giant simplification of the report, but does indeed say: NLIHC’s report calls for “significant investments” in affordable rental housing and emergency rental assistance “to keep low-income renters stably housed during and after the pandemic.” It’s there in the article.

          And no, the article doesn’t prove there is nowhere to move to. Young single people move in with groups of friends, live with parents until they get a raise, rent a converted garage or move to the shitty part of town with all the BLM riots. They don’t look for 40th percentile rentals on a lowest 2% income. That is what psychologists call “being foolish.” (Look it up!)

          One of your recommendations was ‘move somewhere where their services are more in desire and housing is cheaper’, which is what I was objecting to, as I said. Because there are no such places, as the article points out. Even the shitty part of town is not affordable enough.

          You can’t rewrite reality to me having an objection to moving in with parents. You’re the one who, again, decided to mock that, under the guise of not mocking it.

          Minimum wage is usually a life stage, often by those working while students, just starting out in the world, or retired and looking for interaction or side income.

          While the _article_ was about min wage hitting a low point relative to housing, the report itself talks a lot about low-wage workers. Who can, in theory, find _some_ housing they can afford, but not really.

          For example, I live in Georgia. The minimum hourly wage at 40 hours a week, 52 weeks a year, to afford two bedroom house is, according to this, $19.11.

          Average renter wage: $17.51Report

        • Avatar DavidTC in reply to Swami says:

          And addition because it’s not relevant in general and you could think of examples without these problems, but lawn mowing is a _really_ bad example. Your ‘people could do this instead min wage job’ not only requires an investment of a truck _and_ a mower, but only exists as a job in rural areas where people have lawns. On top of that, _that’s a seasonal job_. It’s harder to think of a dumber suggestion of what people could do instead of working min wage jobs.

          And…as someone actually lives in areas like that, and has actually employed a lawn service…there’s not actually any sort of shortage of people providing that, to the point that lawn services are always desperately looking for more customers, to the point of paying referrals. Hint: If companies are paying referrals, it’s because there’s already too many companies chasing too few customers.

          I think maybe you just don’t want to pay what they’re worth, as evidenced by the ‘five times’ statement. Lawn services are way more than five times minimum wage, because they spend time driving to drive to your house, and use their own equipment, which they have to haul to the site in a vehicle. All of which costs money and time, on their part, and can easily be the majority of the expenses.

          Honestly, you don’t pay any company min wage, the entire concept is stupid: ‘Those guys working for fast food places are dumb. They only make like $1.00 for the time they spend cooking me a burger. If they’d show up at my house with a stove and ingredients, and make me a burger, I’d pay them like five times that!’Report

      • Avatar Dark Matter in reply to DavidTC says:

        So, now that you’ve identified one of the real problems…do you have a solution?

        Outlaw local zoning. Insist that it be done at a state level.

        Or just copy Japan’s federal zoning “zones”.Report

        • Avatar DavidTC in reply to Dark Matter says:

          Well, yeah, we all know that’s the solution, but the most politically active people, on both sides of the political spectrum, will _burn the place down_ if you do anything that they think will impact property values.

          This is because, as mentioned elsewhere, we decided to build a system where housing is where people kept all their investments. Instead of a sane world where housing is just…an expensive thing you buy, and if you can later resell it, hey, that’s great! Like a car.

          So, like…yes, you are 100% correct, but…like, it’s something we can’t do. Well, we can’t do it barring some sort of market manipulation that even _I_ would balk at, like having the government promise to subsidy housing sales, like ‘if your house sells for less that this, we’ll make it up to you’.

          Also…why on earth do I keep hitting moderation? I just made two posts to Swami, and my first one hit moderation and the second, made immediately after, didn’t? Neither have links. Is this because I’m using Containers in Firefox, that’s the only change I can think of?Report

          • Avatar Jaybird in reply to DavidTC says:

            Jeez, I’ll let you out. (I have no idea why people keep getting caught.)

            Are you using words like “Nazi” or the F-word? I’ve noticed that those get caught…Report

            • Avatar DavidTC in reply to Jaybird says:

              No, I don’t think so. I was a little yelly in that comment with some caps, but…it seems to completely unrelated to content.

              This a brand new problem for me, and I think it’s because I’m running something called Temporary Containers for Firefox.

              This means when I come here (Or any site), I’ve got a web browser that, as far as that site knows, has never been there before, so I could easily be a spammer. It often seems to be my first comment here that gets stuck, like just happened…that was my first one after clicking on an email, I think. None of my others got trapped.

              I’m going to define this site as always being in a specific container, so I do get my cookies from last visit, and see that stops it.

              Dark Matter, however, seems to end up in moderation all the time, for some reason, and he’s way politer than I am.Report

              • Avatar Dark Matter in reply to DavidTC says:

                Dark Matter, however, seems to end up in moderation all the time, for some reason, and he’s way politer than I am.

                A lot of dogs don’t like me either. I’m big and I loom.Report

          • Avatar Dark Matter in reply to DavidTC says:

            We can’t lower the cost of housing without lowering the cost of housing.

            And you’re very close to pointing out awkward political realities. Local politics insists that prices be high enough so the bottom X% can’t live there AND that the price of housing must go up. They do both of those by reducing supply.

            The concept that everyone who wants a home should be able to afford one flies in the face of those political realities. After that we have a lot of dancing around to pretend that they don’t conflict.

            This is not an income problem. This is a supply problem. Prices rise to price out the bottom X%. Give them more money and that’s just going to increase the price of the housing.

            This is why people flinch away from actually increasing the supply. It would work. Working would mean prices go down, and those sorts of people would be living in neighborhoods they “shouldn’t”.Report

            • Avatar DavidTC in reply to Dark Matter says:

              This is not an income problem. This is a supply problem.

              Yes, except…it’s a low supply making an income problem much worse. Housing isn’t the only thing people can’t afford, wages do need to go up.

              Although some those other things might all be failures of the market also, like medical expenses and childcare costs.

              But the housing market failure, in particular, is specifically stupid, in that it is one we are deliberately doing to ourselves on purpose. We are deliberately messing things up to make prices high.

              As opposed to the other market failures, which happened as side effects of other things we were trying to do. Like, the childcare thing is complicated mass of things, and healthcare costs are…man, we can’t even trace out where we screwed up there.

              But housing? Pffft. And housing is a particularly stupid problem on top of that, as not only are we doing it on purpose, there is a one time event that happens to fix it, and then we don’t need to do anything about it. We can permanently solve the problem for people just by…building them a house. Tada. Solved forever, pretty much. Whereas we can’t build someone a healthier body or a robot nanny.

              But, it a valid point that if we could fix all the market failures that cause prices of certain necessities to be absurdly high, we wouldn’t need to worry anywhere near as much about income. Some of those do not have obvious solutions, but…housing? That’s easy. Increase supply. The market failure cause is obvious.Report

  8. Avatar Swami says:

    So this is an F on content, but extra credit for penmanship?Report

  9. Avatar Saul Degraw says:

    This is a wicked problem with a ton of things that need to be untangled and I am not sure we can untangle them all. You have a large number of Americans that were implicitly or explicitly promised that their housing prices would always go up and this is their primary asset for retirement. You can either have a primary assset in housing or affordable housing you can’t have both. I am not sure if the government can rip of the band-aid for this one and destroy the biggest piece of equity that many Americans have.

    I still think that despite COVID, the American economy is generally going to produce most of the well-paying jobs in 10-30 metro areas. These metro areas will be mainly located in the NE and the Coastal West with some exceptions.

    Another aspect is the that a lot of humans seem to want some kind of Smurf village or Shire as their ideal community. That is a town or neighborhood that is prosperous, self-sufficient with zero or minimal trade, and contained. This is an untrue fantasy for all areas. It is not true for a neighborhood in a major city, a suburb, or a small town not near any major city.

    Plus Baptist/Bootlegger is an issue. This is relates to the smurf village problem. A lot of people want things trapped in amber forever.Report

    • Avatar DavidTC in reply to Saul Degraw says:

      You can either have a primary assset in housing or affordable housing you can’t have both. I am not sure if the government can rip of the band-aid for this one and destroy the biggest piece of equity that many Americans have.

      Yup.

      And the band-aid has to come off at some point.Report

      • Avatar Chip Daniels in reply to DavidTC says:

        Part of why so many people are so deeply invested in their house as an asset is (IMO) the decades long collapse of defined benefit pensions.

        Instead of seeing housing as just something you live in, and retirement income as a safe annuity, both of these things have become defined as speculative gambles, to everyone’s detriment.Report

        • Avatar Philip H in reply to Chip Daniels says:

          That’s item 1, and item 2 is that the home owners who are left are desperate to hold on to the last remaining vestige if middle class signalling. Don’t forget that we lost a ton of homeowners in the Great Recession and with them a lot of family wealth, especially in communities of color.Report

          • Avatar Ozzzy! in reply to Philip H says:

            You guys know you are talking about what, 65% of people in the US that own a home (2018 per wikipedia, if thats cool), right?

            I mean honestly: Throw off your chains of homeownership and all the false prophets of middle-classium, but the first, well, do that first first

            It’s a pretty big pill guys. maybe workshop that some more?Report

            • Avatar J_A in reply to Ozzzy! says:

              Did you mean 65% of people in the USA own a home, or that 65% of people in the USA have a big mortgage and own a very small fraction of their houses?

              I myself am in year 11 of a 15 year mortgage (anything beyond 15 years is just giving banks money for nothing, but that’s another issue), and still owe about 40% of the principal(*).

              The typical house owning model in the USA is buying the largest, most mortgaged house you qualify for, and trade up, to a larger, most mortgaged house in five years or so. In this model, most homeowners own very little of their houses.

              The median net worth of US families is about $100,000, most of which, as pointed out above, being the equity in their houses. For families with a head of household in the 35-45 age range, it’s 60,000 dollars. https://www.cnbc.com/2019/05/14/the-net-worth-of-the-average-american-family.html

              Tl/dr. No, they don’t (we don’t) own their houses. Banks do

              (*) Though because of house prices rising, I would have about 85% of the value of the house if I sold it today.Report

              • Avatar Oscar Gordon in reply to J_A says:

                The typical house owning model in the USA is buying the largest, most mortgaged house you qualify for, and trade up, to a larger, most mortgaged house in five years or so. In this model, most homeowners own very little of their houses.

                Let’s be honest, that is the fault of people who apparently can’t do math. Sure, the bank will look at my credit an happily make me a million dollar mortgage. But I can do math and recognize that I don’t want a million dollar mortgage. I want something much smaller, which means I have to shop around.

                Now, if we want to talk about things which drastically inflate the cost of homes, that’s fair game. And people buying more house than they can afford in some kind of home equity rat race contributes to the rising cost. But I don’t feel bad for those people, just annoyed by them.Report

              • Avatar Aaron David in reply to Oscar Gordon says:

                Yeah, last time we applied for a mortgage they were prepared to offer us much more than we needed or really wanted, with a strong hint of “if that isn’t enough, we can talk about an increase…”

                And yes, there is a real problem with people who cannot do the math, but there are many other problems wrapped up in this whole mess. From idiocies like rent control, people not being accurate in assessing their own needs, pushy lenders, zero/low down payment schemes, the list goes on.Report

              • Avatar Jaybird in reply to Aaron David says:

                Yeah. I did math back when I bought this place back in… 2003? And I came to the conclusion that my budget allowed for $150,000, assuming PMI and this and that and the other thing.

                We went into the mortgage place and they say that, just off of our unverified statements of our incomes, we were PREAPPROVED for $300,000!!!! ISN’T THAT GREAT?!?!?!?!?Report

              • Avatar DavidTC in reply to Aaron David says:

                From idiocies like rent control, people not being accurate in assessing their own needs, pushy lenders, zero/low down payment schemes, the list goes on.

                We really need to get back to a system where banks get hurt when people default on mortgages, so it’s something they really try to avoid.

                I mean, that’s literally what caused the crash of 2008, and all we’ve actually done since then is…honestly, I don’t even know. What have we done to fix the problem?

                No one has ever explained to me why we need to have a market in mortgage ownership at all. We don’t need to package mortgages up and sell them. Banks that make mortgages should have to hold those mortgages in general. I’m not say they shouldn’t ever be sold, but they should at least be treated individually, not bundled into instruments and traded blind.

                And, yes, that includes the government also.

                Make the people who issue the mortgage have to deal with it failing, and also enforce laws about upkeep and security and other things on bank-owned houses, and suddenly banks will start getting dubious about home loans they know they’ll have to deal with.

                I mean, this wouldn’t fix everything, but it would fix things a little.Report

              • Avatar Oscar Gordon in reply to DavidTC says:

                You know the argument to that, right? It has a lot of the same notes that government backed student loans do.

                If banks get more careful about issuing mortgage loans because they hold all the risk, low credit/no credit/low income people will be unable to buy a home.

                I agree with you that banks should be much more careful regarding to who and how much they loan out money, but doing so will close out a large part of the population from buying a home, and reduce the competition for the homes on the market, and hey, that’s my retirement savings right there!Report

  10. Avatar LeeEsq says:

    The only solution to the housing crisis is to build more housing. This requires the loosening of zoning laws to allow more apartments to be built in areas currently dominated by single family housing among other things. The problem is that this requires a change of the law and current zoning laws are protected by a powerful baptist-bootlegger coalition.Report

    • Avatar ozzzy! in reply to LeeEsq says:

      Here Here.

      There could be lots of other stuff, but why not increase supply and see if that helps. The old obvious try, my boy, and whatnot.Report

    • Avatar Chip Daniels in reply to LeeEsq says:

      Changing zoning laws is one part of the solution, but not sufficient by itself.

      Lets say that the pool of potential renters is comprised of two segments, 50% who can afford an apartment of their own (at current rents), and 50% who can’t. ;
      But due to restricted supply only 40% are actually housed, leaving 10% as ready-but-not-able to rent.

      Relaxing restrictions would help builders satisfy this demand. But that doesn’t do anything the satisfy the other 50%.

      The increase in supply will lower the cost, but only within the profit margins; That is, the pressure of increased competition doesn’t make the hard costs of construction go down, it only drive the profit margins thinner.
      So rents might drop by like 10% hich is nice, but not sufficient to absorb the entire pool of potential renters.

      So as long as the relationship of wages to underlying land and construction costs remain unchanged, there will be a large pool of people who can’t afford to rent.Report

      • Avatar Jaybird in reply to Chip Daniels says:

        I’m not a construction guy so I don’t know, but what’s the difference in cost between building a house in California versus building the exact same house in… oh, let’s pick Wyoming or Idaho or someplace else in the sticks.

        I’m thinking maybe 2-3% difference in sales tax for the materials, maybe. A difference in labor costs… but two identical buildings. Whether it be condos, an apartment building, or a duplex.

        What’s the difference in building in California versus building the exact same house out somewhere like Indiana or Maine or West Virginia?Report

        • Avatar Chip Daniels in reply to Jaybird says:

          Land cost.

          In an urban environment I’ve seen it be as much as half of the bricks and mortar. Other places, much less.Report

          • Avatar Jaybird in reply to Chip Daniels says:

            So a plot of land here costs $50,000, a plot of land there costs $500,000, but the same floorplan, same materials, ending up with the same house will end up costing $150,000 (give or take some percentage) in both places?

            (Numbers pulled out of my butt.)Report

            • Avatar Chip Daniels in reply to Jaybird says:

              Kinda sorta.
              Labor also varies geographically.

              The big number differences across geography are land and labor, with regional cost of material difference coming behind.
              So after you adjust for all that, the final remaining portion will vary only slightly.

              Mostly because land, labor and material accounts for the overwhelming amount of the final cost, like in the 90% range.
              There just isn’t enough left in the remaining line items to affect the final sales price.Report

        • Avatar Dark Matter in reply to Jaybird says:

          what’s the difference in cost between building a house in California versus building the exact same house in… oh, let’s pick Wyoming or Idaho or someplace else in the sticks.

          Full stop. Why are you building the “exact same house” in both those places?

          In Wyoming you’re building something that uses a lot of space because space is cheap.

          In California you’re doing it because of zoning. Left to their own devices the builders would be using that space to build tiny houses that fit a lot more people.Report

          • Avatar Jaybird in reply to Dark Matter says:

            Because I don’t want to compare an apple with 1600 square feet and no garage to an apple with 2500 square feet and a 2 1/2.Report

            • Avatar Dark Matter in reply to Jaybird says:

              I don’t mind if you do it, but I think it’s a huge problem if we’re making developers do things like that and we are.Report

              • Avatar Jaybird in reply to Dark Matter says:

                From my perspective, I’m wondering why in the heck that there’s a housing shortage *EVERYWHERE*.

                You want to exclude San Francisco? Fine. Brooklyn? Sure. Seattle? Knock yourself out.

                Why in the hell can’t someone in Ann Arbor pull this off? Des Moine?Report

              • Avatar Dark Matter in reply to Jaybird says:

                The local process gets captured by local people who care about this. They increase their money at the expense of people they don’t know and who don’t even live there yet.

                It’s like when I was comparing a police union to gravity in terms of how constantly they oppose change and responsibility. This is that. The fundamental nature of this beast leads here.

                Given how widespread the abuse is, i.e. everywhere, and how the big success story (Japan) was successful by not allowing local people to do this, the solution is to not let local people do this.Report

              • Avatar Michael Cain in reply to Jaybird says:

                There isn’t a housing shortage *EVERYWHERE*. There’s a shortage in Des Moines because people are moving there faster than they’re building. In much of the rest of Iowa, where the population is shrinking, there’s a surplus of housing.

                (Technically, the Des Moines metro area is growing. Des Moines proper, like San Francisco or Brooklyn, is locked in. It can’t annex so the only way to grow is infill (quite limited) or to tear things down and build higher density, which is as unpopular in Des Moines as it is in Brooklyn.)

                See this map? See all those pink and red areas? Housing surpluses in all of them.Report

              • Avatar Chip Daniels in reply to Michael Cain says:

                In those areas with surplus, are the rents low enough for minimum wage earners to afford them?Report

              • No, but not for the reason usually cited. The monthly payment on a $40,000 30-year 4% mortgage is ~$190. What the minimum wage earner lacks is the $10,000 to put down on the $50,000 house. Certainly in the areas that I have visited where there’s a surplus, the typical surplus housing unit is a two-bedroom house on a quarter-acre lot. The owner would rather let it sit empty than rent it.Report

              • Avatar Jaybird in reply to Michael Cain says:

                I’m going back to this:

                “Full-time minimum wage workers cannot afford a two-bedroom rental anywhere in the U.S. and cannot afford a one-bedroom rental in 95% of U.S. counties”

                While it’s true that there’s not one *EVERYWHERE*, I’d still say that there’s one in 95% of U.S. counties.Report

              • Avatar Oscar Gordon in reply to Jaybird says:

                Quick question, is that report looking at a long-term trend, or a snapshot of time?

                Because prices can be sticky and landlords are not going to lower prices if they think they can avoid doing so.Report

              • Avatar Jaybird in reply to Oscar Gordon says:

                I don’t know. No idea.

                I am down with prices being sticky, I guess… but downtown has had several storefronts that have been empty for *YEARS*. This strikes me as downright insane. (Well, maybe not *THAT* insane, given the covid, but they were empty in the years back in the beforetime.)

                Which tells me that there is some dumb tax law that probably needs tinkering.Report

              • Avatar Oscar Gordon in reply to Jaybird says:

                I guess that falls into the whole ‘avoid doing so’.

                If units are vacant long term (& IMHO a month or two is long term) yet prices remain sticky, then there has to be a market intervention at play.

                Yes, a landlord has a lower bound they need to charge just to break even (cover mortgage, taxes, and upkeep), but an empty unit offers zero dollars towards that minimum, while an under-priced unit at least reduces the bleeding. to a degree.Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                Vacant buildings aren’t a distortion of the market, they are the market at work.
                The cost of operating is higher the the market rate of rent so the market solution is to board them up and wait.
                The other solutions are to convert them to other viable uses like office to residential or vice versa, or just tear them down and make a parking lot.

                Decay, death and renewal are as natural to the market as any other ecosystem.Report

              • Avatar DavidTC in reply to Chip Daniels says:

                The cost of operating is higher the the market rate of rent so the market solution is to board them up and wait.

                The…cost…of operating…an apartment?

                The costs I can count are utilities, maintenance, and some clerical stuff with collecting rent and screen applicants and stuff.

                Utilities are not a problem, and…everyone is aware that there literally are rental management companies that you just…let do the maintenance and clerical stuff, right? Like, you just hire them, and say ‘manage this apartment complex for me’? And they, helped along by the scale of their operation (Like, they can keep a handyman on staff, one spread between ten complexes. They have pre-built payment and tennent screening systems, etc.), run the place entirely by themselves?

                Like, it’s a whole industry of people who just manage other people’s rental properties.

                Granted, the owners will make a less money, the management companies can skim 15% off the top, easy, but…uh…considering that the owners literally will be doing no work, that seems like a good deal.

                What is actually going on is something people don’t want to talk about: People who get enough wealth often becomes _incredibly lazy_. Operating some sort of rental situations requires some level of work setting it up, some level of calculation, they have to deal with the income and taxes, etc?

                So they ask themselves…do they need the money? No. So why do any work at all? Why spend _any_ effort? They can just call it an ‘investment’ and let it sit empty for a decade.

                Yes another way wealth concentration hurts society. They’ve somehow come up with something _worst_ than rent-seeking landlordism. They doing the same property hording but they’re too damn lazy to actually rent the place out!Report

              • Avatar Aaron David in reply to Oscar Gordon says:

                Yes, a landlord has a lower bound they need to charge just to break even (cover mortgage, taxes, and upkeep), but an empty unit offers zero dollars towards that minimum, while an under-priced unit at least reduces the bleeding. to a degree.

                Not really. You are thinking of each unit being individual, as opposed to being part of a portfolio. Any commercial building realtor has multiple revenue streams, and rent is just one of them. There is also the back end profit to consider; what the building will realize when sold.

                See, when you start to look at them as parts of a larger portfolio it makes sense. The whole thing is predicated on there being a certain amount of vacancy at all times. And if your business plan calls for a, say, 75% occupancy rate and you are hitting 80%, then having the storefronts sit empty is a non-issue. And you might want to keep it vacant to make sure that no undesirable rental comes in. In other words, it is a tony area, Mercer Island for example, and having Bongs and Dongs #7 moving into the building that houses and antique art gallery, an upscale restaurant, among other similar things can drop the perceived value of the building. And this hurts revenue stream #2, which is the planned sale of the building. And it affects revenue stream #3, which is using the value of the building to finance further purchases.

                This is a business, and you leave no money on the tableReport

              • Avatar Jaybird in reply to Aaron David says:

                So maybe you don’t rent out to Medicinal Chewables and you don’t rent out to Bongs R Us but, eventually, “Nothing But Birkenstocks” will want to rent it out.Report

              • Avatar Aaron David in reply to Jaybird says:

                /shrug

                Again, does it help or hurt the bottom line? If the calculus determines that it is better to keep it vacant, it will stay vacant.

                One thing to remember, by the way, is that in many areas, SF for instance, the building is worth MUCH more entirely vacant, due to not having the equivalent of squatters rights in the spaces. And while many of those laws and regulations might help businesses in the short term, the long term rot that it can cause a city is devastating.

                We have created a whole maze of perverse incentives, and come out the back end wondering why things like empty storefronts exist. Why we don’t have enough housing. Well, the answer is we wanted something less harsh than capitalism. We got it, good and hard.Report

              • Avatar Jaybird in reply to Aaron David says:

                Sure, it’s worth more on paper, but it’s worth that much because of how much money it could theoretically bring in were people renting. Sure you could sell it… but, presumably, you’d sell it to someone who would either want to use it or rent it to someone else who wants to use it.

                It ain’t no wheat field. Sitting fallow does no good.Report

              • Avatar Aaron David in reply to Jaybird says:

                Not exactly. It is worth more empty, as that gives the owner complete control of the space. If he wants to tear it down and build a high-rise, with the potential to hold many more tenants, an empty building is worth more, as he doesn’t have to buy current renters out, fewer lawsuits, etc. Or, if she wants to reconfigure the space, get it rezoned from residential to commercial or vise versa. Or combine suites to create something else, make it mixed-use, whatever.

                Sitting fallow, as you say, might indeed do good. For the current and potential owners.Report

              • Avatar Oscar Gordon in reply to Aaron David says:

                So the market is distorted.Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                Why isn’t a vacant building nothing more than a market signal that there is no demand for its use?Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                No demand for it’s use at that price.

                If you have an area that is starving for living space, and you have livable space not being used, then I have to wonder why prices aren’t clearing. Aaron gives a good explanation (property as a portfolio rather than as isolated spaces), but even then, there has to be a point where keeping it vacant is costing more than it is worth.

                That said, Dark is right that even if the vacancy rate in the Bay Area was hovering right above 0, the problem would still exist because the Bay area has not been keeping up with the pace of growth.Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                Because the minimum price that can be charged is still higher than the pool of customers can pay.

                In the current markets that I’m aware of, the demand for residential space is doing exactly as you suggest, prompting the conversion of old derelict buildings into apartments- I’m living in one right now.

                But only a few blocks away are some neighborhoods where the demand even for residential is still very low, and projects there just don’t pencil out. So the buildings there still stand empty.Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                Minimum price > $0 that can be charged is what, $0.01? Granted, at that level, leaving it empty is probably better than the headache of a tenant .

                And I can understand a certain vacancy rate just being part of the normal business cycle (keeping something empty while selling, or seeking permits to rebuild/convert/etc.). But if you are above that vacancy rate…

                Let’s step away from urban cores and look at a suburb that is hollowing out for some reason. If the suburb has a high vacancy rate, and rental prices are not falling, then I wonder why.

                Maybe it’s because, as Aaron suggests, a large percentage of the properties are minority positions in a collection of larger real estate portfolios. Or perhaps they are being kept vacant in hopes of a sale (which makes sense in an area that is hollowing out).

                But again, prices should fall. One way or another, be it rental rates or purchase prices, they should go down. And if we have a housing crises, and empty livable space, then cities should do things to encourage prices to fall.

                I’m sure would agree that while everyone wants to make a nice profit, no one is guaranteed a profit, and government has no business taking action, or inaction, to shield the profitability of private markets from the natural ebb and flow.Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                Just to turn the lights on and operate a business involves a certain fixed cost; Management, maintenance, insurance, opportunity cost, etc.

                If those costs produce a higher rate of return doing something else, then its better to just let the asset lie fallow.

                Are you asserting that in a perfectly undistorted market, no properties would remain vacant?Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                I specifically said that a certain vacancy rate is to be expected. But above some value, you would expect prices to fall.

                Even if all the properties are part of a portfolio, prices have to start falling at some point. I expect a certain amount of stickiness, because no one likes taking a loss, but at some point, holding onto it while vacant has got to be costing more than it’s worth.

                And believe it or not, I’m fine with government levying a vacancy tax on property. I mean, part of why government supports and protects property owners is because such owners put that property to work. That work boosts the wealth of society. If someone keeps a piece of property inactive for an extended period of time, that is their right, but I think government has the power to ‘encourage’ that owner to find a productive use for the property, or quickly move it to someone else who will.Report

              • Avatar Jaybird in reply to Oscar Gordon says:

                I think that a certain vacancy rate is to be expected but I imagine that it’ll move around.

                The shoppes that have sat empty downtown are the same dang shoppes. I understand if La Petite Crêperie opens up and closes and two months later Chili Dogs Galore opens up and closes and two months after that Papas Fritas, Cabrón! shows up and stays a while, that there’s going to be some vacancies in there.

                But downtown, those three restaurants opened and closed next to an empty storefront. One that has been empty for *YEARS*.Report

              • Avatar DavidTC in reply to Oscar Gordon says:

                Maybe it’s because, as Aaron suggests, a large percentage of the properties are minority positions in a collection of larger real estate portfolios. Or perhaps they are being kept vacant in hopes of a sale (which makes sense in an area that is hollowing out).

                Which is really just another way to saying ‘Too few people own too much property’, and thus can afford to let a lot of it lie fallow.

                Right now, there’s a lot of stories about individual, small landlords very upset that people can’t pay rent. And small landlords _do_ need to rent property out. They will do anything to make sure they get every dime of rent. I mean, they sound rather like asshole, but, they’re not incorrect…that was their income stream!

                Where large owners don’t care. If you own properties that could make 10 million a year, but you only need 3 million, to do anything you want, what do you care if only only half those properties are full? Like…maybe you want try something else with them, best to leave your options open, sorta half-heartedly rent.

                It’s the same problem that’s caused half the condos in Manhattan to be rented to people who literally don’t use them.

                As I’ve mentioned before, we’re at the point in history where the wastage of the wealthy is becoming seriously harmful, because they keep hording limited stuff.

                We don’t need to change rent or try building more houses. Because we literally already have enough…the empty housing in this country could fit everyone. And building more o that would just have them bought by rich people too!

                Instead, we just need to have a rule that property taxes multiply. We already usually give people a discount on their primary residence, what we need to do is flip that around and just keep increasing it the more rental properties you own above, like, 5.

                And before anyone asks ‘What about corporate ownership’…a huge amount of real estate is owned by small privately held companies, that are only owned by a few people, and it would be entirely reasonable to calculate everything out. Like…oh, the company that owns 300 apartments is owned by 3 people? Well, that’s the same as each of you owning 100 of them.

                As for large, public corporations with ton of shareholders? They’re fine! We’d be a lot better off if they _did_ own all the real estate instead of these smaller things. Because, public corporations would actually want to make money, and thus have large incentive to rent everything out.Report

              • Avatar Dark Matter in reply to DavidTC says:

                RE: Which is really just another way to saying ‘Too few people own too much property’, and thus can afford to let a lot of it lie fallow.

                You’re assuming the vacant lots are owned by large multi-property owners rather than are vacant for some other reason.

                You’re asserting “wastage of the wealthy is becoming seriously harmful”, i.e. that it exists, that waste exists, and that it exists at a level which is “harmful”.

                And after assuming a massive market failure because the evil rich exist, you’re assuming the gov has a way to fix this, when mostly for the housing crisis it’s been more “the gov is creating this”.

                what we need to do is flip that around and just keep increasing it the more rental properties you own above, like, 5.

                This results in either:

                1) If I’m buying multiple rentals then I need shell corporations, one per property.

                Or alternatively if we have a way to deal with the whole “corporations are people” issue,

                2) Fewer people who can/will rent.

                We should be careful about that second possibility. At every other point the problem has seemed to be “the gov isn’t letting the supply be increased”, this looks like another way to make that worse. You need to do a lot of heavy lifting to showcase the problem actually is empty assets that aren’t being used by profit maxing entities for reasons we disapprove.Report

              • Avatar Oscar Gordon in reply to Dark Matter says:

                Good points. I’ll stick with my idea of a progressive vacancy tax. I don’t generally care how much property a person controls, as long as that person is putting that property to work (and they don’t have an effective monopoly on property in a given area).

                But letting stuff sit vacant long term has 2nd and 3rd order effects simply beyond costing the owner money to hold on to.

                That said, perhaps in addition to a vacancy tax, there needs to be changes to leasing laws so that owners aren’t stuck in a spot where taking on a tenant is detrimental to longer term plans. Perhaps there could be a lease rider that says the owner is intending to do something with the property in the future (i.e. plans have been made) and once those plans begin, the lease terminates in 30/60/90 days.Report

              • Avatar Dark Matter in reply to Oscar Gordon says:

                Locally we had a former Fortune 500’s former company headquarters that was vacant or close to vacant.

                Rather than pay property tax on an asset that wasn’t generating income, the company destroyed the building and turned it into an empty field.

                If that’s the behavior we want then that’s fine. If we’d like the building to sit around vacant until they can find someone to move in, then maybe it’s not.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                I’m wondering why this is considered an undesirable outcome rather than just the marketplace efficiently allocating resources.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                I am pointing out punishing owners of buildings for not using them may have side effects we should consider.

                If the root reason the buildings are idle is the evil rich are whimsically not making money, then everything will work out fine. If the root problem is something else, then maybe we’d be incentivizing the wrong behavior.Report

              • Avatar Oscar Gordon in reply to Dark Matter says:

                That’s why I suggested we might want to change laws regarding leasing spaces alongside this.

                If I, as a tenant, enter into a lease for a space (commercial or residential) knowing ahead of time that the owner is considering options (call it a flux state) and the lease has a hard eviction clause, then I can negotiate a reduced rate and the owner can avoid eviction proceedings because I agreed to them ahead of time.

                Obviously you need to craft such things carefully so shady landlords can’t just declare all their properties in a flux state and demand such riders, but for owners with registered plans and such, if the big reason the property sits vacant is to avoid the hassle of tenants in expectation of a sale or reconfiguration, then perhaps that would help.

                If that isn’t the reason, then it wouldn’t be worth much and we’d need to figure out the actual reason vacant properties are held vacant.Report

              • Avatar Oscar Gordon in reply to Dark Matter says:

                1) That assumes a vacancy tax is based upon valuation, rather than area.

                2) The vacancy tax is an incentive to not leave the property vacant and to try and price the externalites of a vacant property in an urban area.

                If the company decides to raze the lot, that’s fine, they still pay the tax. If their accounting is OK with that, so am I.Report

              • Avatar DensityDuck in reply to Dark Matter says:

                “Rather than pay property tax on an asset that wasn’t generating income, the company destroyed the building and turned it into an empty field.”

                If it’s an older building this makes sense. It probably doesn’t meet modern standards for accessibility, or modern notions of office layout (like, a warren of small offices rather than an open-plan cubicle-friendly setup.) It likely doesn’t have modern levels of efficiency (and that’s not green-grubby garbage, efficiency matters when you’re doing lighting and temperature control across an entire building.) The telecoms capability might not be up to what modern workplaces demand.

                I remember when we moved into the former headquarters of Atari Computer Inc. First we had to install ethernet wiring in the entire building, and then we had to replace the air-conditioning plant, because back when the place was built they didn’t imagine that one day everyone would have a computer on their desk…Report

              • Avatar Aaron David in reply to Oscar Gordon says:

                So, what is to stop a company from renting out space to a subsidiary of that company? The “lease” is signed, “money” is transferred, and so on. But, and here is the kicker, no one moves in. But on paper it’s kosher.

                Shell companies are created every day, accounting fictions are created every day, and big companies have some very smart people who do things like this, finding the ways to get around laws legally, every day.

                Now, I just thought of that method, and I would be willing to bet that something even more tricky could be thought up in a matter of seconds every time the gov’t tries to make a Rube Goldberg set of laws to combat this supposed problem.

                No, the only real way out of it is a dynamic economy, one that is prepared for some downtime.Report

              • Avatar Oscar Gordon in reply to Aaron David says:

                It’s a vacancy tax, not a no-lease tax.

                If you lease it to your shell company and the shell company does not put it to the zoned use, the vacancy tax still accrues.

                The objective is to incentivize making the property more productive than sitting empty. Empty property accrues property taxes, but doesn’t generate a lot of economic activity or provide living space.

                But just playing shell games with it while it sits empty shouldn’t dodge the tax.Report

              • Avatar DavidTC in reply to Dark Matter says:

                You’re assuming the vacant lots are owned by large multi-property owners rather than are vacant for some other reason.

                I’m really not talking about ‘vacant lots’, i’m talking about the same thing that Oscar Gordon and Aaron David were…large buildings that are often vacant in large amounts. (Although I care more about residential than commercial.)

                You’re asserting “wastage of the wealthy is becoming seriously harmful”, i.e. that it exists, that waste exists, and that it exists at a level which is “harmful”.

                Yes, I am, and I will point out that in doing so, I am basically rephrasing the claims of Aaron David above. Here, let me quote ‘See, when you start to look at them as parts of a larger portfolio it makes sense. The whole thing is predicated on there being a certain amount of vacancy at all times. And if your business plan calls for a, say, 75% occupancy rate and you are hitting 80%, then having the storefronts sit empty is a non-issue.’

                He’s right. And guess what? Having a 20% vacancy rate instead of allowing people to rent though places is harmful. Not only in that some businesses no longer have a location, but because a reduction in supply causes price increases.

                Well, the example here is for storefronts, which I don’t really care about. But residential housing has the same thing going on.

                And after assuming a massive market failure because the evil rich exist, you’re assuming the gov has a way to fix this, when mostly for the housing crisis it’s been more “the gov is creating this”.

                I’m not calling anyone ‘evil’, in fact, rich people trying to not squeeze every drop of money out of the world is _usually_ a good thing. It’s just here…they’re sitting on limited resources that other people need! If they want to sit on money, that’s one thing, but don’t sit on property!

                1) If I’m buying multiple rentals then I need shell corporations, one per property.

                It’s easy enough to just write the rules backwards: Every piece of property has to list the actual owners. (Or, write ‘This is owned by a publicly traded corporation that has ~200 owners so we’re just paying the normal corporate rate.’.) If can’t list the owners, you get taxed at max rate.

                Hey, that actually solved a bunch of other problems, too!

                2) Fewer people who can/will rent.

                I’m not sure what you’re saying. That actually is my goal.

                What _I_ think will happen is…people who own a bunch of properties will start selling them. And thus we get two effects. The first is rental properties will be distributed among more owners, which not only will result in them caring more about renting them (as they are smaller owners), but also will introduce more competition. That’s sorta the _worse case_ here, and still pretty good.

                The other thing that might happen is ‘This causes housing prices to drop so people are able to buy them’.

                I can’t prove the second will happen, but I could live with the first one, where 10 people own 10 apartment complexes instead of one person owns 10 apartment complexes.

                You need to do a lot of heavy lifting to showcase the problem actually is empty assets that aren’t being used by profit maxing entities for reasons we disapprove.

                ‘For reasons we disapprove’? No. All I have to do is show they have empty assets they don’t want to do anything with.

                I don’t care what the reasons are, or the morality of what’s going on. I care about the _effect_ on society.

                At every other point the problem has seemed to be “the gov isn’t letting the supply be increased”, this looks like another way to make that worse.

                What you’ve mentioned is that in some places the vacancy rate is very low in places with the worst housing crisis,and some amount of vacancy rate obviously has to exist, to have a housing market at all there have to be housing on the market, obviously. So let’s actually look at that.

                https://sf.curbed.com/2020/2/24/21149381/san-francisco-vacant-homes-census-five-year-2020

                San Francisco, as in the actual city, had at least 34,302 empty houses in 2018. 6,694 are for sale, 1,031 are for rent, 6,294 have owners who don’t happen to be there at the moment, or had died but the property wasn’t for sale, etc. 8,523 are occasional use, like second homes, but…I’m not actually complaining about that right now, although I think it’s worth caring about at some point.

                I’m complaining about the 11,760 that are not any of those. Like…no one lives there. Even part time. And yet they aren’t for rent or sale. They’re just sitting there. A few are foreclosures that basically haven’t been processed yet, but…the foreclosure rate is not anywhere near that level, and once they’re for sale they stop being in this group. Also..notes these aren’t included in the ‘vacancy rate’, which is just empty rental housing.

                San Fran only has about 400,000 rental housing units _total_. So there’s a full 3% of housing that could be rented, or sold, but isn’t for…no explicable reason. Someone owns them, but is basically too lazy to do anything with them.

                And before you say ‘3% isn’t that high’…this is _San Francisco_, where housing is harder to find than gold, and there is every possible incentive to use those properties to make money. And yet…shrug. It’s worse in other locations.

                Or to put it another way: Building 3% more housing in San Francisco, 11,000 housing units, is a _massive_ undertaking even without any laws or public opposition. It’s a project that would take years.

                I’m not saying we shouldn’t do that _also_, but really we need to look at the people just sitting on empty houses right now!Report

              • Avatar DensityDuck in reply to Jaybird says:

                “downtown has had several storefronts that have been empty for *YEARS*. This strikes me as downright insane.”

                It’s not so much the tax law as it is the contract practice regarding real-estate financing.

                OK, so, I read about this in an article.

                When someone’s applying for a loan to buy commercial real-estate, the bank calculates how much they’re willing to lend by taking the number of properties and the expected rent for each, and using that to calculate the expected value of the property, and they’ll write a loan based on that number.

                What this means is that if the property owner reduces rates, then as far as the bank is concerned, this reduces the value of the property.

                This matters for the owner because most commercial real-estate loans are short-term; five years at the most, even as low as one, because not every retail or office space is a working proposition and neither banks nor owners want to be stuck in a long-term position. Usually, if a place is working out, the owner will just roll the loan over into a new one.

                buuuuuut this can be tricky if the owner hasn’t paid much of the principal (which, if you’ve got lots of place sitting vacant, they probably haven’t) and lowered rents have caused the property value to drop. If the owner can’t get a new loan that covers the principal of the old one then they’ve got to cough up the cash for the difference.

                So it can indeed be better off, financially, for property owners to keep rents high (and units vacant) than to lower rents, because taking the monthly income hit of vacancies is preferable to needing a big pile of cash for your next refinance.

                Often property owners will offer rent credits or first-months-free sort of deals; if you give a new tenant three months’ free rent, that’s effectively a 25% reduction in monthly rent for the first year, but the number stays the same so the bank doesn’t re-think anything. That doesn’t help any tenant who plans to be there for longer, of course.Report

              • Avatar Oscar Gordon in reply to DensityDuck says:

                That’s an interesting incentiveReport

              • Avatar DavidTC in reply to DensityDuck says:

                This is a …very strange concept on the part of banks.

                Yes, lower rents does make the inherent property value lower…but so does ‘unable to rent the space’!

                It seems like banks should see through this, and say ‘Wait, if this property can get $X in rent each month, why haven’t you rented it out?!’Report

              • Avatar DensityDuck in reply to DavidTC says:

                “lower rents does make the inherent property value lower…but so does ‘unable to rent the space’!”

                Congratulations, now you understand why banks usually won’t write loans for the full value of the property.

                “It seems like banks should see through this, and say ‘Wait, if this property can get $X in rent each month, why haven’t you rented it out?!’”

                So long as I can pay off the premium every month, what does the bank care? “I could conceivably get more money” isn’t really the bank’s problem, so long as I meet whatever minimum requirements they have to get a loan written.

                And besides, if rents drop, that’s an indicator of either Falling Economy, or it’s an indicator that I’m not actually as good at managing property as I let on, and both of those will make a bank think about reducing its overall risk exposure…Report

              • Avatar DavidTC in reply to DensityDuck says:

                Congratulations, now you understand why banks usually won’t write loans for the full value of the property.

                Um, it’s _you_ who argued ‘vacant spaces look better than lower rents’!

                Now that I’ve pointed out that is obviously a nonsensical way for a bank to think, you can’t turn around and claim ‘Of course they don’t think that’.

                Please rewind back to your post, and explain how ‘What this means is that if the property owner reduces rates, then as far as the bank is concerned, this reduces the value of the property.’ makes any sense.

                Basically you’re arguing that banks are idiots, that somehow long-term vacancies are expected and including in the property value, but reasonable rent alterations to attract renters aren’t included and cause the bank to reevaluate property value.

                And…if, as you claim, this has something to do with ‘contract practices’, then it is completely reasonable to point out those practices are _really stupid_ and need to be reevaluated…which sounds easy if the contracts really are for only five years.

                Honestly, it’s hard to figure out why banks would have ever written such dumbass contracts, instead of just something like ‘The property value assumes at least $X a month in rental income. If the total income you receive each month dips below $X, we reserve the right to re-evalute the property value’.

                Especially since, as you point out, rental properties are slipping around the rules by giving several months for free.Report

              • Avatar Dark Matter in reply to Michael Cain says:

                No. That is “change in population”, that’s very different from “housing surplus”.

                San Fran could lose double digits of their population and they still wouldn’t have enough housing because they’ve been shorting for decades.Report

              • So why isn’t San Francisco’s problem “change in population” rather than housing deficit?Report

              • Avatar Dark Matter in reply to Michael Cain says:

                So why isn’t San Francisco’s problem “change in population” rather than housing deficit?

                Those two are only slightly connected. It’s like asking why someone doesn’t buy oranges when he buys apples.

                If memory serves, for decades San Fran had a huge spike in demand with a lot of people creating jobs in San Fran and otherwise wanting to moving in. They build housing for 15% of that demand over a 30 year period.

                If their population drops by 2% in the last time period that the map was measuring, well they’d need a HUGE drop in order to hit “surplus”.

                Edit: Yes, in 1980 they were 680k, in 2019 they were 880k. If they only build 30k houses over that period of time, then even a 10% hit wouldn’t bring them into balance.Report

              • Avatar Brandon Berg in reply to Jaybird says:

                Why in the hell can’t someone in Ann Arbor pull this off?

                This is why.

                Doesn’t matter how dense a city is right now; there are always petty-authoritarian NIMBYs willing to let renters pay whatever it takes to keep it getting any denser.Report

              • Avatar Dark Matter in reply to Brandon Berg says:

                Great link.

                For anyone who missed it, the original vote by the council was 10-0 to kill the idea of more housing. A year later, after realizing they’re going to lose the lawsuit, the vote changed to 7-4 to let him build 70% of what he wanted and shook him down for $350k to expand an intersection.

                So that’s the kind of resources it takes to build a large project there. And Michigan is pretty developer “friendly” as far as these things go.Report

      • Avatar Dark Matter in reply to Chip Daniels says:

        The increase in supply will lower the cost, but only within the profit margins; That is, the pressure of increased competition doesn’t make the hard costs of construction go down, it only drive the profit margins thinner.

        You’re ignoring the velocity of money, the attention of management, and the cost to set up unique events.

        Algo stock traders can make a lot of money from a few pennies of profit at a time. The money they’re moving around can be the same few tens of thousands of dollars. At the other extreme is making someone tie up their money for years while they pay lawyers to fight other lawyers.

        Management time and attention is the rarest resource in the universe. If they need to constantly get involved, or need to employ another set of “experts” to handle the issue, then it’s expensive.

        Unique events is “how many times am I doing this, this year”? When creating a car was a one off craftsman event they were expensive. The assembly line showed people can get skilled. A local housing company does the housing equiv of an assembly line and they manage to create cheaper high level houses. You’re seriously limited in what you can buy from them but that’s a different problem. All of their workers work for them constantly and are constantly building the same few houses again and again.Report

        • Avatar Chip Daniels in reply to Dark Matter says:

          I honestly don’t understand what any of this means or how it applies.Report

          • Avatar Dark Matter in reply to Chip Daniels says:

            RE: Velocity of money
            I have a million dollars I want to use to build a house and sell it. How long does this take? 3 months? 10 years? If it’s 3 months then I can use that million again and again just this year. If I want a 10% profit on that money for the year then that doesn’t need to be 10% on every house. If I want 10% profit on that money per year and it’s going to take me 10 years before I get my money back then I need something like (1.1)^10 (or 260% return).

            RE: Attention of Management
            There are a limit to how much I can focus on. If it requires my personal attention to deal with the local gov many times a week for many months, then either that’s my job, or I have to outsource that (if that’s possible), or things don’t happen.

            RE: Unique events
            People get skilled at stuff they do a lot, and a huge part of that is dealing with the people around you. Is building a house like an assembly line where everyone can work together as a team, know when and how to trust each other, and we can hire people to do stuff that slows us down?

            Or is it more like making a movie where you’re bringing together lots of people who, in theory, know their own jobs but have never worked together before and have to learn everything new for that one job?Report

            • Avatar Chip Daniels in reply to Dark Matter says:

              OK.
              Well, the delay in construction is always at the very front end, when very little money is invested.
              Like, in a 10 million dollar project, the entitlement period which might take years usually only costs about few percentage points, so like 250K; The remainder of that 10 mil is still where it was, in other investments earning money.
              And the property is still there earning whatever income it was before you started.

              Most large builders have in fact made a lot of the process mass production-like which holds down costs.

              There is plenty of room for improvement; There really isn’t any good reason why entitlements need to take years other than most cities don’t have the staff to process them quickly.
              If entitlements were granted say in a couple months instead of years it would speed up the pipeline of projects.

              One thing I really liked about the game SimCity was how it realistically modeled that a city is not just a collection of buildings, but a cohesive complex organism, where all the parts interacted with all the others.

              Like, you want to increase residential stock; OK, is there enough electricity to handle all of that? Enough streets? Sewer capacity? Jobs for those people? Police and fire coverage?
              Do the capital markets even want to pour that much into this sector?

              And so on.Report

      • Avatar Brandon Berg in reply to Chip Daniels says:

        The increase in supply will lower the cost, but only within the profit margins

        Well, yes, of course. It does cost a certain amount to build, and there’s only so much land, so market housing prices can only go so low. The question is how low that is, and how much lower it is than current prices.

        I think San Francisco can do better than $3,000/month for a one-bedroom apartment. Maybe the best they can do is $1500. In that case, you’d need to make $30/hour to “afford” it. But needing to make $30/hour to “afford” a one-bedroom apartment is a much better situation to be in than needing to make $60/hour. At that point, at $15/hour, you can get a roommate, rent a 2BR apartment, cut back a bit on other expenditures, and you’re good to go. And if you need government help, you need much less government help than you would if a 1BR were $3k/month.

        I also have my doubts about whether the 30% rule is applicable to high cost-of-living areas. Other expenses tend not to scale with housing. In San Francisco, housing might cost 3x as much as in Fresno, but food, clothing, and household appliances might only cost 30% more. You also might not need a car. That 30% rule goes back to a time when food and manufactured goods were more expensive relative to housing than they are now, and when taxes were higher on the lower and middle classes.Report

        • Avatar Chip Daniels in reply to Brandon Berg says:

          Maybe a more productive way to frame this is, “What do we citizens want to target as the income threshold of renting an apartment?”

          Or maybe frame it as “What percentage of apartments in the metro area should be within the reach of minimum wage earning households? ”

          Framing it this way acknowledges that there will always be a certain percentage who can’t;

          But I propose that as a baseline, we should consider our economic policy a failure if a majority of apartments in a metro areas are beyond the reach of the minimum wage earner.
          And I support that with the logic that, in order to make any sense, the definition of “minimum wage” should be “the minimum one needs to live on.”

          The reason I come back to wages is that I haven’t seen any possible way that the stock of apartments can be increased enough to drive rents down far enough to meet the “minimum wage” level.

          Even a $15/ hr minimum wage(which is available only in select cities) leaves less than $1000 per month to spend on rent, and even the oldest, most run down units anywhere in the metro area go for considerably more than that.

          All the other ideas tossed around like overriding NIMBYs or removing restrictive zoning are good, and necessary but they don’t change the basic structural mismatch between wages and rents.Report

          • Avatar Jaybird in reply to Chip Daniels says:

            But I propose that as a baseline, we should consider our economic policy a failure if a majority of apartments in a metro areas are beyond the reach of the minimum wage earner.

            What percentage of people in any given metro area earns minimum wage? Fiftyish percent?Report

            • Avatar Michael Cain in reply to Jaybird says:

              Brookings says that nationally about 44% of workers are low-wage workers. Their definition establishes a cut-off that varies by area (eg, $20/hr in San Jose). All of their cutoffs are well above the federal minimum wage. Their estimate of median hourly wage for low-wage workers is $10.22. Across 350 metro areas, they find the percentage of low-wage workers runs from the low 30s (Seattle, Minneapolis, Washington DC) to the low 60s (Miami, Brownsville, El Paso).

              If forced to guess, I would guess that the percentage of workers earning actual minimum wage in metro areas would run below 30%, more likely below 20%. Even the fast food places have modest raises once people have been there a while.Report

              • Avatar Dark Matter in reply to Michael Cain says:

                I would guess that the percentage of workers earning actual minimum wage in metro areas would run below 30%, more likely below 20%.

                From the BLS: Characteristics of minimum wage workers, 2017

                In 2017, 80.4 million workers age 16 and older in the United States were paid at hourly rates, representing 58.3 percent of all wage and salary workers. Among those paid by the hour, 542,000 workers earned exactly the prevailing federal minimum wage…

                That means 138 million workers, 0.54 million of which made exactly min wage. Another 1.3 million made less than min. That means “1.8 million workers with wages at or below the federal minimum made up 2.3 percent of all hourly paid workers.”

                To eliminate SOME of the jokers from this data we should be using household income. My teens are trying to get pocket change, my wife has a paid-hobby.

                That doesn’t deal with the-me-from-years-ago trying to start a business and having a negative income but that’s rarer.

                Focusing on individual income always gives me the impression people can’t make the case for their desired policies so they need to change the data. For example that 1.3 million who earn “less than min” is probably heavily populated with 16-17 year olds.Report

              • All non-farm non-tip hourly workers in my state make more than the federal minimum wage. This year, at least $3.85/hour more. If they’re working in Denver, $5.60/hour more. If they’re working at the airport, starting this month $6.75/hour more.Report

              • Avatar Dark Matter in reply to Michael Cain says:

                Federal min wage is 7.25 and hour. It’s probably more useful to say “at the airport, starting at $14/hour” than it is “$6.75”.Report

              • Yes, it is. I blame dehydration from mowing the grass.Report

              • Avatar Chip Daniels in reply to Michael Cain says:

                If we assert that the “majority of apartments in a metro areas should be within the reach of wage X” should be set above minimum wage, then we need to decide what that floor should be.

                And I’m open to such a negotiation and discussion because right now the X wage in my city seems to be around $60K/ household which excludes a whole lotta people.Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                Mandates like that still need to deal with the demand. If 51% of the apartments in a city need to have rents low enough to be accessible to low wage workers, but your city only has 500,000 rental units for a population of 2 M, how do you intend to apportion those 255K units?Report

              • Avatar Jaybird in reply to Oscar Gordon says:

                If 51% of the apartments in a city need to have rents low enough to be accessible to low wage workers, but your city only has 500,000 rental units for a population of 2 M, how do you intend to apportion those 255K units?

                Maybe renters could offer landlords health insurance?Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                That’s absolutely true, that increasing the housing stock is a necessary component of any housing policy.Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                Not just necessary, but primary. Until you can start doing that, all the other parts will be ineffective.Report

              • I always worry about unintended consequences. Is one of the possibilities for “majority of apartments in a metro area within reach of wage $X” a huge number of tiny studio apartments?

                Certainly when I was a poor college student, making more than minimum wage per hour but limited by the circumstances to ~20 hours per week, when I lived by myself I lived in a tiny studio apartment because it’s what I could afford.Report

              • Avatar Jaybird in reply to Michael Cain says:

                According to the EPI, the median pay in the US is ~$40K/year.

                I always feel weird when I see numbers that tell me that you have to be doing better than the median to be considered to be doing well.

                Now, yeah, I know. We can get hyper-local and say “Well, what’s the median in San Jose?!?” and break it down to regions and all that stuff but it feels that we’re switching between absolute levels and relational levels at that point.

                And if we start measuring stuff by relationship to itself and each other, we’re going to be pulling an Eisenhowerian alarm at finding that half of people are below average.

                But I digress.

                I mostly think that somewhere around 15% of apartments in any given regional area ought to be within reach of a minimum wage worker. I’m not going to be so bold as to suggest that people should be able to live wherever they want (with granite countertops, even), but the whole “it’s not possible to do this at the minimum wage in 95% of counties” things has me inordinately bugged.

                So I asked myself “What’s the Rental Vacancy Rate in the country?” and I got on the google. Quick, guess as to the number. What percent is vacant?

                Well, according to this, the number is “seven”. (But if you break it down by state, there are wild variances… Colorado and California are both below 5%, there are states over 15%.)

                I don’t know what I think that the number ought to be… but under 5% is too low and 15% is too high. (I don’t know where the sweet spot is but it’s probably a little higher than 7.)

                The incentives are all wrong.Report

              • Avatar Dark Matter in reply to Jaybird says:

                According to the EPI, the median pay in the US is ~$40K/year.

                If we’re worried about how much it costs to set up and run a household, then we should be using household pay.

                Median household pay is $61,937

                somewhere around 15% of apartments in any given regional area ought to be within reach of a minimum wage worker.

                Min wage workers are something like 2% of the workforce… and that’s if you include my children.

                Now if you mean “low wage worker” then that’s a different story, but given how badly our intuition is working for min-wage we really should be using numbers.Report

              • Avatar Jaybird in reply to Dark Matter says:

                I’m not worried about “setting up a household”. I’m worried about Junior moving out of the basement.Report

              • Avatar Dark Matter in reply to Jaybird says:

                If Junior is trying to move out of the basement on the same money my not-serious teens can pull in, then maybe that’s the problem right there.

                If that is the situation, then google searches for “rent a room” turn up numbers half or a third as much as “rent a one bedroom apartment”.Report

              • Avatar Jaybird in reply to Dark Matter says:

                Not everybody is above average.

                But I’m one of those crazy people who thinks that everybody (who wants it) should have access to 300 square feet of their own.Report

              • Avatar Dark Matter in reply to Jaybird says:

                Not everybody is above average.

                Eliminate joke jobs and the percentage of people making min wage is roughly 1%. The bottom 1% isn’t “average”.

                It’s not clear to me that we have a problem beyond massive gov mismanagement. Is it a problem for the bottom quintile of renters to find housing in Japan?

                Fixing the gov mismanagement will be politically painful while LOTS of other “solutions” (rent control, rent vouchers, raising the min wage, punishing the rich) would not be but absent fixing the gov-supply issue none of them have a chance of working and most will make things worse.Report

          • Avatar Dark Matter in reply to Chip Daniels says:

            Maybe a more productive way to frame this is, “What do we citizens want to target as the income threshold of renting an apartment?” Or maybe frame it as “What percentage of apartments in the metro area should be within the reach of minimum wage earning households? ”

            Why should my min-wage teenage children be able to afford a metro area apartment?

            Much worse, as long you’re only building enough housing for 15% of the demand there is no solution. The houses being expensive is a symptom of the problem, it is not the problem itself.Report

            • Avatar Chip Daniels in reply to Dark Matter says:

              Why do you think that low wage workers are just teens and students?Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                You started off talking about “min wage” and now have moved the goal posts to “low wage” after we found out “min” is something like 1%.

                You’re also talking about “how to set” prices and the like and what we should do as far as “economic policy” is concerned.

                The real (and useful) question is: How do we increase supply after local NIMBYs and local government won’t let the supply increase?

                If you don’t have an answer for that then I’m not sure what you want to do. Price supports? If there isn’t enough supply then prices NEED to rise to price someone out. Rent control? That will reduce supply even further. Gov Mandates that builders build what the gov won’t allow? That will also reduce the supply.

                So… fine the local gov millions of dollars per unit of obstruction when they’re doing NIMBYism?Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                Yes increasing the stock is critical so some solutions being used are statewide mandates which override local control, or financial subsidies and tax credits.

                But its like I said in my very first comment, there ins’t one solution, there are many parts of necessary and incomplete solutions.

                I don’t know why increasing real wages is considered to undesirable or impossible.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                I don’t know why increasing real wages is considered to undesirable or impossible.

                Because I dislike unemployment. Mandate “jobs need to pay more than their economic output” and you’re destroying jobs.

                Base how much you “want” jobs to pay based off of a percentage of housing costs where those costs are created by gov mismanagement, and the expectation should be bad things will happen.

                Given that the bulk of the problem seems to be gov mismanagement of the creation of supply, I suggest fixing that before we even decide there is a problem. We want employers to be fighting over employees, not employees to be desperate for jobs.

                Destroying jobs really shouldn’t be the first stick out of the bag when it comes to fixing the housing crisis.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                You’re advancing a “One Weird Trick” solution of eliminating government regulation.
                That this would make it cheap enough to everyone to afford a place of their own.

                But you haven’t suggested any mechanism for how this could possibly happen, or shown any cases where it did happen.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                or shown any cases where it did happen.

                Japan.

                But you haven’t suggested any mechanism for how this could possibly happen

                If it hurts when you hit yourself with a hammer, then the first thing to do is stop that.

                After that we have a lot of “don’t let a crisis go to waste” ideology driven “solutions” that can’t possibly fix the underlying problem (i.e. gov mismanagement).Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                There are no zoning or building regulations in Japan?
                Their government doesn’t intervene in the marketplace to establish minimum wages and conditions? They don’t have labor unions?

                You’re offering a thesis of how to lower the cost of rent, but I’m saying even a total radical abolition of zoning would only affect rents slightly, and would have side effects we may not like.

                There is no silver bullet.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                I’m saying even a total radical abolition of zoning would only affect rents slightly,

                There is a disconnect between saying no solution is possible without more supply and a lack of supply is only a tiny part of the problem.

                There is also a disconnect between the idea that housing, which is pretty price inelastic, would only be slightly affected by a sharply reduced supply. If 85% of new demand needs to be priced out of the market then you should expect to see brutal price increases.

                Those price increases will cause other distortions and I think you’re pointing to those results and claiming they’re causes.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                I’m saying even a total abolition of zoning would affect supply slightly, and rents even less so.

                The decision of how dense to build is not solely attributable to zoning restrictions. There are plenty of other variables which determine the final decision.Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                It’s not the abolition of zoning, but of removing the exclusive control of zoning from local hands.

                If the city needs to re-zone an area, and local opposition is making that hard, then don’t let local politics rule the day.Report

              • Avatar Stillwater in reply to Chip Daniels says:

                There is no silver bullet.

                Relaxed zoning regs and UBI?Report

              • Avatar Oscar Gordon in reply to Stillwater says:

                I can’t remember where I was reading it, but there was a recent study of the $600 Covid benefit and how it impacted working. The conclusion supported UBI in that (IIRC) those who could not make the $600 working stopped looking for work, and those jobs either went unfilled, or wages rose to attract employees.Report

              • Avatar Dark Matter in reply to Oscar Gordon says:

                I know several people who make more money unemployed than they did while they were employed.

                Absent Covid I’m doubtful this is good for the economy. The level of expense needed to do this was very high and it seemed to be a misincentive.Report

              • Avatar Oscar Gordon in reply to Dark Matter says:

                If there was a choice between a minimum wage and a UBI, I’d take a UBI every time. Because I think a UBI is more socially useful and less economically disruptive than a minimum wage.Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                I’ve proposed a “UBI in kind” basket of things which would effectively put more money in people’s pockets;

                Like free public transportation; Free higher education or trade school; universal health care; Universal public broadband; And postal savings banking.

                What these things do is make it both cheaper to hire employees (because the employer no longer has to pay group health premiums) and increase the effective take-home wage for the employee.Report

              • Avatar Stillwater in reply to Chip Daniels says:

                Instead of a “UBI in kind” basket why not just a UBI?Report

              • Avatar Chip Daniels in reply to Stillwater says:

                I’m not opposed to that.

                But politically I think a broad basket of different targeted items is an easier lift.

                It’s easier to explain how beneficial it is to make the buses and subways free to ride to work, or why free vocational school helps the economy than it is to overcome the hurdle of “Give everyone a check every month just for breathing”.

                And also politically it becomes harder to destroy, since there isn’t a single court case or legislation that would overturn it all.Report

              • Avatar Oscar Gordon in reply to Chip Daniels says:

                The problem with those kinds of things is the value is highly variable from household to household. And the cost to provide such things typically outweighs to benefit to all. Free public transit is great for people who live AND work along a transit line, but the further you get the lower the value. Public broadband is probably good for the person who just wants to check email and look up some stuff, but not practical for someone like me, who can suck up bandwidth, and that is before we even talk about the infrastructure cost of something like that across the US.*

                Cash payments are more straightforward and we aren’t heavily investing in public goods that will be used unevenly.

                Be better off offering a UBI and for those who use the UBI as the primary income, they get additional benefits like a free/discounted bus pass, tuition at community colleges, etc.

                Postal banking is fine (I don’t get the opposition to that).

                UHC for folks on UBI, sure, why not. But be prepared for the perfect to be the enemy of the good.

                *Something like StarLink could actually make a public option feasible, but it has it’s own issues.Report

              • Avatar Chip Daniels in reply to Oscar Gordon says:

                Somewhere there’s another land
                different from this world below,
                far more mercifully planned
                than the cruel place we know.
                Innocence and peace are there–
                all is good that is desired.
                Faces there are always fair;
                love grows never old nor tired.

                https://www.youtube.com/watch?v=0YaXx6TnaKE

                …and somewhere there is a lovely land where the electoral choice is between a UBI and a basket of UBI-in-kind.Report

              • Avatar Stillwater in reply to Chip Daniels says:

                Chip, your UBI basket has pretty much zero traction politically. I hate to be the bearer of bad news. 🙁

                Since the hurdle is high for either, why not go with the simpler solution? Part of the problem with a UBI is that it sounds worse than the alternatives you propose but that’s just a trick of accounting. Rebrand it, and get on board that bus. It’s a free ride.Report

              • When I was on the legislative budget staff, I was asked to look into a particular situation by one of the members. A young woman in one of the urban counties qualified for a large number of public assistance programs. The list was highly situational: single mom, two kids, dad killed, doing a two-year radiology program at a community college. So she got TANF (cash assistance), SNAP, Medicaid, CHIP, free tuition, and full-day day care.

                The rural conservative member who had sent me off to confirm this was outraged: she was getting on the order of $35K annually. “But Senator,” I said. “She already has a well-paying job lined up when she finishes her degree, and will pay taxes forever. She, and a handful of others who just happen to temporarily qualify for lots of assistance for a short time, wouldn’t ever get to that position without quite a lot of help up front.”

                Tough call. Straight UBI isn’t ever going to be enough to get someone out of that sort of hole. In-kind services will occasionally result in individuals getting a relative lot of assistance for a while.Report

              • Avatar Stillwater in reply to Michael Cain says:

                Michael,

                I understand your point and I agree. The difference here is that you’re referring to already existing programs while Chip’s proposing is a whole slew of *new* programs designed to increase lower-income folks disposable income. If that’s the goal – and I have my doubts that it *is* the goal – then a UBI seems like a better alternative.Report

              • Avatar Chip Daniels in reply to Stillwater says:

                Me, arguing strenuously against a UBI.

                [Willy Wonka “Stop. Don’t. Come Back” gif]

                Seriously, one reason I like the basket idea is that a lot of them could be implemented at the state or municipal level;

                Mitch McConnell can’t prevent Los Angeles from making the Metro buses free, and he can’t prevent California from establishing a state bank, or the UC Board of Regents from adding a slew of vocational training to the existing community colleges.

                Once a state like New York or California has these things it gets harder for an opponent of them in Texas to paint them as bizarre newfangled innovations.Report

              • Avatar greginak in reply to Chip Daniels says:

                Huh? Once NY or Cali does it, it will be required by TX pols to condemn it as the worst thing ever commie marxist….blah blah blah.

                Depending on the items in the basket, there can be problem with people from non basket states using the free basket stuff but not paying any of the taxes. Metro buses/ trains aren’t an issue. Other things like HC will be.Report

              • Avatar Oscar Gordon in reply to Stillwater says:

                The UBI basket also has the problem of only being marginally useful to people not in urban centers.

                Cash is useful anywhere.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                What’s the budget for that, and how do we keep costs under control after we find out giving away free stuff raises the demand for them?Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                We’ll pay for it the same way we paid for the last couple rounds of tax cuts.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                We’ll pay for it the same way we paid for the last couple rounds of tax cuts.

                At the most extreme, then the budget breaks and the economy collapses.

                Population is above 300 million.

                UBI of $1000 a year is 300 Billion a year. We could do that but it’d be painful and not go very far.

                UBI of $10k a year is $3 Trillion. For comparison the entire budget of the US was $4.8 Trillion. Get rid of EVERY other social program in the US (Social Security, Medicare, etc) and maybe we could pay for it. Alternatively we can raise taxes so 90% of us are paying for our own UBI.

                Free Health Care would also cost something like that. It’s 17.7% of the GDP, something like 3.6 Trillion right now. We could have huge cost savings if we fire about 4% of the GDP’s worth of paper shufflers (if we can do that) and the Gov is already paying lots for HC so there’s that.

                Of course the demand for “Free” money in college and HC means these programs starting numbers should be low down payments.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                I was of course, being sarcastic.
                But one thing to note, is your math.

                First, no UBI would be distributed to 300 million Americans; That number includes infants, children, and the elderly who already receive it.

                Right now there’s only about 150 million people who are in the workforce.

                So a $10k/ year UBI would be about 1.5 trillion per year, a bit less than the size of the yearly budget deficit which the Trump administration incurred as a result of their tax cut foolishness.

                In other words, the Republicans COULD have instituted a yearly UBI of $10K to every American worker, and not done any more damage to the economy than they already have.

                I’m not saying they should have. But they could have.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                So a $10k/ year UBI would be about 1.5 trillion per year, a bit less than the size of the yearly budget deficit which the Trump administration incurred as a result of their tax cut foolishness.

                In other words, the Republicans COULD have instituted a yearly UBI of $10K to every American worker, and not done any more damage to the economy than they already have.

                You are incorrectly claiming the Trump tax cut was responsible for every dime of the yearly budget deficit. From budget.house.gov : “CBO projected that the tax cut will add $1.9 trillion to deficits over 10 years”

                Ergo the tax cut was $190B a year;
                Ergo your UBI would be 8 Trump Tax cuts.
                For the same money they could have instituted a $1266 a year UBI to every American worker.

                This same problem shows up with Free HC, i.e. it breaks the budget. If memory serves, over the years various states have tried to implement HC-as-an-entitlement and then had to back away because it quickly breaks the budget.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                Point conceded.
                The yearly deficit is the result of many things:

                The Republican tax cuts of 1980-1988;
                The Republican Medicare benefit of 2002;
                The Republican-led wars 2003-present;
                The Republican tax cuts of 2000-2008;
                The Republican tax cuts of 2017;Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                If our social/entitlement programs would stop growing we’d be fine.

                Big picture the electorate has figured out it can vote itself free stuff (yes, including tax cuts) and has done so.

                That’s probably the biggest long term threat this country has, and there doesn’t seem to be a good solution for it.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                Looking at my comment you don’t notice a pattern, suggestive of a solution?Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                If you’re blaming one side for wanting to spend lots but claiming your side is pure, then that’s more a reflection of where your head is at than the fiscal trust worthiness of your side.

                For example HRC ran on various giveaways she’d do and most certainly not on either rolling back entitlements nor serious tax increases to pay for what we have. Biden will do the same. Sanders and Warren tried to out compete each other on how much to spend.

                The fundamental problem is we’re willing to spend more than we’re willing to be taxed.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                The fundamental problem is we’re willing to spend more than we’re willing to be taxed.

                Agree with you on that one.Report

              • Avatar Philip H in reply to Dark Matter says:

                Some earned benefit programs wills top growing as the population of Baby Boomers dies off. its morbid but its also fact. And the generations behind are smaller.

                The lust for tax cuts – even among the masses who benefit little from them – is more a marketing success then anything else. I am fairly certain Arthur Laffer never actually believed his curve – since its unbacked by the last 40 years of data – but boy hase he made a killing off it.Report

              • Avatar Dark Matter in reply to Philip H says:

                The Reagan tax cuts, i.e. lowering the top rate from 70% to 28%, probably had a LOT to do with the Reagan recovery.

                The economic gains during that time are impressive:

                The US Median Household Income grew by 10% adjusted for inflation from 1980–1989.[5]
                The US Average Income grew by 75% from 1980–1989.[6]
                The US Real GDP Growth rate was 3.5%+ every year from 1983–1989, including 1984 when there was a 7.2% Growth Rate.[7]
                The unemployment fell from 7.5% in 1981 to 5.4% in 1989, though it spiked to 10.8% in November 1982 during the Early 1980s recession.[8]
                The Federal tax revenue doubled from $517 Billion in 1980 to 1,032 billion in 1990.[9]
                Inflation fell from 11.8% when Reagan entered office to 4.7% when he left.[10]
                The Unemployment Rate went from 7.6% when Reagan entered office, to 5.5% when he left.[11]
                The Poverty Rate fell from 14% when Reagan entered office to 12.8% when he left.[12]

                https://en.wikipedia.org/wiki/Reagan_tax_cutsReport

              • Avatar Chip Daniels in reply to Dark Matter says:

                I notice the level of deficit and debt is conspicuously absent from those stats.

                Do you think massive deficit spending, pumping billions of dollars of borrowed money into the economy might have something to do with all those gains?Report

              • Avatar Philip H in reply to Chip Daniels says:

                Deficits are NEVER to blame when Republicans are in power . . . . .Report

              • Avatar Philip H in reply to Dark Matter says:

                From the same source:

                Economic Costs

                The US Federal Tax Revenue as % of the GDP decreased from 18.5 to 17.4 from 1980–1990.[9]

                The budget deficit increased from $74 billion in 1980 to $221 billion in 1990.[9]

                The budget deficit as a % of GDP increased slightly from 2.6% in 1980 to 2.7% in 1989.

                The tax cuts are often blamed for the Wealth inequality in the United States and the Middle-class squeeze.[13]

                After the Economic Recovery Tax Act of 1981 revenues fell by 6% in real terms. This promoted a tax increase that passed the House in late 1981 and the Senate in mid-1982 called the Tax Equity and Fiscal Responsibility Act of 1982. This act was an agreement between Reagan and the Congress that raised revenues for the following years. Following that increase, there were 3 other tax increases from 1983-1987 for other various reasons. In total, the US lost over $200 billion in 2012 chained dollars due to the original tax cut in the first four years and around $1 billion for the second tax cut. The four tax increases from 1982-1987 added a total of $137 billion in revenue which adds up to roughly $64 billion in net revenue lost because of the cuts.[14]Report

              • Avatar Dark Matter in reply to Philip H says:

                That last is the most interesting one. Basically he overshot on the tax cuts and had to increase taxes to make up for it. This was a time period when politicians were willing to do that.

                As for the rest, those are trivial squeaks compared to the gains.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                The Biden campaign notes that tripling the budget deficit is a trivial squeak.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                The Biden campaign notes that tripling the budget deficit is a trivial squeak.

                If you can triple the GDP at the same time? Then yes.

                Does he have a plan for increasing the GDP, much less tripling it?Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                What magic plan did Reagan’s “Spend billions of money we don’t have” use, that any other administration wouldn’t also use?

                Is there like, some secret formula?Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                The magic word is “growth”.

                In Reagan’s case that was massively increasing investment, the return on the same, and simplying taxes (i.e. getting rid of economic disruptions). Carter was claiming it was simply impossible for an economy this large to grow, he was wrong.

                The problem is our current massive economic disruption isn’t taxes, it’s this massive HC boondoggle we’ve built up. It’s a really bad that I can point to multiple points of the GDP and claim they’re clearly not value added.

                Your “spend billions” accusation is pretty shallow after we adjust for the size of the GDP. We currently have a deficit of 4 to 5 percent of the GDP. He increased the deficit from 2.6% of the GDP to 2.7% of the GDP.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                So lets have the Biden administration do exactly the same.
                Except instead of cutting taxes, increase spending and investment, thereby increasing growth of the GDP.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                So lets have the Biden administration do exactly the same. Except instead of cutting taxes, increase spending and investment, thereby increasing growth of the GDP.

                I’d love it if the Dems would buy into the idea that increasing the GDP is the way to go. I’d change parties in a heartbeat.

                Unfortunately their current retoric and proposed policies, certainly by Warren and Sanders, were more “eat the rich! burn the economy down to fight inequality!”. That’s the opposite of growth and seriously temps me to vote for Trump.

                The word “investment” has an actual meaning and “increased gov spending on social programs” isn’t it.

                The BULK of Reagan’s “investment” wasn’t increased spending from the government. Adjust for GDP and within the margin of error that was flat. The heavy lifting of economic growth was done via reform of problematic parts of the economy. Reagan’s tax reform. Carter’s ending of oil’s price controls (although that was phased in starting in April of 1979).Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                You’re using the increase in GDP arbitrarily.

                The increase in spending was massive in raw terms, as were the tax cuts.

                Why is the increased spending measured against the increased GDP, while the tax cuts aren’t? And what makes you think the tax cuts created the rising GDP, instead of the spending?

                I could argue the reverse, that the tax cuts measured against GDP were flat, but the real cause of the rising GDP was his increased spending.

                They are equally arbitrary. The overall effect was to pump billions of unfunded dollars into the economy.Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                You’re using the increase in GDP arbitrarily.

                I’m using it appropriately and it’s very normal for me to adjust numbers for inflation, GDP, or whatever (if you search this thread for GDP you’ll probably see me doing it in other places).

                How much a “raw” number matters depends on the underlying base. That’s why the bank thinks a $100k loan is trivial if you earn millions of dollars a year and a non-starter if you earn $10k a year.

                And what makes you think the tax cuts created the rising GDP, instead of the spending?

                Because we’ve experimented with excessive spending before (and currently) and that hasn’t happened. BTW our current overspending is vastly greater both in raw terms and in percentage.

                I could argue the reverse, that the tax cuts measured against GDP were flat, but the real cause of the rising GDP was his increased spending.

                Then you’re in the awkward situation of explaining why that worked for Reagan but not for Trump (or others).

                You’re also in the awkward position that if it’s true then Reagan (and Trump for that matter) should be spending far more. The economic expansion was amazing and, adjusted for GDP, didn’t make the deficit worse. If that can be done then it SHOULD be done. If you really believe this then you shouldn’t be making quips about funding spending with borrowing money, you should be making serious proposals. If the economy is going to expand so the normalized deficit remains the same then the deficit should be as large as possible.

                This is a political argument aimed at taking away from Reagan’s success and not a math argument.

                Note I’m NOT claiming “tax cuts are always good” nor even “spending is always good”. I’m claiming “getting rid of gov created economic misallocations is good”. Reagan did such a good job that his act has been very hard to follow. The various Free Trade agreements come close but have been stretched out over many years and agreements. IMHO the big economic disruptions we have currently are Covid and HC.Report

              • Avatar Chip Daniels in reply to Dark Matter says:

                So the increase in GDP wasn’t solely tax cuts, and wasn’t solely spending increases, “getting rid of gov created economic misallocations”.

                What ” gov created economic misallocations” did Reagan get rid of, that produces such an economic miracle?Report

              • Avatar Dark Matter in reply to Chip Daniels says:

                What ” gov created economic misallocations” did Reagan get rid of, that produces such an economic miracle?

                I’ve already listed the big three. Carter’s getting rid of price fixing for oil and Reagan’s lowering the top rate on the tax code and simplifying it. Those three moves get rid of a LOT of disruptions.

                If you were paying attention during that time period tax shelters (i.e. making economic decisions purely on avoiding taxes) was a serious industry. Investing in oil was basically impossible before Reagan took office. The oil industry is currently 8% of the GDP but that’s down a lot, it’s been about twice as high.

                Crushing inflation was also his. NAFTA was his although it didn’t come into play until after he left office.Report

              • Avatar Dark Matter in reply to Oscar Gordon says:

                What we’re doing now isn’t UBI, it’s paying people to not work.Report

              • Avatar Oscar Gordon in reply to Dark Matter says:

                The point is two fold:

                1) People are still seeking work. The jobs that are there are being filled.

                2) Wages are rising naturally.Report

  11. Avatar Slade the Leveller says:

    How is it that in a conversation about minimum wage in this country no one has mentioned indexing to inflation? Since the last increase in 2009, inflation has made that $7.25/hour into $6.03/hr.Report

    • Some wise-acre would probably say something about “indexing rent to inflation”, is why. I guess.Report

    • Avatar Ozzzy! in reply to Slade the Leveller says:

      I thought the conversation was about rent levels (and given the name of the org on the report). Wages were just a nice datapoint for them to run through an algorithm, then say….well JayB pulled the quote.Report

    • Avatar Brandon Berg in reply to Slade the Leveller says:

      The problem with indexing a minimum wage to inflation is that it becomes virtually impossible to lower it if it’s raised too high. The ability to lower real wages via inflation is an important tool in fighting unemployment.Report

      • Avatar Philip H in reply to Brandon Berg says:

        um that’s funny. Lower real wages via inflation . . . fights unemployment . . . how does that work?Report

        • Avatar Brandon Berg in reply to Philip H says:

          It’s textbook Keynes. In a recession, markets fail to clear due to nominal rigidity, which keeps prices (including wages) above market-clearing levels, leading to unemployment. Inflation can overcome this problems by reducing real prices in the face of nominal rigidity, allowing markets to clear. Long-run, we want real wages to rise, but in the short term they may have to fall slightly.Report

    • Avatar Oscar Gordon in reply to Slade the Leveller says:

      Pretty sure I suggested that upthread somewhereReport

    • All the states that I know of that have set a minimum wage higher than the federal rate have also indexed it to inflation (could be some who have not, but the two changes seem to go hand-in-hand). To be blunt, the legislative majorities in many of the states that have decided to stay with the non-indexed federal level would actually prefer that there were no minimum wage law at all. I use “legislative” broadly — in Arizona, despite the Republican House, Senate, and Governor’s opposition, the voters passed a state minimum wage law by ballot initiative that reached $12.00 this year, and will increase with inflation in the future.

      Assuming the Democrats win it all at the federal level in November, a higher minimum wage indexed to inflation seems like something enough Republican Senators would go along with if it pushed off the day the filibuster died.Report

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