We've looked at the importance of housing as a cornerstone of intergenerational wealth a few times, and not just for piles like this:
That's the courtyard of Arundel Castle, it's been in the fam (Fitzalans; Howards; Fitzalan-Howards) since the mid-1200's (with a few reversions to the Crown). More after the jump.
From Quillette, April 21:
Serfing the Future?
Land ownership has shaped civilizations from their beginnings, with a constant interplay between great powers—the aristocracy, the state, the Church, the emperor—and those below them. History has oscillated between periods of greater dispersion of ownership, and those that favored greater concentration.
Today, we live in an era of ever-greater consolidation, not from knights in armor, or Communist cadres, but from the forces of big capital and an ever-more intrusive regulatory state. The result has been record-high housing prices, well above the increase in incomes resulting in a systematic decline in the ability of people, particularly the young, to buy their own house as prices rise even in less expensive areas. Supply also faces great constraints, due in part to labor and supply-chain woes and the demand shock of the pandemic and remote work.
Unless reversed, young people will be forced into a lifetime of rental serfdom. The assets that drove middle-class stability, wider social benefit, and subsidized comfortable retirements, will likely not be available to them. Property remains key to financial security: Homeowners have a median net worth more than 40 times that of renters, according to the Census Bureau. Shoving prospective homeowners into the rental market not only depresses their ambitions, but it also forces up rents, which hurts poorer households and even solid minority neighborhoods.
But this impacts far more than just finances. Low affordability and high rents tend to depress the fertility rate, contributing to what is rapidly becoming a demographic implosion in many countries. More important still, dispersed property ownership has long been intimately tied to democracy while concentration tends to characterize autocracies, whether of the state-dominated variety or that of big capital.
How we reverted to a feudalistic state is a complex and infuriating story. Critical to this change has been a planning theology that holds density itself as intrinsically good and that purposely seeks to block housing on the periphery for societal, and environmental reasons. Where implemented, this approach has driven up prices, as evident in places like Sydney, Vancouver, San Francisco, London, and Paris. This has been a boon to speculators and well-heeled developers, but makes middle-class housing unaffordable to the middle class and intensifies the poverty of poorer residents.
The “pack and stack” planning “vision” has been widely adopted, even in land-rich countries like Australia. This ad from the New South Wales government promises an urban paradise of sorts:
This, as many Sydney-siders will tell you, is not exactly what happened. Instead of flocking to the city, research by the Massachusetts Institute of Technology/Queens University (Canada) estimates that nearly 80 percent of Australia’s metropolitan population lives in automobile-oriented suburbs or exurbs. Further, more than 75 percent of employment growth in Sydney and Melbourne occurred outside the central business districts between the 2011 and 2016 censuses. But due to planning restrictions, taxes, and fees, in the decades since these regulations have been imposed, Sydney has become one of the Anglosphere’s most expensive cities, with prices that have placed most prospective homeowners on the sides. Indeed, under these regulations, house prices have tripled relative to incomes creating conditions where two-thirds of Australians now believe that the next generation will never be able to afford a home.
These trends are distressingly common across the higher income countries. The Organization for Economic Cooperation and Development (OECD) reported in Under Pressure: The Squeezed Middle-Class that the future of the middle-class is threatened by house prices that have been growing “three times faster than household median income over the last two decades.”
This shift reflects, at least in part, the movement of big capital into housing, including foreign investors. In 2014, French economist Thomas Piketty produced a widely referenced analysis of world inequality. Soon after, Matthew Rognlie of Northwestern University found that virtually all of Piketty’s increased inequality was attributable to increased house values. In the United States over the past decade, the proportion of real-estate wealth held by middle-class and working owners fell substantially while that controlled by the wealthy grew from under 20 percent to over 28 percent.
This trend will be worsened by moves on Wall Street to buy up single family homes, further raising their price, and then rent them out, particularly to priced-out millennials, has reached record proportions. Rather than help middle-class families this supports the rentier class—which Piketty calls the “enemy of democracy”—assuring them of steady profits by collecting rents while the middle class loses its independence....
....MUCH MORE
In September 2013's "Ben Franklin on Labor Economics (or how to create an underclass)" I intro'd with:
The easiest way to create a dependent class is to price them out of the real estate markets.
"In countries fully settled…those who cannot get land must labor for others that have it; when laborers are plenty, their wages will be low; by low wages a family is supported with difficulty; this difficulty deters many from marriage, who therefore long continue servants and single...."In the United States The Land Ordinance of 1785 set the cost of land purchased from the government at $1.00 per acre in sections of 640 acres.
This price was raised to $2.00/acre in 1800 but purchase was paid for in four equal annual payments.
In 1820 the price of Federal lands was reduced to $1.25 per acre with payment in cash.
An alternate conveyance in the 1862 Homestead Act maintained the $1.25 price.
Compare the wages various craftsmen could command:
In 1785 a journeyman carpenter in New York City was paid $1.12 ½ per day.
Here is the average hourly wage for various years, note the post Civil War inflation in the 1870 numbers and the decreases of the latter 1800's deflation:
As 60 hour weeks were typical, here is the average weekly wage:
- Occupation 1860 1870 1880 1890
- blacksmith 0.178 0.304 0.259 0.271
- carpenter 0.182 0.410 0.276 0.322
- machinist 0.158 0.260 0.227 0.243
- laborers 0.098 0.156 0.135 0.151
Wages and Earnings in the United States, 1860-1890
- Occupation 1860, 1870, 1880, 1890
- blacksmith, 10.68, 18.24 15.54 16.26
- carpenter, 10.92 24.60 16.56 19.32
- machinist, 9.48 15.60 13.62 14.58
- laborers, 5.88, 9.36 8.10 9.06
The point of all this is that in relatively short order a working person could earn enough to purchase a smallholding, that 1785 carpenter is earning almost 1 acre per day.
Even if the cost of non-Federal land was 10x the above a working person could still actually contemplate becoming a land owner. No more.
It's probably worth repeating:
4. In Countries full settled, the Case must be nearly the same; all Lands being occupied and improved to the Heighth; those who cannot get Land, must Labour for others that have it; when Labourers are plenty, their Wages Will be low; by low Wages a Family is supported with Difficulty; this Difficulty deters many from Marriage, who therefore long continue Servants and single. Only as the Cities take Supplies of People from the Country, and thereby make a little more Room in the Country; Marriage is a little more incourag'd there, and the Births exceed the Deaths....-Benjamin Franklin, “ObservationsConcerning the Increase of Mankind, Peopling of Countries, etc.” (1751).
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