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Comment by arcticbull | Hacker News Reader

I agree with part of your premise -- artificial supply constraints caused by NIMBY-ism precludes building up in highest-demand metros which causes prices to go up.

On the other hand, "human flourishing" is unlikely tied to real estate. Real estate is an investment vehicle, and one that is pretty broadly indexed to inflation on average in the US. It's often the case that renting somewhere cheaper will leave you economically advantaged as compared to ownership. I'd suggest playing with the variables on the New York Times rent vs. buy calculator from a few years back [1]. Owning is by no means a "clear win" but rather part of the American wealth-building narrative.

[1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

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I guess the OP means that humans are less able to function if they have to pay out a large proportion of their salary in rent, which is basically true for people living in cities near to jobs. It becomes a constant source of anxiety, and could mean that any break from work threatens to make them homeless. So it's probably fair to say that humans don't "flourish" if house prices (and therefore rent or mortgage payments) are very high in the specific places where jobs are located.

Imagine an article bemoaning the fact that the cost of clean potable water was coming down across the country and calling for massive government intervention to increase the price of drinking water. That’s how this kind of article reads to me.

That's the rentier run society for you. Seriously high rents and real estate prices rat fucks the real economy.

The only satisfying thing about the pandemic is before the it hit our companies new landlord told us he was raising the rent to $4/sqft. We've just scored a better for us place a block away for $1.5/sqft. We're taking one of his other tenants with us too.

> I guess the OP means that humans are less able to function if they have to pay out a large proportion of their salary in rent, which is basically true for people living in cities near to jobs.

I hear you but owning isn't a solution to that for most people. When you take into account the interest on a 30-year fixed-rate mortgage, HOAs, property taxes, homeowners insurance and 1% per year in repairs/upgrades, and periodic remodels. As a renter you're on the hook for none of that.

A 1-bedroom 700sqft apartment in downtown SF rents for ~$3750 in my building.

It's worth about $840K. You're out:

- The opportunity cost on a $168,000 investment.

- $2080/month in interest.

- $870.00/month in HOA fees.

- $83.33/month in homeowners insurance.

- $1260/month in property taxes.

- $700/month saved up towards your 1%/year repair bill.

That means you're paying $4700 per month in what amounts to rent, and you're setting aside $1000 per month in principal saved in the first year. Once you deduct those from the salary you need to afford it in the first place, we're talking right around what rent would be.

In general, especially in these areas, not only are your PITI payments really, really high -- rent tracks all-in expenses. Basically the cost of renting an apartment is approximately what the non-recoupables would be owning, for much of the first decade of ownership.

I’m not commenting either way on who should own the housing stock. But whoever owns it, cost to live in it is strongly correlated with cost to buy it. So when prices come down that’s a good thing, not a bad thing. Same as with food, clean water, clothing, and for that matter cell phones, TVs, and musical instruments.

Agreed. My points are:

(1) renting doesn't necessarily automatically have to put you at a disadvantage to owning (so long as you're investing what would have gone to principal) as there's a lot people forget to factor in.

(2) house prices per square foot on average are the same now factoring in inflation as they were in 1970 and

(3) house prices in major metros are governed not by anything other than artificial supply constraints imposed by city councils acting on behalf of landowners to the detriment of renters. They are unlikely to change substantially as a result of this financial ... hiccup.

Not that I disagree with your point, but to finish the conclusion: in the rent scenario you save $12k a year, or about 1.4% of the purchase price.

As the return on investing that $12k will be so low (in dollar terms), it is perfectly rational to own if you believe the condo will increase in value by even a little more than 1.4% per year. And as our government goes out of its way to prop prices up, that seems like a safe assumption over the long term.

I don’t think you are taking into account leverage and the cost of it.

That’s the major difference between stocks and homes. In the first case the government sharply limits private lending, in the second it has nationalized the industry and subsidizes it significantly.

> Real estate is an investment vehicle

That's the problem. Real estate can't perpetually be both affordable and a good investment.

Yes, I agree completely. It's not physically possible, but it's also the core of the American financial wellness narrative. It is heartening however than on average it only tracks inflation, so it's not an investment so much as a store of value.

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