Just the sort of blue sky policy ideas I tune in for, thanks.
Rents get weirder the more I learn about them. The decision someone faces between renting or selling a house hinges on all sorts of subtle options in federal and local tax codes and in lending policies...
I'm not sure if in total these policies drive more investment in housing, or more NIMBYism to protect those investments. But the rules and tax advantages are definitely arcane, and it feels like if we simplified and rationalized some of them we might be able to implement policies that more straightforwardly incentivize whatever we want to push for.
If anyone has any recommended reading on rental property tax policy, if such a thing even exists, would love to read it.
The problem here is that cities have lots of ways to hold down rent (possibly by statute) other than building new housing. If you did this, you would probably see large number of cities implementing badly designed rent control in an effort to game the federal minimum wage statute.
I really like this idea of tying local minimum wage with the local average cost of rent/housing! It can create a fair living wage for workers, but is also fair to small business owners in less wealthy areas. Great article!
Seems like a good idea. One way to tune it better would be to use the bottom quartile (or similar) of local market-based rent, to focus the minimum wage on the parts of town the poor can actually afford.
I like this idea in theory, but in practice it doesn't seem to work. Minimum wage isn't directly tied to rents in San Francisco, but it effectively is. Small businesses report it's very hard to find workers and they have to pay them above SF's $15 minimum wage when they do find someone. And turnover is super high because their workers are constantly getting priced out, which means they have to spend lots of time hiring and training. And yet, despite all this, most businesses in SF support NIMBY candidates!
I did the math for this idea and it comes out to roughly 2% of whatever rent you mark it to, assuming 40 hour workweek and 33% of income going towards rent. So, if you were looking at a 1 bedroom apartment in SF, the minimum wage would be approximately $68/hr. The instant this passed, every business in SF would be lobbying to change the zoning laws and supporting every anti-NIMBY candidate they could find.
I'm sure someone else has pointed this out, but why wouldn't landlords just continually raise rents, knowing that others would be forced to raise wages to pay them?
Landlords could raise rents, but the pressure would be on municipalities to make it easier to build more housing. Unless all the landlords got together to raise rents (which is illegal), others would enter the market with cheaper options in order to attract tenants,
Interesting idea! It doesn’t feel very politically sustainable though; the first time you get a minimum wage decrease because rents fell, you’ll have Republicans yelling on every platform about how ‘Democrats cut your wages!’
I’m also not sure it’s true that it’ll incentivize housing in some of the cities with the most housing need, because many of those cities already voluntarily adopted higher minimum wages than the federal/state minimum wage. (Unless this would somehow preempt all local control over minimum wage such that instead of just a floor, it’s also a ceiling, which is interesting.)
The increased minimum wage in places like SF, Seattle, and NY are not anywhere close to what a minimum wage linked to rents would require. Like my previous response, $15/hr in SF would need to be increased over 450% in order to match the rents in the area.
It might be necessary to include a "no reduction" clause into the law, even though rents only trend down in dramatic situations (i.e. the collapse of Metro Detroit)
Don't you worry this creates more excuses for Democrats to oppose construction? Not only is it "gentrification" it's also "cutting the wages of the poor" so there's even more reason to restrict any construction.
A flat minimum wage is a double edged sword - "too low" (whatever that is) would drive people to work in low cost of living areas, and "two high" could drive those same places out of business.
Scaling the minimum wage levels the playing field for employees, but does it incentivize employers to move outside of higher cost of living areas? Do you scale it to the cost of living for the actual business address, or to the cost of living in the area each employee actually lives? I live in a rural area and commute into the city for the exact reason of the cost of living differences.
Why not tie rent control to building restrictions? Allow rent control to be imposed, but in return building restrictions are gradually lifted, with the degree of deregulation being a function of the gap between the rent control rate and the market rate. All new buildings would be some mixture of market rate and subsidized (i.e. affordable) housing.
As a devoted online YIMBY and VP of my school's living wage campaign, I'm in love with this idea. My only concern is landlords might take advantage of this by raising rents, knowing that their tenants, with their higher wages, would be good for it. Would restauranteurs and the like be a powerful enough political counterweight?
Well, if the policy results in a boosted housing supply, landlords would not have the same leverage to raise rents as they did before. You are correct that this would essentially put many local employers in direct contention with local landlords. Of course, many employers are national corporations with only a store manager (vs small business owners in the NFIB) and many landlords are also property managers with some big property investor behind them (with some rental properties owned and managed by locals).
It would be interesting to see the various employers and landlords compete in housing fights. My biggest concern is that NIMBYs fight very hard and a lot of new housing goes into places without powerful neighbors or good transit. If the metro area for the rent/wage link includes greenfield land on the edge of a city, then employers could simply go around NIMBYs, advocate for upzoning on the fringe, and employees would be compelled to drive long distances to afford housing. Not great for climate.
I seem to remember economists who have looked into minimum wage in depth have found that minimum wage increases tend to drive wealth transfer from the poor to the landlords, because as wages go up so do rents. Pretty much in lockstep, as if misery is conserved. When my wife rented apartments near the Navajo reservation she continually had to explain to the Navajo that if they made $800 a month they couldn't rent an apartment for $750 a month because they had to eat too.
I like the idea - but I'm cautious of how well this will work as an incentive to pursue upzoning. My understanding of NIMBYism in the US is that it is largely ideological over economic. If you do not combine this with upzoning to help slow down the rise in house prices, then you'll be left with an excessively high MW. This won't be a problem in the short-run where most states have MWs much below optimum, but eventually this would be problematic without significant housing reform.
Just the sort of blue sky policy ideas I tune in for, thanks.
Rents get weirder the more I learn about them. The decision someone faces between renting or selling a house hinges on all sorts of subtle options in federal and local tax codes and in lending policies...
I'm not sure if in total these policies drive more investment in housing, or more NIMBYism to protect those investments. But the rules and tax advantages are definitely arcane, and it feels like if we simplified and rationalized some of them we might be able to implement policies that more straightforwardly incentivize whatever we want to push for.
If anyone has any recommended reading on rental property tax policy, if such a thing even exists, would love to read it.
The problem here is that cities have lots of ways to hold down rent (possibly by statute) other than building new housing. If you did this, you would probably see large number of cities implementing badly designed rent control in an effort to game the federal minimum wage statute.
Ah good point, it would have to be market rents. Forgot to make that clear.
I really like this idea of tying local minimum wage with the local average cost of rent/housing! It can create a fair living wage for workers, but is also fair to small business owners in less wealthy areas. Great article!
Seems like a good idea. One way to tune it better would be to use the bottom quartile (or similar) of local market-based rent, to focus the minimum wage on the parts of town the poor can actually afford.
I like this idea in theory, but in practice it doesn't seem to work. Minimum wage isn't directly tied to rents in San Francisco, but it effectively is. Small businesses report it's very hard to find workers and they have to pay them above SF's $15 minimum wage when they do find someone. And turnover is super high because their workers are constantly getting priced out, which means they have to spend lots of time hiring and training. And yet, despite all this, most businesses in SF support NIMBY candidates!
I did the math for this idea and it comes out to roughly 2% of whatever rent you mark it to, assuming 40 hour workweek and 33% of income going towards rent. So, if you were looking at a 1 bedroom apartment in SF, the minimum wage would be approximately $68/hr. The instant this passed, every business in SF would be lobbying to change the zoning laws and supporting every anti-NIMBY candidate they could find.
I'm sure someone else has pointed this out, but why wouldn't landlords just continually raise rents, knowing that others would be forced to raise wages to pay them?
Landlords could raise rents, but the pressure would be on municipalities to make it easier to build more housing. Unless all the landlords got together to raise rents (which is illegal), others would enter the market with cheaper options in order to attract tenants,
TBH I hate reading good ideas from bloggers because there's never any serious possibility of such ideas becoming reality.
Interesting idea! It doesn’t feel very politically sustainable though; the first time you get a minimum wage decrease because rents fell, you’ll have Republicans yelling on every platform about how ‘Democrats cut your wages!’
I’m also not sure it’s true that it’ll incentivize housing in some of the cities with the most housing need, because many of those cities already voluntarily adopted higher minimum wages than the federal/state minimum wage. (Unless this would somehow preempt all local control over minimum wage such that instead of just a floor, it’s also a ceiling, which is interesting.)
The increased minimum wage in places like SF, Seattle, and NY are not anywhere close to what a minimum wage linked to rents would require. Like my previous response, $15/hr in SF would need to be increased over 450% in order to match the rents in the area.
It might be necessary to include a "no reduction" clause into the law, even though rents only trend down in dramatic situations (i.e. the collapse of Metro Detroit)
There's precedent for this already, in the sense that federal salaries are already adjusted for cost of living.
I think it first happened in France ... anyway, the rent was low but the security deposit was huge (and no interest was paid on it).
Goodhart's Law and all that.
Don't you worry this creates more excuses for Democrats to oppose construction? Not only is it "gentrification" it's also "cutting the wages of the poor" so there's even more reason to restrict any construction.
A flat minimum wage is a double edged sword - "too low" (whatever that is) would drive people to work in low cost of living areas, and "two high" could drive those same places out of business.
Scaling the minimum wage levels the playing field for employees, but does it incentivize employers to move outside of higher cost of living areas? Do you scale it to the cost of living for the actual business address, or to the cost of living in the area each employee actually lives? I live in a rural area and commute into the city for the exact reason of the cost of living differences.
Why not tie rent control to building restrictions? Allow rent control to be imposed, but in return building restrictions are gradually lifted, with the degree of deregulation being a function of the gap between the rent control rate and the market rate. All new buildings would be some mixture of market rate and subsidized (i.e. affordable) housing.
As a devoted online YIMBY and VP of my school's living wage campaign, I'm in love with this idea. My only concern is landlords might take advantage of this by raising rents, knowing that their tenants, with their higher wages, would be good for it. Would restauranteurs and the like be a powerful enough political counterweight?
Well, if the policy results in a boosted housing supply, landlords would not have the same leverage to raise rents as they did before. You are correct that this would essentially put many local employers in direct contention with local landlords. Of course, many employers are national corporations with only a store manager (vs small business owners in the NFIB) and many landlords are also property managers with some big property investor behind them (with some rental properties owned and managed by locals).
It would be interesting to see the various employers and landlords compete in housing fights. My biggest concern is that NIMBYs fight very hard and a lot of new housing goes into places without powerful neighbors or good transit. If the metro area for the rent/wage link includes greenfield land on the edge of a city, then employers could simply go around NIMBYs, advocate for upzoning on the fringe, and employees would be compelled to drive long distances to afford housing. Not great for climate.
I seem to remember economists who have looked into minimum wage in depth have found that minimum wage increases tend to drive wealth transfer from the poor to the landlords, because as wages go up so do rents. Pretty much in lockstep, as if misery is conserved. When my wife rented apartments near the Navajo reservation she continually had to explain to the Navajo that if they made $800 a month they couldn't rent an apartment for $750 a month because they had to eat too.
I like the idea - but I'm cautious of how well this will work as an incentive to pursue upzoning. My understanding of NIMBYism in the US is that it is largely ideological over economic. If you do not combine this with upzoning to help slow down the rise in house prices, then you'll be left with an excessively high MW. This won't be a problem in the short-run where most states have MWs much below optimum, but eventually this would be problematic without significant housing reform.