“I didn’t become a software engineer to be trying to make ends meet.” — a Twitter employee
Bury or Praise Rent?
We’re not numerous but we who love science and swear by logic want to know the worth of Earth in America. Not just out of curiosity but also because such knowledge is crucial. Yet according to conventional economists, mainstream statisticians, even some critics and reformers, “rent” does not matter.
They trivialize and misconstrue “rent”. Economists compare it to the portion of earnings of a talented person above the earnings of an average person. No, that’s wages, however towering. Want an accurate analogy? Try urban drivers stuffing coins into a parking meter.
Naysayers say our spending for land et al is not enough to either feed or starve economic growth. Cynics claim that capital accounts for growth, yet it’s the soaring price of land that stymies growth. And it’s not owning capital that widens the income gap but owning land as Matthew Rognlie shows in correcting Thomas Piketty. Can’t get more relevant than that.
Doubters also doubt land’s impact on the business cycle. They’re not impressed by the “geonomic” argument, to wit … Our spending for never-produced land—typically beneath housing—gets so huge, that it consumes so much of our household budgets, that we don’t have enough wherewithal to spend on the goods and services that our neighbors do produce. That spells recession. Can’t get more crucial than that, either.
If only some agency would track and release figures for spending for land and other assets non-produced. That’d let us see the approaching tipping point where a downturn follows. Rational actors could take protective measure, re-arrange their portfolios. Furthermore, knowing the success of their economy, society might find a socially beneficial use for this windfall now arriving in very few pockets.
The Opposing Lineups
In the political sphere, our critics say, despite evidence to the contrary, that no one demographic gets the lion’s share of such spending; it’s spread out. And no one misspends it. Yet even if true, are those reasons enough to oppose others trying to tabulate this value?
You can’t blame the help, of course. Academics depend on donors and subsidies, bureaucrats squarely on government expenditure. It’s a bit much to expect hirelings to go against the grain, even if public servants, paid with public funds, should serve the public at large.
Funny that a mere statistic is controversial. It does not take much guesswork to imagine why, or an ounce of cynicism. Those who get the spending for land now want to keep it for themselves. Keeping the total unknown helps their cause. Slam dunk.
Ironically, what’s taboo to academics is invisible to most critics. Reformers, without any pressure constricting them, give rent a pass. Look at what they overlook. As Bloomberg’s Noah Smith said, “[I]t’s landlords, not corporate overlords, who are sucking up the wealth in the economy.” And when humans wage war—for oil today, for surface land in the past—it’s not for the actual turf so much as it is for the payments people make for the stuff.
Housing Conflict > Land Value Stat?
Yet given human diversity, some reformers might lend a hand in ferreting out a stat for “rent”, particularly those battling NIMBYs for affordable housing:
- The New England Public Policy Center, which is at the Federal Reserve Bank of Boston, unabashedly finger land rent.
- Demographia International Housing Affordability Survey: 2016
- The Washington Post WonkBlog reported that Hawaiians are fleeing paradise because rent is too high. (January 5) Later they reported that the National Low Income Housing Coalition sees the gap between wages and rent growing. (June 8)
- CityLab reports the nation’s largest generation, Millennials, have been slower to buy houses due to affordability and location; the Boomers’ suburbs lack the appeal of urban housing. (April 17)
- Harvard reports that “Over 38 million American households can't afford their housing, an increase of 146% in the past 16 years.” (July 13)
- Stanford researchers found affordable housing raises local land value. (2016 December) By how much? Maybe they’ll help us find out.
- The Urban Land Institute is “Facing the Challenges of Affordable Senior Housing” (September 20).
- BuildZoom notes the high cost of housing in expensive coastal metros is driven not by construction costs but by land. Because developers must acquire spendy land, building on it and selling what gets built is not necessarily lucrative. (October 17).
- The Dirt by the American Society of Landscape Architects notes low-pay but essential jobs downtown don’t pay workers enough to live downtown. (Oct 20).
- Not the Housing Rights Committee but a techie making six figures who no longer can afford Silicon Valley who said venture capitalists should quit investing in silly apps and instead solve social issues. (February 27)
- Bloomberg opined that tech corps should argue less about visas and more about affordable housing for the employees. (April 20)
- Wired reports tech workers do well financially and bid up housing prices, which takes a toll on everyone else, especially blue-collar and service workers, who are increasingly priced out. (April 26)
- Slate in their section Metropolis: Cities of Today and Tomorrow, ran “San Francisco’s Civil War” (June 28). Across the bay in Oakland, some have turned to living in shipping containers with their tiny footprint on land.
- The magazine Politico reports the YIMBY Party, a coalition of renters, blocked a San Francisco ballot initiative to move zoning decisions beyond local control. Frustrated by high rents, they call for higher density housing and the federal government to get involved. Perhaps the US would tally land values for us all. (July 7)
- Researchers at UC Berkeley found that more than half of low-income households in the Bay Area, including those in higher-income neighborhoods, are at risk of, or already experiencing, gentrification. (August 24)
- Techies flee to places like Portland and Austin, making those places unaffordable. Or stay behind; in LA, more Millennials live with their parents than all-ages live in Chicago (nearly 4 million). (August 29)
- A recent University of Southern California survey said the high cost of living, especially housing, which is location, was making it difficult for businesses to retain employees (April 12)
Most of the above appeared in 2017. One can find a dozen similar articles every year.
Once a critical mass sees how cost of living rides location rent, they may demand the statistic from responsible agencies. Meanwhile, let’s trot on over to the hall of records, see what officials have to say. Googling should dislodge the statistic easily, eh?
This article is Part 4 of a series highlighting the forthcoming book, “Bounty Hunter: a gadfly’s quest to know the worth of Earth,” by Jeffery J. Smith. To date, the experts have not risen to meet the challenge. Indeed, some have even stood in the way. Yet the payoff for knowing this datum is huge.
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