> All else being equal, I would gladly earn $1 million per year and spend 75% of it on rent

Ah, so you want to live in San Francisco

There IS a reason why rent in high cost areas are so, well, costly.

If you go to NYC or SF and make 400k/year after tax, who cares if housing costs you 300k out of that. Especially if you're buying, in which case you can get part of your money back once you sell.

And when the bubble pops, how long will you be able to make your 30k/month mortgage payments?

You won’t, because you were smart and rented instead. :)

haha, but what if it doesn't pop and we see something like Japan's economy from the early 90's on? High prices that never come down, combined with wage stagnation? We're kind of already seeing it now.

You can then move to a flyover state in the mid-west, and buy a palace for the $100,000/year you were stashing away.

This is the future. Silicon valley rent problems are a network optimization problem best solved by pushing resources to the edge of the graph.

Ya it has to be. We have so many square miles of underutilized cheap land between the costs it's crazy. The federal government owns around 60-90% of the land in the western states too. If only there was a way to communicate without being face to face.

Especially with the type of technical work that's so predominate on the west coast.

A lot of that work could be moved to cheaper interior parts of the country.

Yet for some reason tech giants insist on building more opulent, centralized megaoffices in unaffordable areas. Perhaps it is because they do not bear the brunt of these costs.

One reason is that the executives who make the decisions on office locations can easily afford to live nearby. And most of them prefer to live in fashionable areas.

Japanese real estate has been in a hole for a long time. It's significantly cheaper to live in Tokyo than in a major US city now.

Wages have to stagnate for a whole long time for our 200k+ salaries to lose their value.

I'll worry about that in 10 years if that happens. Plenty of time.

Woah, when did renting became the smart choice?

As a thought experiment, imagine that you could rent a million dollar house for 1$/year. Then renting is obviously the smart thing to do. So rental yields are an important factor, as are your expectations of house price growth, opportunity costs etc.

But if rental yields are low (as they are now) and you do not expect house prices to rise at a fast rate in the future, renting can easily be the smart choice.

Regarding future house price increases. It seems to me that house prices can be approximated as a function of rents, interest rates (determining required return on owning a house), and anticipated growth in house prices (which again can be decomposed into growth in rents, reduction in interest rates and 'irrational' growth). Using London as an example. Rental yields appear to be around 3.5% in London at the moment, which suggests to me that a good deal of anticipated growth is priced in. But where can that growth come from? Rents are a function of incomes and are unlikely to outpace inflation. Interest rates seem to be more likely to go up than down. So it seems that house prices are unlikely to rise, and once that is realized by the market, prices may even come down as participants stop anticipating growth just because "London house prices always go up".

House prices going up faster than rents in recent decades can probably be explained by interest rates being in a downward trend over the same decades. Now we seem to be in at least somewhat of a bubble due to irrational future growth expectations.

I'm general, when the price-to-rent ratio is too high. Last I heard San Francisco averages >30. It only makes sense (financially) to own if the price-to-rent ratio is under ~15. If you're an investor looking to become a landlord don't even consider buying a property if the price-to-rent ratio is greater than 8.

Its a smart choice in other situations too - like when you are intending to live somewhere on a temporary basis, for example. You would certainly be better off (again, financially!!) if you were renting a room for a couple hundred bucks a month if that allowed you to sock away $2,000 a month into your retirement funds. That's provided you have the ability to actually save/invest the extra money you have, a mortgage can act like a forced savings account for some people.

Its too late to edit this post, but I should be more clear that the parent post is a major generalization, your individual factors will vary if it makes sense (financially!) to rent vs buy for your primary residence. Price-to-rent ratio is a big factor, but not the only one. There's also a lot of luck and factors out of your control that contribute to if you make out ahead (financially!) either way. I just looked up the data on Zillow and the average P/R ratio in San Fran isn't as bad as I thought, but still extremely high.

Anyway, when you're talking about buying vs renting you're also heavily involving non-financial factors that are usually MUCH more important than financial factors (assuming you have some sort of a budget); so something might be a "smart choice" for an individual but not the most financially optimal one. Just like eating lentils and ramen noodles every day might be the most financially optimal choice but is probably not a "smart choice" for most people. In fact, if you have a family you probably aren't going to make the most financially optimal housing choice unless you absolutely have to.

A real world example:

I have friends who are renting a decent single family house with tons of land for an absurdly low price (family price!) and the landlord (family member) even pays utilities because it's just "easier" and she isn't trying to make a profit. Factoring in depreciation and amortized repair/upkeep costs the landlord is almost certainly subsidizing their housing costs. Financially, great deal! They will almost certainly never have a chance to have a full house that cheap ever again. Staying there as long as the landlord lets them is the most financially optimal choice. However, for a number of complicated (but understandable) reasons, my friends hate it and are planning to move whenever they have saved up more and paid down their loan balances.

There's a great writeup on this -- I may have even seen it here [1]. On average house prices tend to keep up with inflation and trail the market across the US. In specific markets that may not be true, then there's all your expenses. Ultimately, it depends on your personal situation if you should buy or rent, and the New York Times has a great calculator [2].

tl;dr: It's not always the smart choice to buy. Or to rent.

[1] https://affordanything.com/is-renting-better-than-buying-sho...

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

When it became the only choice

If you were smarter you'd have commuted in from the suburbs and banked the money for retirement.

Spending your day commuting and living in a car dependent hell hole is smarter, just because you can retire a bit sooner? What alternative universe has HN transformed into?

For NYC it can be an easy 30-45 minute train ride where you are free to occupy your time with something productive.

Something productive that can be done in a car or train you mean. Not, say:

- Being with your kids, spouse or helping them out to school or work

- Housekeeping

- Working out

- Doing anything that requires undisturbed attention

As someone with a long train commute, my train time is basically my non-productive "me time". Read a book, read the internet, take a nap, program on fun, non-work projects. If I'm at home, I'm usually engaged in child-care or house-care of some flavor or another, with very little time for simple idleness.

To your last point: in NYC it's pretty easy to do things requiring "undisturbed attention" on a 45 minute express Metro North train into the city from the suburbs. It's a very different experience from the subway.

As for the other three, I guess I could say that I'm not sure it's realistic to try and budget your time so efficiently that a 30-45 minute commute is intolerable. Many people have commutes for which that's a margin of error on how long it will take them - that sounds like a real problem.

Aside from working from home full time, what kind of commute are you looking to have, and at what distance from work? It's not realistic for most people to achieve a 15 minute commute, so 30-45 in a train really isn't that bad. If it really matters then you could do things on the train that would normally keep you from your spouse or kids at home :)

I'm one of those 30-45 minute margin-of-error folks- I'd move into Hoboken or Brookyln for a 45 minute commute in two seconds!

My friend does the Go Train from Oshawa to Toronto every work day. She spends the time on the train either reading a book or watch a video of a show she is following.

On the way home she will sometimes watch a movie and finish it at home. Time on the train does not have to be work or a vegetable.

Just to add perspective here. Toronto anywhere proper, you have to get on a bus generally, to get to the station. Then you have to take the train south to Union. Then take the GO, East to Oshawa. The entire trip can be done in less than hour, but you are walking between connecting options for 10-15 minutes which limits your "free time."

The idea here is many people want a house and if you aren't DINKs then Oshawa was cheaper in housing a while ago. Now it's almost similar to Toronto cost and rent is nearing.

You can trivially get a 30 minute commute just within SF. I imagine other expensive cities are similar. Living within a few minutes of work is a real luxury for all but remote workers.

Depending on how early you retire it can be the smart choice.

That’s 2+ hours per day of your life that you’re never getting back. You can always make more money, but time lost is gone forever.

How much is 2x5x52 = 520 hours worth to you?

If you’re selling your time for even just $100/hour that’s $52,000/year right there. With a 300k salary your hour is worth way more than $100. For your family, it’s priceless.

If you commute by train it’s not all necessarily wasted time. You can read, play games, listen to podcasts, etc.

I always read many more books when I commuted than when I didn’t commute. I find myself making new year’s resolutions to read more. But it was easy when I had the commute as a forcing function. (Not having internet on the subway probably helped...)

If you don’t think reading books is valuable enough to do when you aren’t commuting, is it really valuable to you? Or are you just doing the best you can to salvage a shitty situation?

(I audiobook when running so I’m no better)

I always find other more pertinent/alarming things I need to do at home and the forced lack of internet makes me focus more than I normally would.

Admittedly this doesn't say great things about my attention span...

I think it is valuable, I’m just bad at organising and prioritising my spare time!

300k a year post tax, 50 weeks a year, 50 hours a week, that's $120 an hour.

If it takes an extra hour a day and $500 a month that's $3000 to save a month in housing costs

Don’t forget to take transportation cost out of your $3000 per month.

I live across the street from the office and yes the rent is stupid, but my commute is a 5 minute walk.

And rent is still stupid in a 30min radius (for a total of 1h/day). You really have to go 1h+ radius to make a significant dent in rent around here (SF).

I did - $500 a month. I have no idea what communitng costs, and little idea about rent.

I have a 5 second commute from the bedroom to the office (3 minutes if I go downstairs and boil the kettle first), far easier. Monthly Mortgage is less than the weekly rent that one colleague pays in London, and he still has a 45 minute commute each way.

If you are working for somebody else, you can't exactly make any extra money by working extra hours. At least in a programmers case.

The only real thing to gain in this case is convenience.

I work full time in software engineering and do occasional paid freelancing work. It's quite possible to be full time and work extra.

Depends on your contract and whether you get paid overtime.

It's essentially unpaid work. So you "upgrade" your 40 hour week to a 50 hour week.

In SF the suburbs are called Silicon Valley and are also expensive.

Sufficiently expensive that when I consider Silicon Valley jobs in my future, I also consider getting a pilot license and commuting by plane from the central valley.

There are also suburbs across the bay that are cheaper.

Maybe.

Right now though, my 401k has been doing 15-18% for the last couple of years. My condo has been going up in value by about 13%/year, but I put 20% down and I think I'm at 30-35% equity, and my monthlies are cheaper than an equivalent rental.

The rent + invest vs buy + bank on property value debate is age old, and I won't restart it here, but so far, I'm not doing terrible.

Yea and the majority of people don’t make anywhere near 400k. You still need a huge low paid workforce to get things running. Firemen, police, teacher, retail and grocery workers, cleaners, bus drivers, plumbers and the like.

None of those positions are low paid outside of teenage retail/grocery workers.

Fire/police/teacher/plumbers are very well paid.

Cleaning is hit and miss, specialty cleaning is borderline extortion.

Still, I know that most cleaning people get paid min 15$/hr.

At 15$/hr, 30k/yr is plenty to live.

please show specific details on your claim that teachers are well-paid

fire, police, teacher, and plumbers are all in the $40k - $60k range, at least in the US. I wouldn't call that well paid.

I do not consider plumbers low-paid.

I would agree with you and I actually looked up some numbers. 56k was an average for an experienced plumber on his own. Not to mention they have to invest in tools.

I remember an article showing up a while back about a unionized BART janitor raking in nearly 300k.

That's someone who learned how to game the OT system. A real issue, sure, but not at all indicative of how much BART employees make. It's the same kind of manipulative bullshit that spawned the 'Welfare Queen' myth.

So your example is one Janitor out of how many in SF?

>There IS a reason why rent in high cost areas are so, well, costly.

Yeah, it's the ratio of population to number of housing units.

Exactly, I'm glad someone else realizes this. I live in Boston. It's the 4th most expensive city in the USA [0]. It's most decidedly not the 4th best city to live in the USA. The fact that enough NIMBY attitudes and construction unions have jacked up the cost of housing doesn't suddenly make it paradise.

[0] https://www.investopedia.com/articles/personal-finance/08091...

Wouldn't you know it! I live in Boston too. I think we're a good prototype case since, well, we're such a shithole in so many ways.

Every year the Globe runs a story on Massachusetts losing its young and poor population to the Sun Belt, but if you bring up building more apartment buildings, people yell that you should Go Back Where You Come From.

I’d guess that, in practice, the ratio is more important for birth rates. Humans seem to be wired to judge their position in life relative to those around them. So, you make more, but then you end up around other people who also make more. And now it doesn’t feel like you’re making that much money. The crazy thing is that this seems to hold true almost all the way up to the 1%.

IMO, the winning strategy is to be weird.

It’s not about you, it’s about aggregate housing costs. If everyone was earning $1mn and spending $750k on rent, the remaining $250k may not be a lot of money.

But of course you’re right, everything else being equal I would also be happy to earn $1bn and spend 99% on rent.

No, the aggregate isn't important: the thought experiment is the same as if everybody earned $251k and spend $1k on rent -- but the percentage of income spend on rent would be radically different. But yes, if everybody suddenly had $250k disposable income, prices would be higher.

I think the point GP is trying to make, is that it matters more if you can afford in absolute dollars to have a family on whatever is left when you're done paying rent, not what the percentage is.

And my point is that an “everything else being equal” argument about the income and spending of an individual is not particularly useful when discussing demographic issues.

Yes, the cost of things is more expensive in dense cities, but by 2x-3x for some services and not at all for buying a pair of jeans from a retailer - those prices are pretty much uniform everywhere, modulo state/local taxes. I'll argue that one's quality of life is better in SV on $250k vs $70k in the rural midwest or $100k in a midwestern city - obviously this will depend on spending patterns, which depends on personal preferences. But for me, it's a conscious decision to make more and spend more on a west coast city.

The problem is you need more space after having kids. If your already spending 75% of your income on rent adding another room is not feasible.

Or more basically you need a significant surplus to be able to afford kids.

That entirely depends on the income level you're talking, which is the OP's point. If you're making $10 mil and spending $7.5 mil on housing, you probably already have enough rooms to have kids. And even if you didn't, you could surely find room in your remaining $2.5 mil to add a room onto your house or find a slightly bigger place. This obviously does not apply if you're making $50k... Hence why absolutes are relevant.

You are assuming that 7.5 million buys a multi room home. At the extreme it may only rent you a 350 square foot apartment.

Some people might spend 75% of their income on massive dwellings, but most people downsize if possible before going past 55% of income. And as we are talking about things on the social not individual level those preferences matter.

I guess his point is that what is important is the amount of money that is left after paying rent that you can use to raise kids (at least in this context). An homeless person spends 0% of his income in rent, but he's not in a good position to raise kids

What baddox's comment (about only the difference mattering) misses is this: what if you need another bedroom?

In other words, it's ignoring the fact that houses come in many sizes. Anyone spending 75% of income on housing has an enormous incentive to choose a slightly smaller apartment. And is completely unable to contemplate expanding slightly. What if you want two kids... and the second one turns out to be twins? Can their grandmother come to stay for the summer & help out?

If you're spending 20% of income on housing, then you have a lot more room to solve these problems. (And, as others pointed out, to get a different job which pays slightly less, etc.)

Me and my sister shared a bedroom in a two bedroom apartment for a few years. I recentlty had neighbors that had a one bedroom with two kids. I'm not sure where this requirement of one bedroom per child comes from. Really, that's just a luxury.

> I'm not sure where this requirement of one bedroom per child comes from. Really, that's just a luxury

Relavent

https://www.npr.org/templates/story/story.php?storyId=552528...

> The average American house size has more than doubled since the 1950s; it now stands at 2,349 square feet.

> Back in the 1950s and '60s, people thought it was normal for a family to have one bathroom, or for two or three growing boys to share a bedroom. Well-off people summered in tiny beach cottages on Cape Cod or off the coast of California

Indeed, I make no claim about the size of house you ought to be able to afford.

But families always have more need of space than the childless. This makes anyone contemplating children very sensitive to questions like "how much of my present after-rent income must I give up for another 100 sq ft?". And this will be very different for the guy who's found himself spending 75% (to be near google, or whatever) and the guy spending 20% (in 1958).

You are missing one important factor: prices of locally rendered services will factor in the high housing costs of the service provider workers, and of service establishments. I.e., all the services will be significantly more expensive just as well.

And even goods' prices will reflect the high rent costs, given that stocking & sale of good requires[1] employment of local workers, and purchase/rental of local commercial space.

-- [1] even the automated, self-service stores require certain amount of human work as of now.

So you need absolute income minus housing costs [PPP]?

Well, it would be PPP adjusted income minus nominal housing costs then. But since housing costs factor into everything you purchase, that metric would probably only give you a sense what was being spent locally vs. spent everywhere else and/or saved.

While you are right, it is an exceptional scenario to earn that kind of money. So it is statistically insignificant to calculate absolute income minus rents etc.

It's quite significant even within much more common ranges. If you make $60K/year and spend 25% of it on rent, you net nearly 20% more than someone who makes $40K and spends 5% on rent. Looking solely at percentage of income spent on housing will lead you to a very wrong conclusion in that circumstance.

You're forgetting about income tax.

Then factor that in as well. The divide between $60K/25% and $40K/5% will still be substantial.

No, this should end up being about the same. This means that household is extremely over leveraged in household cost. Suppose that their income is cut in half, they would have to come up with 250k just to keep their housing expenses alive. The net result of this is that on average you would be averse to having kids if you knew that they could suddenly be thrust into this circumstance.

> I would gladly earn $1 million per year and spend 75% of it on rent

No, you wouldn’t. As income goes higher, long-distance transportation becomes (a) more comfortable and (b) smaller as a fraction of income. De-camping to Washington State and commuting to San Francisco doesn’t make sense at $200,000; it does at $1 or 2 million.

I'm not sure I follow. Assuming the $1 million is post tax, it equates to $250,000 post tax and nearly entirely disposable income. Compared to, say, someone making $200,00 post tax and spending only 25% of that on rent it is strictly better. The point that the above commenter is making is that if the percentage of income spent on rent is higher, but the purchasing power adjusted income is higher it can cancel out.

I'm not sure what transportation has to do with this. Someone could increase their commute time to reduce rent, but that's the case regardless of income.

I think he's saying that as absolute incomes get higher, commuting cost as a percentage of income drops, because commuting cost is largely fixed regardless of income. And so it makes more sense to live in a low-COL region and commute to a high-COL region.

For the average person, flying to work every day is unrealistic. If you are making $1M/year, it suddenly becomes very realistic. Same day roundtrips between SFO and Seattle via coach are about $200 when purchased 3 months out. Times 200 workdays/year, that's only $40K/year. You end up way ahead financially buying in Seattle and commuting by plane to your job in SF, if you're willing to stomach the ~6 hours/day of commuting time.

Then if you don't want to spend an hour and a half in the terminal, you can fly private jet. Private jet time apparently runs about $5k/hour. At ~600 hours/year, you're looking at about 3 million a year to commute by private jet from Seattle to SFO. Still out of your price range at a million in salary, but quite doable if you were making say $10m, and your commute time isn't much worse than sitting in traffic on 101 between Google and the Marina.

Replace Seattle with Las Vegas and all 3 of (housing, flight time, expense) get better. Round-trip to Vegas is about an hour and a half; coach prices go as low as $59 and private jet prices would be about $1-1.5M/year; and houses can be had for $200K, freeing up lots of money for flying.

There are a variety of private jet subscription offerings popping up, including Surfair: https://www.surfair.com/us/membership-pricing/ That one is only $2k/month for unlimited trips between a few locations in California. I don't know how restrictive their scheduling options are, though (i.e., could you actually commute daily with the service?).

Yes you can do daily. Although they've recently reduced their flights by quite a bit so now some days/location combinations are no longer available.

If you don't mind missing a flight now and then, you can shave down the time waiting in the terminal quite a bit. Flights run constantly, so you can just take the next one. Uber is a big timesaver too, as you can walk out the terminal and get picked up / dropped off and no futzing with parking/renting.

Why would you commute for 6 hours for $200 when you could stay in a hotel during the week? What's the point in going "home" to sleep?

The thought-experiment that started this thread assumes that rent in SF would reach $750K/year if salaries were $1M/year. Hotel rates are unlikely to stay at $200/night if rent is $750K/year. If they rise proportionally, expect hotel rates of ~$4000/night at that price level.

> Why would you commute for 6 hours for $200 when you could stay in a hotel during the week?

Tax residency.

Is it better?

Consider what happens if you lose that job. How much money do you need saved up to live the next 6 months in both scenarios?

If I pay $750K/yr, I need $325K saved up to pay rent for 6 months. That will take me 1.3 years of saving to get to that threshold (assuming I pay for nothing else - food, etc).

If I pay $50K/yr, I need $25K saved up to pay rent for 6 months. It will take me 4 months.

Depending on how long you live, etc, I suppose there is a point where the former is better. But not in the short term. That's assuming you're paying mortgage and not rent. What if this is pure rent?

Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings.

Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.

You're assuming that people would have to live in the same place after their employment ends (you do bring this up later, though). This definitely isn't the case for me; I've moved every single time I've changed jobs.

The point remains, in the first scenario the person has $250,000 worth of disposable income. In the latter it's only $150,00. The former is in a much better position to build up saving. Heck, even one year's worth of post-rent income in savings is enough to spend as much money as the average American annual income (~35k) for the next 7 years.

> Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings. Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.

Sure, but now you're talking about a drastically different scenario if the resident has concluded they will live the rest of their life in their apartment. In that scenario, optimizing for post-employment living is a more important factor. But until unless you've decided to retire in your current apartment, the first choice is strictly better.

I'm a glad your comment is more nuanced this time. Your original one had:

>Compared to, say, someone making $200,00 post tax and spending only 25% of that on rent it is strictly better.

I stand by the notion that the first scenario (making $1M and spending $750k in rent) is strictly better than the second. Of course I also agree that making zero dollars and spending $750k in rent is considerably worse than spending $50K rent. But that wasn't part of the original comment.

Essentially, I claimed that Scenario X is better than scenario Y, but now you're saying "but! What if scenario X suddenly becomes scenario Z?".

I said “all else being equal,” and the example was deliberately hyperbolic to make the math obvious.

If I earnt a million a year, I wouldn't be commuting more than 5 minutes to to work. Commuting sucks.

If you ever live with anyone else you will probably have to optimize multiple commutes (or proximity to other resources). Your salary likely won't have much impact on that decision.

In my particular case, I work at the same place as my wife.

> No, you wouldn’t.

I can say with absolute certainty that I'd be pretty damn happy with $250k post-rent income.

I think the dispute is more wether 75% rent is a likely choice in the million dollar scenario.

(vs the contentment with remainder)

This entire thread is so strange to me, if you're spending $750000 per year renting, shouldn't you be buying $750,000 properties once a year instead?

I think the idea that the grandparent commenter was pointing out is that pointing to higher percentages of income going towards rent is an overly simplistic metric. If the percentage of income spent on rent goes from, say, 20 to 40%, but average incomes double then the total amount of post-rent income still went up by 50%.

We're talking about San Francisco. There aren't any $750k properties. ;)

It's actually not that expensive to commute by air to SF. There are 261 working days in a year, and say $200 air fair per day, that's $55,200 in air fair. It'll cost more than that with to/from the airport, so say a hundred grand. This becomes doable at far less than $1m. I've made many day trips to SF from Seattle, and the plane was usually full of such day trippers.

Of course, if your employer is flexible, it can cost far less.

Better donate that $100k/year to scientology, or spend it in Las Vegas, it will have a more positive effect on your life than commuting to work by plane every day.

My comment was merely about the finances. One may also find such an arrangement more workable with working 2 days a week at home, or stay overnight frequently in SF.

Yeah, this. There is no way that would work.

> No, you wouldn’t.

The hell I would too.

Protip for those of you who are rolling in the $$ and considering this:

The locals hate it when you do this because you screw with their low CoL so please don't shove it in their face by being politically active as well.

No you wouldn't be glad because most of that remaining $250K would go towards paying other people's rents... E.g. When you go to a restaurant, everything on the menu would cost more to cover their rent. The cost of rent factors into pretty much anything that money can buy.

I think you have to consider downside risk, if the economy goes bad or you lose your job how easily can you make rent and survive? At 75% you have much less margin than at 22%.

It's the average. If the median wage was $1MM all goods would be way more expensive.

But all this is wrong because rents rise to soak up income. If we all earned $1MM rents would be most of that if all other goods stayed the same.

This was shown. When household incomes increased as women working became the norm, households had more to spend on housing, which meant house prices ballooned. Much of the rest of the money was taken by things like childcare, gardening, cleaners, etc.

This had the end result that those who want to stay at home can't, society is now based arround two decent income salaries.

Because the ratio is what makes people aim low or high. If it takes 75% to have a house, is very attractive to live in something smaller and pocket the delta for fun and games (and/or stash it away for a downpayment later in life). High wage/rent areas will only exaggerate this, since many of the luxuries in question are not coupled to local markets (gadgets, vacations, stressing away for living in a cheaper place)

If shelter is cheap, skimping there won't be worth it.

Exaggerated example: in a high wage/rent area, I'd rather have a boat than an extra bedroom. In a low wage/rent area, I'd rather have an extra bedroom than a slightly bigger TV.

I have argued for the same as well, but not many cares.

However I don't believe in minus housing cost, as everything is relative. We should simply have housing cost / wages shown at different distribution level. Median, 60% and 80%, etc.

Although I am glad the world has finally caught up to the housing prices problem. Hong Kong people has been crying about it for decades.

If you live in an area where housing costs are high, most other cost is likely also higher (tax, food, daycare, school, etc.).

The ratio of income is important in another way. Many apartments (in the Los Angeles area at least) want or require tenants to only spend X% of their gross income on rent. Places with $750k/year rent probably don't care, but for the median working American it matters a lot.

And that remaining 25% would help you pay for rent in retirement... How?

Not everyone wants to move to Ohio to retire.

That pretty much strengthens the position of the article, assuming living surface need increases proportionally with head count. Then adding people to your family will quickly become unsustainable because your income is fixed but costs increase far quicker.

That kind of metric would not be comparable across cities with different costs of life. Dividing by housing cost is a good normalising factor. You could divide your metric by housing cost, maybe.

If you are earning a million a year you are in the outliers where percentage cost is fairly irrelevant. For people on "normal" salaries it makes more sense to use a percentage.

> percentage of income spent on housing is not a great metric. A better metric is absolute income minus housing costs. / All else being equal, I would gladly earn $1 million per year and spend 75% of it on rent, because that remaining 25% would be a heck of a lot of money.

It makes sense, but that doesn't make it true. Is your argument based on your personal beliefs, or is it based on actual outcomes in the economy?

As someone once pointed out, if 'makes sense' was a reliable indicator of the truth, we would have had accurate physics in 5,000 BC.

> It makes sense, but that doesn't make it true. Is your argument based on your personal beliefs, or is it based on actual outcomes in the economy?

Seems to me it's based on basic arithmetic. Are you arguing that $250,000/year isn't a very comfortable take-home wage?

I'm saying that the currency of fact is evidence, not speculation and analysis. It's an interesting theory, but we need evidence to know whether or not it's true. That's what science and reason are about.