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Comment by jgh | Hacker News Reader

I'm pretty ignorant when it comes to gentrification, so perhaps someone could help me understand: how it is that we're simultaneously hearing about how poor millennials apparently are overall compared to their parents generation, and gentrification and spiraling housing costs in seemingly every city?

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I live in NYC. Gentrification happens like this right now:

1. lower income neighborhood becomes trendy because poor artists (read: cool people) live there because it's cheap.

2. Rich people who want to be cool start to also move there for more access to culture.

3. This is the "sauce": Wealthy developers buy up 3 story homes and convert them into 3 apartments. (I live in one.)

4. They then rent these apartments out at rates that are "affordable" to a person willing to live with 4 other roommates.

5. The poor lower income people (read: families) that used to live there are getting priced out due to the wealthy developers and "single" people who are banding together.

Now, your point about comparing to my parents: they purchased a house when they were 2 years younger than I am now. (mid late 20's) I work in tech, so I make close to 2-3x more than most of my non-tech friends. I'm still about ~4 years away from comfortably being able to put a downpayment on a home in anywhere I want to live and I live debt free and am an aggressive saver.

For most of my non-tech friends, home ownership is literally a dream.

0. The local economy adds thousands of competitively paid knowledge-work jobs, recruits the best candidates from around the country and world to fill them, and makes offers that are at least good enough to fund a bachelor lifestyle without the benefit of tenure in the city.

To be upfront, I don't know this for a fact, but what I always hear when this topic is discussed is that corporations are buying a lot of properties as an investment and leaving them vacant or renting them out via AirBNB, etc., thereby preventing that unit from actually serving as someone's home. If we accept this, it appears that a relatively small number of people is basically shutting off a large chunk of the available real estate.

Again, this is just what I hear, not what I know, but it is possible that this is at least part of the explanation.

That’s exactly what happened in cities hit hard by the last recession. Private equity types bought thousands of houses under an array of LLCs from banks.

My wife worked for a utility at the time and noticed this when things started picking up. About 100 different LLCs bought 600 properties in one area all with 3 billing addresses.

One of the other posters described it best. Capital is both more sophisticated and dumb. We’re in an era very different than anything that has happened before.

Does private equity actually hold properties vacant for long periods of time? Blackstone, for example, owns a ton of real estate, but it's actually in the landlord business.

Millennials who are able to find good jobs do so by migrating to a handful of cities, driving up the cost of housing there. When they do, they rent urban/transit-connected apartments, which white professionals haven't really done en masse since White Flight [0].

Stagnant cities and (especially) their outlying freeway sprawl are cheaper than ever.

[0] https://en.wikipedia.org/wiki/White_flight

Increasing wealth inequality. Economic activity and investments are being concentrated in big cities.

Millenials are probably waiting for their parents to pass away, and then inherit their property. It's the path with least resistance.

I qualify as a Millenial and I don’t know a single person who’s planning on doing this. I rent right now in a major city but am looking to buy, maybe, in the next few years. For my peer group anyway that’s the norm. What I do find as one of the major drivers of increased housing costs are actually Boomers (aka my parents generation) engaging in a nasty kind of NIMBYism - a sort of “I got mine” mentality. My fear is that we’re building in a lot of tail risk into our cities by behaving this way and not building. There’s all sorts of absurd zoning rules all over the country. Things won’t change until there’s another collapse.

They would collectively be in really bad shape if that is the case. I don't think the average boomer is leaving much in terms of an estate behind. I expect a whole lot of HELOC and reverse mortgaging going on in the next 10-20 years as the severe lack of retirement savings of that generation comes into focus.

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