This Is Why Rent Is So High

The Law of Rent:

The rent is so high because very few people own major property in the city, and most of the non owners are too dim to comprehend that they will be paying for every tax increase they approve at the ballot box.

Seattle

So basically, it's what we've known since we were kids? It's better to own, then rent? Sounds like it!

This is why people call economics a pseudoscience.

Chomsky said:

So basically, it's what we've known since we were kids? It's better to own, then rent? Sounds like it!

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U Know sir that U and I have a problem at the moment, But I refuse to let that get in the way of making sure U understand that this.....this U get right.

:thumbs:

Geoist said:

The Law of Rent:

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I think that John should grab Steve's flagpole and shove it up.........well...you know the rest.
Instead of a physical confrontation, John should join this guy's political party....

The video verifies that increased wages will contribute to a higher cost of living for all -- so, that should tell those who favor forced increased minimum wages that they'll just be creating a vicious cycle of inflation and higher rent.

Good video for opposing minimum wage increases.

Chomsky said:

So basically, it's what we've known since we were kids? It's better to own, then rent? Sounds like it!

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The problem comes when most can't afford to own.

Geoist said:

The Law of Rent:

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Real.estate is an entirely unnatural market because you cannot choose not to participate.

It is literally illegal to sleep in the united states unless somebody pays.

Even the wilderness requires a pass. And that pass forbids foraging.

We are only free to choose who we pay. Not whether or not to pay.

When they have you by the balls...

In the example, the second guy should have told the first guy to go **** himself.

If we all woke up tomorrow on a planet vacant except for ourselves there's no way in hell we'd go for the current "deal".

And the first guy in the video would need armed men to enforce his claims.

Which explains a lot of history.

Geoist said:

The Law of Rent:

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Yep, the bottom line is that land is the source of all wealth.

Hawkeye10 said:

The rent is so high because very few people own major property in the city,

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And fairly large chunks of cities sit vacant/idle/underutilized while people push outward seeking cheaper land leading to all the problems of sprawl. So the question is, how do we fix this problem without Soviet-style land confiscation/redistribution?

and most of the non owners are too dim to comprehend that they will be paying for every tax increase they approve at the ballot box.

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Depends on the tax, but I do agree that many taxes do get passed down.

Carjosse said:

The problem comes when most can't afford to own.

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Nope; the problem comes when most want to own more than they can afford and the banks tell them: "Sure, you can swing it."

Something the video barely touched on: The landlord has bills too.

Since we don't live on a desert island or a frontier, the landlord probably had to BUY that land from someone in the first place. The purchase price he paid is part of what determines the rent... he probably had to take out a MORTGAGE.

Then he has to pay TAXES on that land every year to the government... in a sense he pays "rent" to the government for the privilege of owning land.

Then there are EXPENSES... if he wants to rent the property there are certain standards required of him, in the maintenance and condition of the property.

Add in his MORTGAGE payment, the TAXES, and his EXPENSES and you now know the MINIMUM he can charge for rent.


Ok, but he didn't go to all this bother, getting the mortgage paying the taxes and expenses (and probably improvements) just to BREAK EVEN... though in fact landlords with properties that only break even or are NEGATIVE CASH FLOW properties is a real problem... but he wants to make a profit like any other businessman, otherwise why bother?


If you've never been a landlord you probably don't realize that his profit margin may be rather slim. There are often economies of scale where it is more profitable to own and rent out 100 units than 5 units, on a per-unit basis. That's IF you can afford to own 100 units to start with, or go that far in debt... thus large-scale ownership is typically more profitable and more likely to remain in business, so the landlord biz trends towards the big owners over time.

There is risk...if property values or rents decline or expenses/taxes/etc go up, or the renters tear up your houses and disappear and you have to spend $$ to fix them again, you can end up with an unsustainable NEGATIVE CASH FLOW and become a "Don't Want-er".... someone desperate to get rid of their property... then along comes someone with some cash to take advantage of your desperation.... this is where Gentrification often comes in, pushing the lower-income renters out because in its older less appealing state the property couldn't generate enough rent to be viable for any owner.

So one thing the owner has in spades is RISK. The renter has his problems, the landlord has his own.

Chomsky said:

So basically, it's what we've known since we were kids? It's better to own, then rent? Sounds like it!

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Since most mainstream economists treat land as capital I seriously don’t think most of adults understand. Most Americans don’t actually ‘own’ their property as they are usually paying off a mortgage to a lender.

Geoist said:

And fairly large chunks of cities sit vacant/idle/underutilized while people push outward seeking cheaper land leading to all the problems of sprawl. So the question is, how do we fix this problem without Soviet-style land confiscation/redistribution?




.....

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A lot of that land is vacant or unused, because the current owner can't find anyone to rent it to that would make it worthwhile... given the mortgage or debt, taxes and expenses involved... so it ends up being worth more as a tax write-off, or is seized by the city who finds nobody wants to buy it from them either, quite possibly because the neighborhood has gone to ****.

HowardBThiname said:

The video verifies that increased wages will contribute to a higher cost of living for all -- so, that should tell those who favor forced increased minimum wages that they'll just be creating a vicious cycle of inflation and higher rent.

Good video for opposing minimum wage increases.

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Increased wages for the working class means money that is immediately returned to the economy, and a good chunk of that going to the landlords. We are between a rock and a hard place when it comes to wages. They are not increasing at a pace to keep up with cost of living so we have to put a floor on it. There are unintended consequences, but it is still better than the conservative alternative. Minimum wage is a bandaid on a severed limb.

Carjosse said:

The problem comes when most can't afford to own.

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And rich people buy up all the land. Even worse, foreign investors pay cash over asking for land that the regular person can't afford. Then like the video said, they can charge more and more in rent.

Geoist said:

Since most mainstream economists treat land as capital I seriously don’t think most of adults understand. Most Americans don’t actually ‘own’ their property as they are usually paying off a mortgage to a lender.

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That's because for most Americans it's the only way it's financially feasible to buy real property. If it's one's personal residence, or a rental property that can or will soon carry itself, they're usually a great investment when chosen wisely and in a normal appreciating real-estate market. And if they were smart enough to take a sane mortgage, they will indeed eventually own their property free & clear.

I've done the rent-vs-buy calculation ad-nauseaum when I was starting-out in life, and as long as your intention is to stay in the place for a long time - the numbers always sided with 'buy'. Plus you end-up with a fixed mortgage (if you're smart), whereas rent costs will appreciate over time, to say nothing of the added security of not being at a landlord's whim.

If they are stable financially & geographically, I think (among other things) owning one's own set of digs should be the goal of a young man. Get-in early in life, with no more than a 15 year mortgage. You'll thank me in mid-age when you see the equity & stability you have. Your housing costs will be very low, you'll be beholden to no one, and you'll have a nice sized chunk of equity should you decide to ever move.

Chomsky said:

So basically, it's what we've known since we were kids? It's better to own, then rent? Sounds like it!

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depends on your situation. If i was single i would rent.
why? it is more beneficial to me to rent.

I don't want the responsibility of maintenance or the cost of that on the place i am renting.

I own a home now it is a pain in the rear end to upkeep when something breaks.
i have to get a new roof put on my place cost is going to be about 8k dollars.

I have had to replace the water heater and the entire AC system for about 6k total.
replaced the carpet another 3k
redid a bathroom another 2k.

just money money money and money (except for the bathroom i will never get back out of it
if i sale it.)

Chomsky said:

That's because for most Americans it's the only way it's financially feasible to buy real property. If it's one's personal residence, or a rental property that can or will soon carry itself, they're usually a great investment when chosen wisely and in a normal appreciating real-estate market. And if they were smart enough to take a sane mortgage, they will indeed eventually own their property free & clear.

I've done the rent-vs-buy calculation ad-nauseaum when I was starting-out in life, and as long as your intention is to stay in the place for a long time - the numbers always sided with 'buy'. Plus you end-up with a fixed mortgage (if you're smart), whereas rent costs will appreciate over time, to say nothing of the added security of not being at a landlord's whim.

If they are stable financially & geographically, I think (among other things) owning one's own set of digs should be the goal of a young man. Get-in early in life, with no more than a 15 year mortgage. You'll thank me in mid-age when you see the equity & stability you have. Your housing costs will be very low, you'll be beholden to no one, and you'll have a nice sized chunk of equity should you decide to ever move.

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I am a happy man: my place is paid off. My cars are paid off. I owe almost nothing. Great place to be even if it took 20 years to get here.

The beauty of a fixed mortgage is over time it tends to consume a smaller % of your income.

Chomsky said:

That's because for most Americans it's the only way it's financially feasible to buy real property. If it's one's personal residence, or a rental property that can or will soon carry itself, they're usually a great investment when chosen wisely and in a normal appreciating real-estate market. And if they were smart enough to take a sane mortgage, they will indeed eventually own their property free & clear.

I've done the rent-vs-buy calculation ad-nauseaum when I was starting-out in life, and as long as your intention is to stay in the place for a long time - the numbers always sided with 'buy'. Plus you end-up with a fixed mortgage (if you're smart), whereas rent costs will appreciate over time, to say nothing of the added security of not being at a landlord's whim.

If they are stable financially & geographically, I think (among other things) owning one's own set of digs should be the goal of a young man. Get-in early in life, with no more than a 15 year mortgage. You'll thank me in mid-age when you see the equity & stability you have. Your housing costs will be very low, you'll be beholden to no one, and you'll have a nice sized chunk of equity should you decide to ever move.

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2 out of 3 of my kids bought houses with a 15yr fixed/20% down before their 25th b-day... other kid lives in Seattle (and pays more in rent than her siblings pay in house payments).

Chomsky said:

That's because for most Americans it's the only way it's financially feasible to buy real property. If it's one's personal residence, or a rental property that can or will soon carry itself, they're usually a great investment when chosen wisely and in a normal appreciating real-estate market. And if they were smart enough to take a sane mortgage, they will indeed eventually own their property free & clear.

I've done the rent-vs-buy calculation ad-nauseaum when I was starting-out in life, and as long as your intention is to stay in the place for a long time - the numbers always sided with 'buy'. Plus you end-up with a fixed mortgage (if you're smart), whereas rent costs will appreciate over time, to say nothing of the added security of not being at a landlord's whim.

If they are stable financially & geographically, I think (among other things) owning one's own set of digs should be the goal of a young man. Get-in early in life, with no more than a 15 year mortgage. You'll thank me in mid-age when you see the equity & stability you have. Your housing costs will be very low, you'll be beholden to no one, and you'll have a nice sized chunk of equity should you decide to ever move.

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I did things a little differently since I didn't want to lock myself in one location and limit my job prospects. I rented cheap, say a master bedroom with a private bath in a SFH or townhouse - no apartments. I didn't buy a house until I was in my early 40's and about to get married. It's worked out well. The only reason we have a tiny mortgage on our current house is that it seemed better to keep that money in the market and not pay the cap gains hit. Interest rates at ~4% - it made sense.

...and that's our only debt. Cars, everything else is free and clear.

Moral : Look at Chomsky's forehead - THINK! Come up with a plan that will work for you and apply it.

Geoist said:

The Law of Rent:

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At some point John's going to get sick of Steve, kill him and take his stuff.

On another note, I always wondered what happened to the guy who did the voice overs for middle school sex ed films.

By the time we retire we should have zero debt so our home equity is enough to pay for the small fortune we will need to live in a nursing home. Or have enough retirement income....
My wife and I could do it either way.

Goshin said:

A lot of that land is vacant or unused, because the current owner can't find anyone to rent it to that would make it worthwhile...

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So the financially sound thing to do should be to sell the property to someone would better utilize the site. The tax write off only encourages speculation and drives up costs for everyone else.