The walkability comes at the cost of tiny housing though.
Like here in Stockholm even 60m2 is getting very pricy (~350-450k USD).
The main issue is that there is just nowhere near enough housing to keep up with population increases, seemingly anywhere in the Western world. And housing has become a "store of value" against inflation for investors, driving up prices and becoming a retirement fund for landlords and homeowners so governments can never let the prices drop (e.g. by embracing the abundance of development proposed in this article).
>The main issue is that there is just nowhere near enough housing to keep up with population increases, seemingly anywhere in the Western world.
Not sure about Sweden but at least here (Spain) housing being bought for investment is much more of a problem than physical unavailability. And I don't mean it as a store of value:
People (and companies) buy houses to rent them and have the rent payments pay for the mortgage payments, since it's basically free money - For those that can get a mortgage, since it's pretty much mandatory to pay 20% of the cost upfront (plus taxes).
Basic needs really shouldn't be investment material.
> Basic needs really shouldn't be investment material.
Companies providing and selling food, energy, and consumer staples are investment materials. I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
These companies are invested in precisely because these are basic needs. The company gets the capital it needs to operate, consumers get a reliable supply of food, energy, and clothing, employees get steady jobs providing these staples, investors get a relatively safe store of value and some income. Who exactly loses in these investments in supply basic food, energy, and consumer staples?
>Companies providing and selling food, energy, and consumer staples are investment materials.
>companies that grow or sell food.
House builders would be the analogous party to that. The parent comment is describing landlords, specifically part-time landlords who buy up family homes and turn them into rental properties. Your analogy doesn't apply to those landlords.
A supermarket is in the business of buying food in bulk and then offering portions of food suitable for a shorter time period. A gas station buys 8000 gallons of gas from a tanker and offers it by the gallon at retail. Target/Walmart buy pallets of jeans and offer them individually to consumers. The supermarket didn’t grow the food, gas station refine the fuel, nor did Target manufacture the jeans.
A landlord is in the same business but for housing: buying in bulk (in this case in the time dimension) and selling a shorter time period’s worth of housing.
No, a grocery store is like a sub-developer, buying in bulk and splitting it up.
There is no other physical necessity sold on a time dimension. I cannot rent you water, or rent you food. Once the grocery store has sold a certain amount of food, they have to re-enter the market and buy more. Once a gas station has sold a certain amount of gas, they have to re-enter the market and buy more. Once a sub-developer has sold a certain number of homes, they have to re-enter the market and buy more.
A landlord does not. A landlord is not the same thing.
Its an interesting way of describing landlords, but we have now worked our way back to GP's original criticism, just stated in a different/less-tangible way: For landlords, the simple act of buying housing (a basic need) allows them to extract a profit in the time dimension, and it shouldn't work like that.
Seriously, what is your proposal for how it should work? Presumably the people renting the housing would have bought it themselves if they had the financial resources to do so (unless they just like having housing with no real downside investment risk).
So what would they do without a landlord? If the builders didn't have people to sell the property to, they wouldn't build them and the housing just wouldn't exist.
> Presumably the people renting the housing would have bought it themselves if they had the financial resources to do so
It's actually quite the opposite. By literal definition, every renter that's paying their rent can already afford the housing they currently occupy, because every renter is already paying for (their entire unit) as well as (all cost of maintenance) and (some extra profit for the landlord)
So by definition, every renter is always already paying more than it would cost to own, operate, and maintain their unit. Every renter on the planet (who isn't like, behind on rent) has already proven they have the financial resources to own their unit.
> So what would they do without a landlord?
Save money every month. (By the exact amount of profit the landlord currently makes).
So if you want to move out of your parents house to attend college or to begin your career, you can do so by simply purchasing an entire dwelling in perpetuity and will save money doing so?
I don't know where "in perpetuity" comes from. Nothing stops you from selling your small apartment condo later or whatever.
But yeah, generally speaking, adults should be able to own their buy and own their own housing, and be able to reside there as long as they choose to. For the same reasons we expect people to be able to own their own coats and shoes and laptops and such, and hold on to it as long as they are alive. And if people change jobs or move to a new city or start a family or whatever, they sell their old one and buy the new one.
The “in perpetuity” doesn’t mean you can never sell it, but it does mean that at the moment of purchase you’d have to pay for the discounted cash flow value of consuming that housing for the expected lifetime of the building and for using the land for the expected lifetime of the land, because that’s what you’re buying: the perpetual right to exclude others from that dwelling and land/shared land until you decide to sell it.
That is unlikely to be affordable or practical for 18 year old high-school graduates starting work or starting college away from home.
If instead of requiring people to pay for the perpetual right to occupy and exclude others, you allow them to pay for that right for only one year or one month at a time, well, that’s what renting already is.
> If instead of requiring people to pay for the perpetual right to occupy and exclude others, you allow them to pay for that right for only one year or one month at a time, well, that’s what renting already is.
No, that's what property taxes are -- and they're already paid out little bits at a time. (Here, twice yearly). Rent vs buy has nothing to do with the "right to occupy", the taxes do, and renters and owners both pay their property taxes in full (renters taxes are rolled up into their monthly rent, but same thing).
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Every benefit a landlord offers is a lie -- it's a benefit the renter setup, and the landlord is stealing credit for. A landlord does not "maintain" any property (the renter does, the renter pays money that gets spent on a property management service that does the work). A landlord does not pay any taxes for the land (the renter does, through monthly rents). A landlord did not build the structure on the property (a construction firm did, using money exclusively paid for by current and future renters). A landlord does not protect the property from risk or damage (the homeowners insurance / property insurance company does that, paid for entirely from monthly rents from the renter tenant).
You could potentially argue that the landlord is a bank, a form of financing to get money upfront and paid back later -- except they don't do that either, the Federal Government does that through a mortgage that the landlord just gets to hold for no reason, so the landlord usually isn't even risking any finances there either. A default doesn't leave a landlord high-and-dry, it leaves the general public (through the Federal Government) holding the bag.
The landlord doesn't even take on any opportunity cost risk in the US, because the US soft-mandates (though fiscal policy) that property values continuously rise on average, and passes this cost on to citizens. So, even if hypothetically all renters abandon the property in a few years, the landlord will be able to 'cash out' (sell) the property, nearly always for more than they paid for it (using appreciation paid for by past renters).
A landlords choice is literally "do I do nothing and get free money forever for no labour" or "do I cash out now, and dump the money into some other place, for the chance at more free money for no labour". That's the only "opportunity cost" they ever have to weigh.
The landlord *literally* *does* *nothing*, they provide *literally* *zero* value. They exist solely to skim money from people. It's a political choice to let these people exist and take the bulk of earned value from a given area, not some kind of need-based response to anything.
I agree with your premise that the cash flows from the tenant to pay for these things, just like employers don’t pay salaries but rather customers pay salaries and the employer just handles the money. (I disagree that property taxes are the only charge to exclusively occupy a structure. Purchase price and property taxes [and insurance] are.)
My parents were (very) small-time landlords having 0, 1, or 2 houses (or half-houses) at the time while I was growing up.
The reason that I’ve stayed away from doing it is that I saw firsthand just how much work it actually is, notwithstanding the claims from people (almost invariably never-landlords) about how easy it is.
A home needs so damn little maintenance. They're not providing that as a service. If the person owned a home maintained it - what fix a broken hot water heater for 600? And that's a reason to make more people required to rent?
The real difference (surprisingly not mentioned yet) is land for housing in cities is incredibly finite. Food, energy and consumer staples can be produced endlessly
The key here being housing in cities and I would also add in nice neighborhoods, in cities. You can still expand the city, and build more cities. For practical matters, land is not finite. Food and consumer staples are similarly finite if you only look at the nicest and most attractive versions of it. There is a constant "shortage" of michelin star food and ferraris
And are the landlords just leaving the house empty for the hell of it? Or is it being rented out to people? I know with one is more likely.
The thing is, housing is a surprisingly flexible commodity (too expensive, people live with parents/share, and then move back out if prices fall) , and encouraging everyone to buy a full on house in a suburb is a recipe to drive expensive housing.
I think you are over stating the flexibility of moving out, getting a roommate, or moving in with your parents.
What if your parents moved into a smaller residence and can't fit a family?
>And are the landlords just leaving the house empty for the hell of it?
No, but a landlord who got into the market early when properties were dirt cheap can leverage that and buy more and more for renting them out, reducing the supply and increasing the competition if you want to buy your first property and not be a renter your whole life. You know, like when you want to settle down and have kids, you're gonna be out-muscled by a landlord who already has 3 properties and is is looking to buy 2 more.
>housing is a surprisingly flexible commodity (too expensive, people live with parents/share, and then move back out if prices fall)
The thing is this is one of the reason why birth rates are so low in rich western cities. How can you expect people to start families if you expect adults to live in shared accomodations or move in with their parents?
Having access to cheap, spacious housing that's just for living and not part of someone's investment vehicle, would definitely make "nesting" an enticing proposition for young adults, like it was for the boomer generation. But if you expect them to bum around between living with roommates and living with their parents like adolescents, and their only hope of nesting being to grind away after years in university at some soul-sucking job 40+ hours/week plus commutes just to afford a bank loan for a shoe-box that they'll have to pay off till they die, then of course they'll realize this expectation of their life is a scammy wage-salve trap and say "to hell with that, I'd rather stay single, childless and free and spend my time and money on travelling, clubbing, netflix, meme-stocks and videogames".
But of course, fat chance to get governments to admit their policies of enriching the banks, property investors and the older owning class by squeezing the young is the cause of this. To them, the real reason why the young can't afford to settle down is because "these pesky millennials and zoomers spend all their money on iphones and avocado toast, so to fix this we'll allow uncontrolled mass immigration from the third world".
Housing can't be an affordable necessity for starting a family that everyone should have access to while at the same time being an investment vehicle design to enrich their owners. It's either one or the other and most of the west has chosen the latter while talking how the former is more important.
In Austria, the goverment isn't even hiding the fact that housing is officially an investment vehicle, with the conservative party throwing the blame back on the people for not having bought properties as the reason why they stay poor and can't afford to keep up with rent increases. Despicable!
Investment buyers and owner-occupants both provide the cash to the homebuilders to allow them to go build the next home. You can't sell a home without a buyer.
I don't think requiring anyone who wants housing to be financially able to buy an entire home is sensible, meaning that some entity needs to be in the business of paying for more housing than they personally need to allow people to have housing who can't or don't want to buy an entire dwelling unit.
Maybe you want the government to have a monopoly on that activity, but someone needs to provide it or you end up with far less access to housing and far more people living on the street than currently.
Housing is also subsidized in the US, the FHA, USDA and VA all have housing subsidy programs. States and local governments also operate housing subsidy programs.
>Companies providing and selling food, energy, and consumer staples are investment materials. I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
Companies providing and selling food are providing a service. Large investors that buy in bulk, keeping new hosing out of the market to keep prices high, are not really providing anything - they are just a different kind of consumer.
I would make a parallel with the relation between gamers and bitcoin miners in the graphic cards market: miners can pay more and buy in bulk, which makes prices rise and prices out gamers. Only in this case, the people who are being priced out are no longer able to cover a basic need.
"I don’t get why housing should be a special carve-out "
Capital and leverage.
Wealthy and access to capital can build, rent and make giant returns.
Students paying off debt cannot even get the minimum down payment.
If everyone rented, and, if transition costs were very simple i.e. you could 'jump homes with ease' - then this would be less of a problem.
Also I would add stability. A government job which can be had for life, they will get a mortgage. A private sector worker or freelancer, may have blips in income, a bad blip means no mortgage payment which is very bad.
The consistency required for 25 years of paying off something lends power to the entrenched kinds of workers.
> Students paying off debt cannot even get the minimum down payment.
This is huge. My wife and I are pretty privileged and own a very modest fixer-upper home on the very edge of a coastal metro area. We somehow managed this only after a decade of paying off ~150k of student loans that our parents encouraged us to take out when we were effectively children.
I have friends who are software engineers who own big houses in the city who skipped a 4 year degree altogether or their parents were able to pay for their education.
The difference between them and me? They were able to pocket that 150k as opposed to giving it to some useless university administrators and various federal lenders.
Private utility companies are often subjected to regulatory board controls. Their local monopoly is limited by a representative (supposedly) of the public's interests. That low-risk investment has its potential returns limited to what a board deems "reasonable".
Some states regulate residential housing, or at least taxes on it, to limit what municipalities and counties may do with their taxing authority. It wouldn't be much of a stretch to regulate the rents charged by "housing provider" individuals or companies to be, on average, 1/3 of average local income.
> I don’t get why housing should be a special carve-out and don’t see a workable answer to how to provide food for everyone while banning all investment in companies that grow or sell food.
The economy exists to support everyone's life, not the other way around. Just because you can argue someone can make a quick buck selling a basic necessity, that does not mean it's ok to deprive a whole community of basic necessities.
Take for example water. Would it be ok to hold everyone hostage over access to it, and even lobby for municipalities to stop the public sector from encroaching onto a service provided by a private business, just because Nestle and the likes bottle and sell it?
The current delta between the have and have-nots, and the profound impact that "small" real estate investments have on pushing access to housing far out of reach of your average middle and upper-middle class family, is a collosal social and economical red flag. Access to housing has a profound impact on everyone's lives and even community. You accept jobs based on access to housing, and the amount of time wasted supporting said job is time eaten away from the time you spend doing far more important things like caring for your children and family. Being deprived from that just because a faceless investor wanted to park his bailout money somewhere and decided to dump it in real estate hurts society.
i think you misunderstand. the tail has been wagging the dog for some time now. it is not for the market to adapt to our needs, it is for us to adapt to the market and hopefully we can extract what we need.
> it is not for the market to adapt to our needs, it is for us to adapt to the market and hopefully we can extract what we need.
The market isn't a magical entity which demands human sacrifices. It's quite possible to keep it reigned in with a combination of banning private property investments[1] with public housing and urban renewal projects. Cut down on detrimental demand and increase supply.
The role of investors in the economy is ultimately to finance new development.
It's easy to see how this works when an investor is the first owner. If it weren't for the initial investor with the required capital and/or credit to make the purchase, the housing likely wouldn't have been built in the first place.
Now you may ask, what is the role of investors who buy up older properties? They provide valuable liquidity to the market, which provides an incentive for the initial investors to invest. Both investors and regular homeowners alike prefer to own a property that they can easily sell on short notice if needed. Without investors buying up "second-hand" properties, it would be harder to sell a property making homes a less attractive investment. Fewer people would buy new properties, resulting in less new housing being built.
All of this extra development spurred by investment money pouring in leads to lower rents for everyone since rents are pure supply/demand. If you build more, rents will go down.
The role of investors in the economy is ultimately to finance new development. ===> False. The role of investors is to make money.
If you build more, rents will go down. ===> In theory True. In practice self builds lower the pricing. The barriers set by bureaucracy for the sake of bureaucracy are the problem and they cause property prices to go up. EDIT: Restrictions set by bureaucracy is what creates artificial scarcity(think diamonds market)
"They provide valuable liquidity to the market" ===> False. It's long term value storage and/or speculation.
The same properties would be bought by new families if they were closer to a realistic price. You'd get the same if not more cash movement if it would be affordable. By affordable I mean: A young couple with minimum wage should be able to pay it off in 10-15 years with no problems. Not in 35-50.
As a sidenote(IMHO): Ideally, property ownership should be limited to 1/+18 year old to prevent/reduce speculations. Maybe 2 if we're talking about adding a holiday home(yeah. I know it's a strech).
Companies should not be alowed to own residential properties unless they are a developer. In that case, they can own the newly developed properties for up to ?5? years.
> The role of investors in the economy is ultimately to finance new development. ===> False. The role of investors is to make money.
No. The market pays investors if they managed to allocate capital well, and takes away their money if they happened to misallocate it. The investors take on a risk of loosing their money if their investment goes bad. This is how capitalism is so successful. Investors who make good decisions grow richer and that allows them make more good decisions on how to allocate capital, creating a positive feedback loop. Investors who make bad decisions go broke and that prevents them from misallocating any more capital.
> If you build more, rents will go down. ===> In theory True. In practice self builds lower the pricing. The barriers set by bureaucracy for the sake of bureaucracy are the problem and they cause property prices to go up. EDIT: Restrictions set by bureaucracy is what creates artificial scarcity(think diamonds market)
I'm all for small government and cutting down on bureaucracy.
> As a sidenote(IMHO): Ideally, property ownership should be limited to 1/+18 year old to prevent/reduce speculations. Maybe 2 if we're talking about adding a holiday home(yeah. I know it's a strech). Companies should not be alowed to own residential properties unless they are a developer. In that case, they can own the newly developed properties for up to ?5? years.
That's exactly the kind of regulation that prevents efficient capital allocation and leads to increased pricing.
"and leads to increased pricing. " ==> I can see the effects efficient capital allocation and no limits on properties owned had on the price of properties in the past 20 years.
Don't take this the wrong way mate but this is exactly the sort of mentality that led to this situation in the first place.
Keep in mind this comes from someone that owns 8 fully paid off flats (going 9 next year) and a good sized house(enough for a family of 6-7) in the country side with 50HA of arable land+forest. I am not complaining about the current laws or that it bothered me in any way. I'm saying that current laws+ speculation are keeping youngsters away from owning a property in a reasonable ammount of time. The way I see it, they live with a chain around their neck for 1 lousy house with cardboard walls.
"The market pays investors" ---> Stakeholders pay investors for sucessful speculation(in other words - investment)
I am a part of the young demographic you're talking about, so I have experienced the (compared to my parent's time) inflated prices first hand. I only own one investment property (in a large city) so far and it's mostly debt.
If you scroll down a little bit you'll see that in another comment I have written that I think the high prices of today are caused mostly by the influx of young people into cities. It is for the most part simply a case of having too many people wanting to live in a limited geographic area. In particular, they want amenities and jobs which tend to be concentrated in big cities.
The only way out is to either build more (with much higher density) increasing the capacity of existing cities or to revitalize small towns as hubs for remote workers with all the amenities they want. As it stands right now, even with remote work on the rise, myself included (I have a fully remote job yet I choose to live in an expensive city), not too many people my age would want to live in a small town their parents or grandparents may have happily lived their whole lives in.
The reason I believe that is the case is that rents are expensive too. Speculation may affect property prices, but it does not lead to increased rent prices. That is barring a few extremes where people buy housing for investment and don't rent it out or live there, which fortunately doesn't seem to be too common -- just take a walk outside in the evening and you'll get a good idea of how many houses/apartments are lived in. In general property tax is designed to prevent this.
Bad policies like rent control may lead to inflated rents (cheap rents for original residents only mean much higher rents for everyone else), but you do see high rents even in cities without such bad policies.
As a landlord, I charge market rent. I'm happy to lower it if I have trouble finding a tenant, as even an absurdly low amount is much better for me than having the property be empty -- I have a mortgage to pay. So far I haven't had to. In fact, the current tenant offered to pay me more rent than what I had originally listed the property for in exchange for me making some minor improvements to the property! I was more than happy to oblige.
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There's one more factor making the situation look worse than it is -- low interest rates. People often calculate how many average annual salaries it takes to buy a place and compare that with the past, but I believe that is not the right metric to look at.
The right metric to look at should be yearly interest as a percentage of one's annual salary. In theory, if the interest rate is cut in half (i.e. from 2% to 1%) you'd expect home prices to effectively double since one can pay the same amount of interest to own a place twice as expensive.
This doesn't quite happen in reality, because when home prices rise, even when accompanied by lower interest rates, a mortgage usually requires a down payment which does scale linearly with the house price along with the principal you are required to pay every month.
You'd be right to point out that this does disproportionately affect younger and less wealthy people, since the more wealth you have, the less you have to rely on traditional mortgages -- you could borrow against your stock portfolio for example, and only pay interest, in which case the interest rate being cut in half indeed does let you own twice as much house with the same cash flow. Of course, you do need to be prepared to weather the storm that may come should the interest rate start rising again, which is precisely why it would be too risky for banks to let the average Joe do something like that -> hence a down payment and monthly principal repayment is required for most mortgages.
I'm not sure what's the best way of solving this. Ideally, your average young person should be able to buy twice the house when the interest rate is halved, but they do need to be shielded from the risk of the interest rate suddenly going up somehow. The government stepping in as a guarantor would likely lead to moral hazard deforming the market which I'm not a fan of. I'm of the opinion that interest rates are mostly determined by the broader market and large secular trends like demographics and technological advancement, as opposed to central bankers, so I don't think this can be solved by attempting to manipulate the interest rate either.
Overall I think the first problem of housing scarcity which is reflected in rent prices is a much bigger issue and solving that would help lessen the effects of the second one.
Supply and demand is the simplistic view of economy taught to middle schoolers, it's disappointing that people use it for reasoning about the world after completing that level of education.
I think you're locked into a Capitalist view there.
What you say amounts to "without rich people to pay every time they do some work poor people wouldn't be able to build houses". I don't buy it. I think it's perfectly possible to organise society without the driving force being "how can we as a society benefit this tiny cadre of super-rich people without pissing-off everyone else enough that they revolt".
Of course you need to wrest control from the people who can buy "mind control", and vote to allow corruption from the ruling party (cf UK parliament yesterday).
>All of this extra development spurred by investment money pouring in leads to lower rents for everyone //
The more we give to the rich the cheaper everything will be for us plebs, yeah, you're going to have to spend a bit more on your PR to press that idea home.
Countries ranking at the top have had a few decades of government provided homes (communist countries).
Now, they are not the most prosperous countries in the world, but my theory is that it's exactly because there is not as big a pressure to work just to have a roof over your head. Which is why foreigners frequently comment on the easygoing attitude and carelessness they see in people.
This simply isn't true in the UK. You can't drive 5 miles without seeing some giant new sprawl of new build housing, yet rent is increasing year on year.
Not just the UK, but virtually everywhere in the developed world.
New apartments are being built because it's more and more profitable to do so. It's more profitable, because the property prices are increasing. The property prices are increasing because rent is increasing. It takes tremendous mental gymnastics not to realise it.
The way to lower the rent is to make renting less profitable (eg. by taxing it higher), limit any homeowner support (eg. tax breaks on mortgage) only to the first residential property and control the mortgage amount that can be provided by banks.
Ideally someone who's buying property to live in should be paying 20%+ less than someone who's buying it to rent.
Then perhaps building even more is what's needed to keep up with the demand. If you keep building at a fast enough pace, then at some point, there will be more housing units than prospective renters, landlords start having trouble finding tenants, and that's when prices will inevitably fall. If demand is rising, then housing needs to be built at an even faster rate. Rising demand can be very hard to keep up with, and I believe that's what we're experiencing right now.
I don't live in the UK, so I'm not too familiar with the specifics there, but what seems to be happening worldwide is that young people are flocking to cities. I'm fairly young myself and I don't know anyone my age who would like to live in a small town in the middle of nowhere - everyone I know was either born in a larger city or moved to one.
In the past, if you were born in a small town, maybe there was a factory nearby and you'd end up working there. Only a few would move out.
These days the factory has most likely closed, and the jobs were shipped off to China. Even if, by some miracle, it happened to still be open, most young people wouldn't want to work there anyway. Young people tend to be more educated and want jobs where they can make use of their education. These jobs tend to be located in big cities.
There are only two ways out of this mess:
The first one is to satisfy the demand -- that means building more, a lot more. No Western country is currently building enough. The demand is so huge that the only way to satisfy it would be very high-density housing. I'm talking 30+ stories apartment buildings everywhere like you see in East Asia. This would have to be accompanied by enough public transport because at that population density, you'd need super wide highways everywhere to support people driving cars. I don't think allowing such construction is politically feasible, however, as it would completely change the character of existing cities.
The other one is to embrace remote work and revitalize small towns. Remote work is not enough since people still demand the amenities cities provide. These are lacking precisely because so many young people have left, causing a negative feedback loop. We need trendy cafes and restaurants, we need WeWork locations, and for young families, we need high-quality school/preschool/daycare. If small towns "gentrify" with such amenities causing young remote-workers to start moving there, this may significantly ease the demand pressure on city housing.
The best solution is probably a combination of the above two.
legitimate (non-speculative) demand is more than enough to fuel construction. People will still need to live somewhere, and therefore will pay for it. They just won't need to pay stupidly high prices because half the offer is hoarded by large companies to artificially inflate the price.
A decent apartment here costs the equivalent of 20 times the average income. you need to have roughly 25% of the cost for a mortgage to be granted, according to local regulation, which would be 5 times your yearly salary. Try to save that considering that just renting (while you save) will easily take 50-60% of your income.
Even those who can do it will only achieve it after more than a decade of paying through the nose.
Housing cooperatives are a thing, most people don't seem very interested, but if you are, you can certainly get some other like-minded individuals together and start one!
I agree completely, at least here in Sweden it's harder to rent flats out, so this is less common (it might change next year though when the conservatives/nationalists win).
IMO I'd make renting restricted to government monopoly (like alcohol sales in Sweden, and the old first-hand contracts system), and property ownership restricted to your residence only, and then build much, much more whilst stopping mass immigration (it's crazy to invite 2+ million refugees when there isn't enough housing already!).
If you use price per square meter to compare European housing to American housing, Europe seems super expensive. But, if you compare by the functional space (# bedrooms), Europe is cheap.
I moved from San Diego to Amsterdam and was very happy to find 3-4 bedroom apartments to buy (the bank accepted my self employment income and gave a 1.6% interest rate). Apartments are well designed so you don’t need as much space.
I live half a block from a grocery store and still get a lot of groceries delivered. We have 3 kids and no cars. Cheap and easy to rent if we want one for the day. I love this life style where the kids can walk and bike everywhere themself.
Son: “Dad, I have to go to guitar, but it is raining”
Dad: “Here are your rain pants. Hurry, but be careful biking in the rain”
I guess you're on a US salary as a contractor? There's no way I could afford more than 2 bedrooms in the city as a senior engineer, and even that's a push.
Yeah, that US viewpoint kinda irks me too. Of course Europe is cheap when you earn US tech salaries. Amsterdam is definitely not cheap on your average non-FAANG/IB local Dutch wages.
>I recall housing prices being mostly reasonable 15-20 years ago
And bitcoin was a fraction of a dollar just 10 years ago. Unfortunately, we don't have a time machine and the housing prices of today have far outpaced the earning increases that the working class saw in that time.
15-20 years ago, housing was seen mostly as a place you'd buy to live yourself, not an investment vehicle you'd buy to get grand returns from. That's the difference.
Our opinions on the cause aside, we had reasonably priced housing before, we can have it again, without fundamentally changing the way our cities are built (that's not to discount any other reasons to do so).
For FAANG, levels.fyi shows pretty competitive salaries in European cities where it has presence (Munich, Amsterdam, London, etc) — most are in six figures. Every time I put those figures in expatistan.com, I absolutely don’t get the feeling that FAANG salaries are low in Europe.
Local European IT firms (your local broadband provider, or a supermarket chain) normally pay much less though.
I’m not in Amsterdam, but my mate works in Amsterdam and lives on a single engineer Dutch salary in a beautiful 2 bed with a separate dinning/kitchen/lounge near Sarphatipark, 10 minutes walk from Museumplein, walking distance from the Rembrandt Museum and to work.
Did he buy or rent the apartment recently and from his own savings+income? Many such stories involve an old rental contract, a family-owned apartment or sizeable inheritance.
Bought from own savings and income 4 years ago with no help from parents, not a family-owned apartment or sizeable inheritance. Owner is an immigrant from a developing country, the exchange rate alone would be prohibitive for any family assistance.
IIRC the housing market in the Netherlands 4 years ago was way more accessible than the madness of today so that's probably not a surprise that he could afford it. Ask him if he could have bought in the market of today please.
Still affordable in today’s market. This shouldn’t even be up to discussion as anyone can check the available houses for sale in Amsterdam and what they sold for.
It's sort of viable, but you'd have to spend 2-3 years living in overpriced temporary sublets while trying to save up to that deposit, and still it just supports the original comment which was that you could only afford 2 bedrooms and even that is a push.
To get one of those 600k apartments you'd have to flip your first apartment for the bigger downpayment, and that's gonna take another 2 years.
We are talking about living right in the centre of Amsterdam. No one is stopping you from buying something with a much lower deposit at a cycling distance from the city centre or a much smaller deposit with a 30 minutes public transport commute for 2 years so you can then afford to live in one of the most desirable areas of a main city with a sizeable tourist industry.
That’s 2 years saving to then live where you want and then an extra 2 years to live where you want in the apartment that you want which is oversized for a single person.
Why do you need a 3 bed as a single person and what’s your ideal scenario? Do you want to be able to afford a house without a deposit, is that it?
My own company. Capitol cities are expensive; but compared with most, I still find Amsterdam reasonable. Part of the reason is that it isn’t necessary to live in Amsterdam to have the kind of lifestyle I’m describing; there are so many walkable, bikeable, transport accessible,kid-friendly and beautiful neighborhoods in this country. Open to critique; it’s a beautiful day today so I have my rose colored glasses on.
Here are the family places in Amsterdam for less than 900k. According to ABNAMRO, that’s affordable (with mortgage), if you have two incomes that gross 150k.
https://www.funda.nl/koop/gemeente-amsterdam/
In my experience, it's bullshit. The author must be conflating staff positions with "senior".
I was paid 75k as an L5 engineer at Amazon, that's like intermediate senior (two levels down from Staff). So maybe one level up you'd get 100-110k?
I've never seen salaries anywhere close to that article. Even contractors might pay $150k (and then you have to pay your own taxes, insurance, etc. out of that).
The author is spot on. You just happened to be working for the scrappiest/shittiest faang that's all. Shop around, there is decent money to be made in Europe - but of course it's not as easy to walk into it as in the US today. Oh and don't forget that it's TC that matters in big public tech, not salary.
I have gone through interview rounds a few months ago at several of the companies the author mentions in the blog post and I can confirm that the range seems about right. The offers I received for their EU offices were between €120k - €170k (total comp).
But - compared to what I have heard about the US, the variance between offers is much more extreme in the EU, depending on whether these companies only compete in the local market or globally, and it is really hard to figure this out before going through the whole process. I have been surprised by a few companies that pay very competitive salaries in the US but which are barely competitive compared to some of the salaries I know from local companies here in the EU.
So yeah, it is possible to find these salaries in the EU, but they will still be considerably lower than what you can expect in the US and the bad offers are harder to weed out in the EU.
>You just happened to be working for the scrappiest/shittiest faang that's all.
You know, with this statement you've just proved his point, that good tech wages in Europe are super scarce when you need to be very picky with wich FAANG you join for good compensation. That's basically skimming the cream off the cream you just skimmed. How much are you left with now, ~1% of the total tech jobs?
Amazon is worst payer among them in the US as well. Facebook and Google pay decent money in London and Zurich, almost on par with US in the latter, London is maybe ~30% less.
> How much are you left with now, ~1% of the total tech jobs?
If you want top 1% pay, you gonna have to hunt for top 1% jobs, seems obvious, no?
>If you want top 1% pay, you gonna have to hunt for top 1% jobs, seems obvious, no?
Of course, but the discussion was about the fact that the tech job market in Europe is poor. You pointing out that the top 1% devs in Europe make really good money doesn't change that since the 99% are left with sub-paar options.
To make it clearer, a better indication would be to look at median opportunities and wages in the tech sectors, and here the wages in the EU are far lower than in the US even when adjusted for the local purchasing power and real estate prices (actually, I think this makes it even worse for Europe, as stuff cost more and real estate is more expensive).
If you remove the 1%ers like FAANGS and other US unicorns pumped with VC money form the EU tech scene, you're not left with much good local grown opportunities, the wages take a massive nose-dive, which is what the majority is earning.
Anyone getting USD75k/EUR65K/GBP55K in Europe can afford to buy an apartment in any of the major cities, including London with access to a walking lifestyle.
Add a partner’s salary to the equation and you are walking your kids to school and living the dream.
To be fair for me (Swiss and self employed) the renting prices in beautiful places like Haarlem or Rotterdam appeared really tempting. Nice big apartments nearby the city for less than $1000/m are basically unheard of in Switzerland, or Austria for that matter.
No idea what locals earn there, but from a outside perspective it appeared really affordable if you ignore the high taxes :3
If I may ask, your profile says "Professor of Human Centered Design"
- is this why you moved to the Netherlands? I'm very curious about your work, based on that.
That’s why I moved to the Netherlands. While the pay for professors was almost half the pay in the USA (ouch), it was allowed for me to continue to run my company.
No, it's not walkability that makes apartments in central Stockholm expensive. There's just not much more space there for more houses. For decades car traffic was what was prioritised. Just look at old Slussen which was just a couple of big traffic circles, with narrow tunnels for pedestrians. Or Sergel's torg, arguably the most central square in Sweden, which is dominated by a big traffic circle and with shops and pedestrian areas underground.
Then it is true that too little housing is built, and with the current very low interest rates people can afford to pay a lot for their dwellings. But I don't think it is intentional to not build more.
Car traffic is still prioritised, the new slussen is still an 8 lane highway right through the middle of the city, and the biggest reason it's downsized is that the ring road is now finished. And the biggest reason why Stockholm is managing to be so "car free" is because the highways are in tunnels underground.
I do think it is an improvement that they nowadays put cars in tunnels and people above ground.
But it would of course be much better if they had spent all that money they used for car tunnels on public transport and more bicycle lanes and highways.
Too car friendly for my taste and I don’t get why people drive so much.
Stockholm is small enough that it’s walkable with fast public transport connecting everything.
I don’t think it ever took me over 30 minutes to get anywhere, none of my friends drive in town but over half of them own a car so we are often traveling north for skiing, south for the summer, weekends in someone’s parent’s farm, but I have no recent memory of driving around town, there’s just no need, plus, no drinking, so it’s a nonstarter.
> Like here in Stockholm even 60m2 is getting very pricy (~350-450k USD).
Isn't that still really cheap compared to NY or Silicon Valley? Rising housing prices has more to do with pressure to move to a select few cities rather than walkability or rising population. E.g. in Germany housing in Munich, Hamburg or Frankfurt costs multiples of housing in smaller eastern German cities.
Taxes are also much higher (especially if your employer has good health insurance coverage in the US, so the added benefits are less). Like I pay an average 40% rate on income plus 25% sales tax, the marginal rate on income (and RSUs, etc.) is 56%!
It's really painful for stuff like housing which is a similar price (and increasing!), or inelastic international goods like electronics, cars, fuel (which is also heavily taxed), etc.
Americans are incredibly lucky - far higher wages, and the freedom to manage your own finances (not forced to pay for irresponsible parents' lifestyle choices through extremely high taxes).
“Americans are incredibly lucky - far higher wages, and the freedom to manage your own finances (not forced to pay for irresponsible parents' lifestyle choices through extremely high taxes).”
USA is a huge nation with extreme variations in housing costs and salaries depending on location. Most workers get few benefits, no vacation time, and meager government benefits. Homeless people wander most areas especially urban due to these issues. Still think Americans are lucky?
Don't forget the 31.42% payroll tax that's hidden from your salary but a tax right on it.
A salary of 50k SEK costs the employer 65.7k SEK on their books, which is what actually matters. The actual marginal taxrate flowing from your employers books at that level is somewhere up at 75%-80%, not even counting sales tax when you use the money.
I was just in Italy and it seemed like all the restaurants were packed every night. They're not cheap. How are people able to eat out so much in EU on these salaries?
'loads and loads' is kind of not quantitative enough imo.
Not saying you're wrong.
I've just read that Europeans make objectively WAYYYY less than American's in tech jobs to a staggering depressing amount for the same amount of work...
So just rustles my jimmies to see unscientific hearsay rumours about them to make their situation worse.
I was just in Italy the last few months and it's true that street food is cheap but normal restaurants are similar to US prices and those places were packed every night in every city I visited.
> remember those freedoms can also destroy your life, if you end up on the other end. Americans have to step over homeless people on the sidewalks, who got fired, who got sick while uninsured, who are addicted or mentally ill. Those who do well live in suburbia, where their kids are also not that free, going outside alone is too dangerous.
I support universal healthcare, free life-long education and universal paid leave.
I don't support inviting 3 million refugees (to a nation of only 11 million people at the time) when we have no spare housing, or being forced to fund others' childcare (it's a lifestyle choice).
For software engineers, there are employers in Stockholm that pay much more than 63k USD p.a. A good income combined with the low mortgage interest rate (~1.4%) and the basically tax-free investment accounts (ISK/KF) make Stockholm a pretty good place to make money in over time.
I think the original poster is off by a bit, 350-450k USD for 60m2 is what you pay outside Stockholm. In the city proper, it's ~770k USD for 60m2. Basically this segregates society into the "haves" and the "have nots".
> The walkability comes at the cost of tiny housing though.
Is it really obligatory? I know that it is often correlated, but it is possible to build apartment tower with decently sized apartments, in a walkable neighbourhood.
Maybe it tends to be more profitable to split apartments into smaller one? While splitting house plots into smaller being less profitable and resulting in this effect?
Walkability is highly correlated with population density. Dense walkable neighborhoods are more attractive. These two together make housing small and expensive.
Walkable neighborhoods need destinations you can walk to. Businesses need a minimum number of customers to be viable, so the denser the neighborhood the more variety of destinations it will have.
To avoid cars taking up the space, it's necessary to have high-frequency public transport, and that also requires high population density to be viable.
Isn't Toronto one of the most expensive cities to live in North America? If you are building large houses in a nice, walkable area, you can't fit enough people there to match demand, and so the cost of the housing spikes. The point is that you can pick 2: walkability, large houses, affordability.
* Walkability, large houses = very expensive neighborhoods and gentrification
* Large houses, affordable = rural areas where cars are required
* Affordable, walkable neighborhood = Tiny apartments/homes in an urban area
Those houses—actually the land that they're built on—are expensive nowadays because living in the urban city is cool again.
Up until ~2000 it was not so, because living in the city was for immigrants and all the WASPs moved into the innter/outer suburbs with their white picket fences. The area of the links is where the Poles concentrated; to the west were the Ukrainians; to the east is Little Portugal (then onto Chinatown); to the north-east is Little Italy. Toronto is a good example of what Jane Jacobs saying 'you don't live in a city, but in a neighbourhood':
And the reason why Toronto (SW Ontario) is so expensive, especially since 2015, is because we've had so much immigration in the region, but housing hasn't kept up by pure volume (regardless of density or other factors).
Basically over the course of about 20 years, college educated twenty somethings decided they liked living in the city. When I graduated from grad school, aside from those working in Manhattan, almost none of my cohort moved to a city.
I guess for walkable as in literally able to walk somewhere that works.
But I was thinking about walkability from European perspective where it means you don't need to own a car (the places you've liked to look like every household has a car). When I lived in London on multiple occasions I've had jobs within 20 minute walk from where I lived.
> you don't need to own a car (the places you've liked to look like every household has a car).
I know people who are in the area that do not have a car, but the area has been gentrified over the last few years, so folks have cars 'just because why not' really.
Still generally applies per the label of streetcar suburbs. The area in question is just south of a subway line, and Roncesvalles has a streetcar line going through it to a station.
'Not become' but 'has been' for decades. You only now start to notice it as inflation and wages have not kept up.
This is by design in most post-WW 2 western economies as an economic policy to "increase national wealth". That's why housing loans are subsidized and whatnot.
Well post-WW2 there was a huge boom in construction in Europe at least.
Especially since many cities were almost completely destroyed. Even where my grandparents lived in England, the Blitz destroyed a lot of homes and meant mass construction was inevitable.
It's really been since the 80s, that all infrastructure and construction projects have been slowed down and hampered by NIMBYism - and it's all about just pumping up the existing prices through artificial scarcity.
How comes in eastern Europe where fertility is low, immigration is practically non-existent and wages much lower than Sweden, the property prices keep rising too?
Because of internal immigration. Due to povery, lack of investments and lack of opportunities, the countryside there is becoming empty fast as everyone moves from the villages/small cities to the 3-5 big metro areas in the country with top universities and cushy skilled desk-jobs instead of bumming around in rural areas begging for low paying manual labor type jobs.
In western europe, rural areas and small towns, although boring AF, usually have some trade schools or small collages and local industries of their own that still keep locals there and sometimes attract foreigners so not everyone has to scram to the big cities, although big cities there have major housing issues too.
Wages there are high for skilled workers who can sell their work on the global market, like tech workers, but people are tired of the herd stupidity of the population, political corruption, the incompetente of government institutions, underfunded healthcare, useless police, etc. so they pack up and leave even though they'll take a hit on lifestyle frivolities.
I think that the reason is similar to why stocks have appreciated so much - long-term interest rates have dropped as a result of QE.
What central banks usually do is that they buy short-term bonds to affect short-term rates. QE means that they buy long-term bonds to affect long-term rates.
> The walkability comes at the cost of tiny housing though.
You might have your correlation/causation things mixed up. Walkability means higher quality of life, which means higher demand thus higher prices. In turn, as real estate prices go up, real estate developers are pressured to provide more houses from a limited construction area, thus this means shrinking apartment sizes.
Offering smaller apartments also has the advantage of increasing price per unit of area, while keeping selling prices within reach of the market segment you're targeting, i.e., you might not afford 1M for a house with 200m² but you might afford 500m for a house with 100m².
Walkability demands density, and density intrinsically is encouraged by smaller units. Now, obviously the economic factor you describe can exacerbate this, but fundamentally dense walkable neighborhoods can't have the kind of sprawly mcmansions some people have grown comfortable with in suburbia.
I live in exactly that kind of pre-war streetcar suburb and yes, I've heard suburbanites complain that the houses in these neighborhoods are too small and narrow and lack attached garages. So yes, even the moderate walkability created by streetcar suburbs is still requires a shift to noticeably smaller homes for many North Americans acclimatized to sprawl.
Firstly, walkability only means higher prices if supply is limited. If it's the default, then supply matches demand.
Secondly, a grocery store needs say 500 potential customers (households) within walking/transit distance. A cafe 2,000. A specialist shop 5,000. Otherwise they need parking for customers arriving by car, which takes up yet more space, making the area less walkable, inducing more car demand and car lanes, etc. The same calculation applies to schools, parks and other amenities.
It isn't possible to reach those customer numbers while giving each family American suburbia levels of space.
> Firstly, walkability only means higher prices if supply is limited.
Isn't it, though?
In fact, not only is it limited, it's also a market on the supply side.
> Secondly, a grocery store needs say 500 potential customers (households) within walking/transit distance.
In consolidated urban areas with medium density occupation, such as city centers in pretty much any relatively large European city, you already have multiple supermarkets at a stone's throw. In some places like Madrid some suburban areas even have multiple supermarkets in the same apartment block. Feel free to do a quick search for "supermarket" in Google Maps and just look around.
Like here in Stockholm even 60m2 is getting very pricy (~350-450k USD).
The main issue is that there is just nowhere near enough housing to keep up with population increases, seemingly anywhere in the Western world. And housing has become a "store of value" against inflation for investors, driving up prices and becoming a retirement fund for landlords and homeowners so governments can never let the prices drop (e.g. by embracing the abundance of development proposed in this article).