Rising rents are almost entirely because of local restrictions on creating more housing. The beneficiaries of restricted supply are existing owners and landlords.
Rent is a strict substitute for buying property so the rental prices in most cases track the real estate prices fairly closely. In fact, rental prices tend to change much faster than property as rent can be raised every year while a mortgage doesn't necessarily change once the sale has been finalized.
http://www.independent.co.uk/news/new-zealand-foreigners-buy...
https://www.washingtonpost.com/realestate/wealthy-chinese-bu...
https://www.forbes.com/sites/sarahsu/2016/10/31/chinese-inve...
And here's an article talking about a study done in Vancouver indicating these activities are driving rent prices too high:
https://beta.theglobeandmail.com/news/british-columbia/out-o...
Making assumptions about people because they say something that doesn't fit your world view is just as dangerous as xenophobia itself.
If we abolished Prop 13 statewide, did some minor up-zoning throughout the Bay Area (and had more mixed use zones), made new housing easier to construct (less drawn out process for people to block development, etc.), reduced parking requirements, worked on improving public transit, and taxed unlived-in buildings [or better, switched toward land-value taxes], did more planning at a regional rather than municipal level, we could take a lot of incremental bites out of the housing quagmire.
Unfortunately most of those are politically infeasible.
From a strictly economic perspective they are helping increase demand when it was low and increase supply later on. They got rewarded for that.
inherently more risky than building up in any other city, like NY or HK?
If those restrictions are a constant, then foreign purchases can still play a huge role in pent up demand.
Plus, there are limits to how much you can (and want to) built. You don't want to cover every inch of land with buildings, or grow into sprawling third-world style megacities...
see also: freddie mac / high tuition / yadda
I live in downtown chicago where rents are reasonable and skyscrapers for living at everywhere.
Meanwhile, you gotta move heaven and earth to build high density housing in some cities like SF. Even suburbs will fight 4 story apartment buildings. It's not rocket science.
Let the foreigners invest in building more of them. When the crash happens, the locals get to buy them back on the cheap.
What shouldn't happen is foreigners investing in sitting stock as a bank to store funds....zoning laws are like NIMBY on steroids with a long history of racism and classicism.
That's what really is what we should be angry about.
If you want to know what Seattle is actually infamous for: https://en.wikipedia.org/wiki/Seattle_process
I'm genuinely curious. Coming from Vancouver where rents compared to salaries are considered beyond insane, what I found on Chicago's craigslist seem to be comparable. That is, accounting for exchange rate but not salaries.
https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...
$1900/mo got me a 2-story townhouse in chicago just south of the south loop; maybe 15 min by train to the heart of the city, 20 min walk to chinatown
Had 3 proper bedrooms and an attic, so with 3 roomates it was more like $450/mo
Reason?
Outdated zoning laws and hotels were slow to catch up with the tourist industry.
It was crazy watching my nearby competitors(the major hotels) adjust prices like the stock market.....
$1800 a night for the last suite at the sheraton up from $250-500 normally. Bonoroo and Country Music festival held the same week is what I called "Second christmas".
2 massive hotels went up downtown and another third is coming online soon.
Sank my new years and March madness profits.... It was a good run.
Then again, canadian salaries are lower and exchange rates are a factor.
Many high rises under construction here....they aren't building them for tax breaks.
This is my biggest concern with wanting to dip my families toes into their first home purchase. We lived in Seattle last few years and the market is stupid, we recently moved to Bay area and this market is even more silly. (I know we pick some great places for first time home buyer but careers and education take you where they take you, that's another discussion.)
I've lived here for 5 years and have been saving, was getting pretty close to being able to afford a house, and the last year or so has seen such a huge increase in home prices and a decrease in availability that I've given up hope.
Or you could be bankrupt.
Either one seems equally possible to me.
The key issue here is that there's housing that's unoccupied, even under lots of demand. The fix for that is to tax or ban unoccupied housing, not ban foreign housing.
An investor from Texas can simply open a Vanguard account. The theoretical mechanism for Chinese speculation is that real estate is the path of least regulatory resistance compared to stock markets, etc. under Chinese law.
If you think the states property markets are crazy, well, the Chinese ones are crazier by an order of magnitude. It's no wonder that many wealthy Chinese see the states (or other countries) as a safer bet. The upside is that rents in china are still reasonable (so that 7 million yuan apartment is only renting for 10k RMB/month).
However, the same was true with Japan, and when their asset bubble crashed, it took many foreign markets with it (taking about a decade to recover, heck, even California, especially California, suffered).
10 years later in major metropolitan areas, property prices are even higher than they were in 2007. Most likely the Federal government would pursue another bailout during a housing "collapse".
While it has been true in the Vancouver market, I read an article recently mentioning otherwise for Seattle: http://www.sightline.org/2017/07/05/stop-blaming-foreign-hom...
If governments are to serve their people, then they should curtail this speculation. Of course in America, corporations are people.
What Citizens United established was that free speech applied to legal personality generally, not humans in particular. Folk forget that this includes organisations they like, as well as the many they don't. It's easy to dislike the situation (as I do), but trickier to explain how to define a way out of it.
I recently had a house burn down in a neighborhood with numerous $150k houses. Cost to rebuild a similar structure was over $200k. I got three bids and every contractor told me the cost was much higher than nearby existing properties because legally, the house would need to be built with different materials and different building requirements.
My home insurance company made this very clear when I started a policy with them - they discussed the price of the house (e.g. in tax roll estimates of "land improvement") vs their estimated replacement cost. Even with new requirements though, no one talks about the productivity improvements in construction - from faster to put up materials, to the abundance of various tools .. is it really regulations or a form of cost disease...
Even absent any non-resident speculators, the demand is still going to significantly exceed supply such that the prices increase given that housing is not growing at the rate of population. Foreign speculators may or may not make it worse but they aren't the primary cause of price increases; simple supply and demand is sufficient to explain it.
The US has traditionally put free markets above human rights.
(In lip service, that is -- the US had plenty of protective taxes and tariffs early on).
Homelessness is a mental health issue. Nobody is homeless because of foreign speculators.
Yes, people are indeed incentivized to relocate to housing markets that Chinese people have never heard of like, for instance, Tacoma.
If those people spent half their time working and saving (like their parents did) as they spent bitching about their basic human right to live in a walkable neighborhood with artisanal foodstuffs they would then have a nice down payment when the inevitable crash comes to the hot housing market in question.
The reasons you're bringing up are strawmen at best. The people who are homeless or on the brink of homelessness are not complaining about artisanal food stuffs.
In Oakland, a family of 4 has been living in a single family home for 15 years. This year, after new owners purchased the property, the rent went up 100% in one year. Needless to say, they are facing a housing crisis where they will be homeless.
If you want to understand the severity of the situation, I suggest just literally googling "homelessness housing crisis bay area" and read all the both qualitative and quantitive reporting done on the issue.
Here's a brief stat overview to refute your claim that it's a "mental issue" primarily: http://www.socialsolutions.com/blog/2016-homelessness-statis...
As a resident of the bay area I assure you that I read about this topic every single day - and consume a wide range of reporting and editorial.[1]
"... the rent went up 100% in one year. Needless to say, they are facing a housing crisis where they will be homeless."
That's not obvious at all. Certainly that's a very difficult situation and I suppose it is technically true that they will indeed be homeless as they physically move their bodies to their new home ... but there is nothing at all new or noteworthy about people making rational economic decisions about what they can and cannot afford - and voting with their feet for new locales.
The only thing that's new (and this is something I encounter more and more frequently, especially in the bay area) is the idea that not only is housing a basic human right but housing in an arbitrary location without any consideration of ones actual economic status is a basic human right. This is, I am afraid, absurd.
I am open-minded about the notion of housing as a human right. I completely reject the notion of housing wherever one most prefers[2] as a basic human right (or any kind of right whatsoever).
[1] 48 Hills, for example.
[2] Where you grew up, where you raised your kids, where the cool restaurants are, where the artists are at ... etc.
If a person is paying $1000 a month, and sees a 2% increase every year and can afford it, but then can't afford a 100% increase in one year, are you saying they made bad economic decisions? OR that they should have anticipated the housing market to shift so drastically?
Of course not, because, as you said, it is absurd to not consider ones actual economic status.
Wrt to the newly homeless who have been evicted - i think it is convenient to chalk this up to market economics, but the truth is that zoning, housing, and rental laws have created an environment where you are seeing mass displacement of people. You may say "well that's the market" but you might feel different if it was you and yours. It also trivializes the value those people bring to their communities, and the lag effect in economic production their displacement will invariably produce. Longer commutes = less productivity (http://www.cityam.com/265145/heres-just-much-impact-long-com...).
I don't disagree that you need to consider economic status, but in that vein, it's worth considering that housing laws help us define the values we want in a community and sometimes those are not always economic.
At the end of the day, there is pretty conclusive evidence that building more affordable housing is good for cities.
I won't make the overly broad claim that nobody ever demands housing in popular districts, but I don't think this reflects the reality of many housing decisions; usually it's about convenience; convenient commute to work, convenient access to schools and hospitals, convenient shopping for necessities (food, etc), convenient utilities. I know that some people get a thrill out of living in hip areas (my brother lived in a popular section of Chicago for years and paid outrageous prices for a hole in the wall), but more often than naught people just want a convenient location with the ability to perform their daily tasks without undue stress.
Living abroad, it's possible for me to have an hour commute because the public transportation is reliable and cheap and there are ample options for shopping at virtually every transit stop. This was not the case when I was in the US and my car was destroyed by a drunk driver; having lived in Tacoma, I enjoyed their transit system, but it was not convenient, as missing your bus even slightly after peak hours meant a 45 minute wait in the rain just for an hour commute and then another 15-30 minutes walking.
The cost of living in the US isn't just reflected in the rental price on the apartment or the cost of the house/condo; it's also with how livable the area actually is and what you need to live well in an area.
My experience is that typically this is what people are frustrated with and concerned about, not so much having fantastic apartment or homes at the coolest place. Bringing up such a concern just seems like focusing on an edge case and diluting the main concerns when it comes to difficulties with housing. I was lucky enough that the worst rent increases I had were to the tune of $30 every other year - that was as simple as deciding not to get takeout once or twice a month when I may otherwise had done so. This was in Tacoma in a relatively stable part of the city; but as Tacoma continues to try and shake off it's former reputation, many of the neighborhoods at the time were being bought up and rebuilt, and I had friends who lived near such areas whose rent shot up much more, and what was a place where they could live rapidly became beyond their means and they had to seek new housing. It's easy (relatively) to move when you have even a small amount of financial freedom, but when you are restricted financially, adjusting to rapidly increasing rental prices is very difficult. It has long reaching effects and leaves an already trouble part of the population without options as they are forced to move further and further away from the things they depend on into situations which aren't good for their situation.
You'd be an idiot to invest unless your in a super stable job or confident you can find another quick in a recession.
I've been in a similar situation and thank god for Airbnb.
Somehow we have a societal consensus that it's your basic human right to live in a quiet neighborhood free of traffic, shadows, or other humans. It's good to see some push in the opposite direction.
Same thing in Los Angeles (the entire county) and Irvine.
That, and a cultural shift toward wanting to live in cities, even though many of these financially struggling millennials would do just fine financially in more distant suburbs.
The movement away from cities had a lot of reasons that have been solved(jobs came back, riots, red lining, less pollution, less crime) so I'd say the cultural shift was justified to return.
Commuting sucks too.
They had a housing shortage for the past few years and removed a lot of restrictions. Recently they actually overbuilt despite a shortage of skilled construction workers.
You can build hella fast when the demand is there and the government wants buildings fast. We're talking skyscrapers in 12-14 months.
In Seattle, for example, many (newly) wealthy Chinese people are buying houses purely for investment purposes. I know some of them. One of them has purchased 10 houses, and lives in only one of them (when they are in the states). They've made millions on just this speculation.
In the short term, this means housing prices are absurd. In the long term, when these houses are no longer appreciating in value at such large scales, we can expect a crash in the housing market. Which will likely mean something similar to the housing crisis of 2008.
The Seattle city council has wanted to pass a law that would make it visible to the public which houses were being bought by foreign investors, but it was deemed illegal.
https://www.seattletimes.com/seattle-news/politics/proposed-...
To me, this is absurd. This is a human rights issue (homelessness is growing by a large amount). This is also a national security issue; this speculation cannot happen forever, and when it ends, I forsee an awful crash.