What, or Who, is the Middle Class?

[downtown]

Eh I don't get the impression that housing in New York or DC is vastly superior for it in comparison to say Germany. It sounds more like a lot of rip-offs. It is not like that there is no renovation and development going on in Germany. But of course you have to balance regulations with initiatives for investment.
Why do you think it is a 'huge failure'?

I can't speak for NYC, but here is why housing in DC is out of control expensive:

1) There are regulations that artificially limit housing supply within DC itself. For both national security reasons and traditions, there is a strict height cap on buildings within DC. There are no true residential high rises. Since DC itself is actually kind of small (physically), there isn't much room to build particularly dense housing. This is especially problematic for anybody seeking an apartment larger than one bedroom. Families face a HUGE supply squeeze.

2) DC's public transportation system removes incentives to live farther away. Unlike virtually every other subway in the US, DC does not sell monthly passes, and charges by distance and time, rather than a flat rate. If you live farther away to save on rent, your commuting costs will increase, often at a rate larger than the savings in rent. It's often actually cheaper to DRIVE, even with parking and insurance costing an arm and a leg. I pay over eight bucks a day to get to my office and back, as does my wife. That adds up!

3) DC, and the surrounding area, is almost exclusively white collar work. There's no manufacturing sector to speak of at all, so the people looking for housing are high wage consultants, contractors, academics, lawyers, etc. Developers have no real incentive to chase any other kind of demographic, and prices skyrocket.

It's a perfect storm. Young families who aren't high wage earners tend to leave pretty quickly. It's a lovely place if you are ambitious and single (or a college student), or absolutely loaded, but it sucks otherwise.

The distinction between "Middle Class" as a cultural identity and "middle class" as an income/wealth stratum is really interesting.

...that's all I really have to say right now sorry.

Yeah, I agree! I could be persuaded a lot of different directions here, but I'm inclined to think it isn't JUST about purchasing power.

 

[Hygro]

People who live on a salary and people who depend on welfare are not in the same class.

When you zoom out, both are consumers living on the edge.

I don't know that wealth alone is really sufficient to determine class... you have both people who are nominally very wealthy but probably can't actually move markets with that wealth for whatever reason (Queen, Pope, etc.) and people who aren't market-moving wealthy but wield more influence than most market-movers and don't live lifestyles that most people would consider "middle class". (Various heads of government, Linus Torvalds, Brian Krzanich, Jony Ive, Terry Myerson, etc.)

Just talking wealth classes in America.

 

[Terxpahseyton]

@luiz

I don't know the minutia of how rent control is or can be done. I definitely don't think of fixed prices and know that this is not the way it is done over here. It is more a dynamic system with in-built adjustment. What I know is that it works pretty well over her (though as said surely not flawlessly). Our inner cities are diverse but still well maintained, but it is also true that in very booming areas housing as become a bit short in recent years. It may not work well in NYC. I never heard of any rent black market over here and it sounds pretty outlandish to me, it may exist elsewhere but I don't know what makes the difference.
You seem to operate under the assumption that investment in housing is only worth it if they can get out of it what they could get out of it in a free market. But that seems like an arbitrary assumption to me. Profit is profit. More profit will attract more investment, naturally, and the lack of it can be an issue, but there is also a significant upside to be gained.

Bottom line - I think we both are informed by very different cases of rent control and both made the mistake to generalize based on them.

@downtown
Ah cool thanks, that makes a lot of sense.

 

[Samson]

2) DC's public transportation system removes incentives to live farther away. Unlike virtually every other subway in the US, DC does not sell monthly passes, and charges by distance and time, rather than a flat rate. If you live farther away to save on rent, your commuting costs will increase, often at a rate larger than the savings in rent. It's often actually cheaper to DRIVE, even with parking and insurance costing an arm and a leg. I pay over eight bucks a day to get to my office and back, as does my wife. That adds up!

I am not sure that adds up. If you pay $8 and work 230 days a year, you and your wife are paying $3,680 a year for transport. That is really not that much, and if living twice as far out only costs that much (only $300 a month) then you cannot be paying that much on rent and travel out of 100,000 a year. Many people pay more that 50% of their income on those 2 expenses.

 

[downtown]

I am not sure that adds up. If you pay $8 and work 230 days a year, you and your wife are paying $3,680 a year for transport. That is really not that much, and if living twice as far out only costs that much (only $300 a month) then you cannot be paying that much on rent and travel out of 100,000 a year. Many people pay more that 50% of their income on those 2 expenses.

That's 3,680 {just to go to work}. We go other places too.

 

[sophie]

Three wealth/income levels of people:
People whose money can move markets.
People who can live off their investments.
People who live on wages or welfare.

I would split "wages or welfare" into two groups:

People who live on a salary (fixed annual income + accrued benefits/paid leave)
People who live on hourly income (paid salary with variable hours, no benefits/leave)

To my mind middle class starts at achieving a job with a fixed salary, with upper middle class being some combination of salary and living off investments.

 

[Archbob]

When you zoom out, both are consumers living on the edge.


Just talking wealth classes in America.

Hardly, doctor making $200,000 a year and a homeless guy making $0 a year are hardly in the same boat. I would say if your double the poverty line then your not in the same boat as those living off welfare.

 

[Old Hippy]

it used to be so much easier to tell which class people were in, you just looked at their brand of cigarettes and which type of car they drove, and they would have the newspaper that was class approiate tucked under their arm for all the world to see

nowdays you have to poke around to see if they have 'homebrand' pickles in their pantry

 

[GenMarshall]

People who live on hourly income (paid salary with variable hours, no benefits/leave)

In actuality, there are corporations that do offer benefits and leave to their employees as well as have a fixed amount of hours to work at 40 hr/wk (discounting any overtime that is offered). Not all hourly income workers work at McDonald's part time.

 

[Borachio]

Hardly, doctor making $200,000 a year and a homeless guy making $0 a year are hardly in the same boat. I would say if your double the poverty line then your not in the same boat as those living off welfare.

The homeless guy making $0 a year is dead. (Unless he's living off the land entirely. Which is really, really, unusual these days.)

But seriously, it depends how you live. If you live beyond your means the future is bleak and unsustainable no matter how large your income.

But if you can live within your means, and crucially can afford an adequate diet, then the future is rosy no matter how small your income.

Oh, but wait, non-universal health care. Yeah. Right.

 

[Traitorfish]

Three wealth/income levels of people:
People whose money can move markets.
People who can live off their investments.
People who live on wages or welfare.

Grand bourgeoisie, petty bourgeoisie, proletariat?

 

[Zelig]

Hardly, doctor making $200,000 a year and a homeless guy making $0 a year are hardly in the same boat.

They are from the perspective of market movers.

But then again, from Torvalds' perspective, Bill Ackman and homeless guy are probably in the same boat.

 

[CKS]

It think a 3.3 times difference in income is so big that even in NYC you'll live much better with $100K than you would in St. Louis with $30k.

In Belleville, a suburb of St. Louis, with reasonable for the US light rail connections to the city, $500 / month gets you a reasonable 2 bedroom apartment, 900+ square feet, in an okay part of town and a good school district. There are many options at this price point. (Of course, if you aren't picky, $200 will let you buy a 2 bedroom house in East St. Louis.) You can buy 2-3 bedroom fixer-upper houses in the surrounding small towns for under $15000; a quick MLS search returns more than a dozen in places that aren't scary.

Searching NYC for apartments under $1000 per month returns 52 hits (in an area with a population of close to 100 times the area searched in Illinois), all 1 bedroom or efficiencies and many with 200-300 square feet. For $1500/month, I find places with 2 bedrooms and similar sizes to the Belleville apartments. (Of course, I know nothing about the neighborhoods there.)

A quick glance at grocery prices in NYC suggest that prices run 2-4 times higher (varying by item) there than here.

I think $30k here and $100k there are going to be pretty equivalent in how well you can live.

Here, $30k isn't bad for a household with no kids. You'll be able to pay loans off and to splurge a little.

 

[luiz]

In Belleville, a suburb of St. Louis, with reasonable for the US light rail connections to the city, $500 / month gets you a reasonable 2 bedroom apartment, 900+ square feet, in an okay part of town and a good school district. There are many options at this price point. (Of course, if you aren't picky, $200 will let you buy a 2 bedroom house in East St. Louis.) You can buy 2-3 bedroom fixer-upper houses in the surrounding small towns for under $15000; a quick MLS search returns more than a dozen in places that aren't scary.

Searching NYC for apartments under $1000 per month returns 52 hits (in an area with a population of close to 100 times the area searched in Illinois), all 1 bedroom or efficiencies and many with 200-300 square feet. For $1500/month, I find places with 2 bedrooms and similar sizes to the Belleville apartments. (Of course, I know nothing about the neighborhoods there.)

A quick glance at grocery prices in NYC suggest that prices run 2-4 times higher (varying by item) there than here.

I think $30k here and $100k there are going to be pretty equivalent in how well you can live.

Here, $30k isn't bad for a household with no kids. You'll be able to pay loans off and to splurge a little.

Well I'd take a $100k job in NYC any day over a $30k job in St. Louis.

 

[Zelig]

I've sometimes thought about the practicality of buying a cheap house in a rural area - I can work remotely, so it wouldn't really make any difference for that... my real problem is that my hobbies involve team sports, mountains, and women, all of which are real deficient in rural areas with cheap houses. (And fine dining, but I could pass up on that if I had the others.)

 

[hobbsyoyo]

It think a 3.3 times difference in income is so big that even in NYC you'll live much better with $100K than you would in St. Louis with $30k. And there are cheaper (though not cheap) places to live in NYC. Just not in Manhattan or the fancy parts of Brooklyn. I really don't see why anyone feels like they "have to" live in Manhattan, even if their job is there. Public transportation in NYC does extend beyond the island. Living there is a luxury, so you get what you're paying for.

Additionally, by living in say Manhattan you're buying a lot of "cultural goods" that you don't get if you live in some tiny Midwestern town where living costs are much lower.

To the last line in particular - yeah, that's exactly one of the things I was trying to get at. Big city life has a lot of benefits and in effect, you are going to pay for those benefits by living in the city.

To the first part, well, someone else covered it. But I'm not truly sold that you would live much better on 100K in NYC than STL. The difference in cost of living is pretty extreme plus at 100K, who is to say you could afford the 'cultural goods' of NYC? And I do understand that the cost of living in particular parts of a city (i.e. Manhattan) can be very different than living in other parts of the city. I completely agree that not everyone should try and live in some places that they can't really afford, which is why I'm not totally in favor of government intervention to bring everyone up to the same level of living standards.

However, I'm also not ok with areas of a city becoming a de facto ghetto as prices spiral upwards. So I'm torn on the issue.

I
And what does that

Even mean?

It means I'm not entirely comfortable with rent control schemes or the government buying up property in rich areas to rent at low rates or other schemes of artificially controlling the cost of living in areas.

 

[JollyRoger]

You can tell where you fit on the class spectrum by when you dine - the later the higher. Don't dine? No class.

 

[luiz]

You can tell where you fit on the class spectrum by when you dine - the later the higher. Don't dine? No class.

I'm an aristocrat then

I dine around 10. I guess that's mostly a big city vs small city thing. Big city people tend to dine later.

 

[Zelig]

My entire schedule is way earlier since I moved to a city. Only way to avoid unbearable traffic is to work 6:30 - 14:30. Restaurants tend to close at 21:00-22:00 anyway, it's mostly pubs/bars/clubs open later.

 

[luiz]

My entire schedule is way earlier since I moved to a city. Only way to avoid unbearable traffic is to work 6:30 - 14:30. Restaurants tend to close at 21:00-22:00 anyway, it's mostly pubs/bars/clubs open later.

That's the thing, real big cities are the only places where you can find good restaurants open past 22.

Places where everything closes at 21 are what I call deathtraps