Why Boston rents are so high.

[JumboBuc]

One thing that perplexes me about this article is the idea that the tax bill will hurt the middle class trying to buy a house. It wont, middle class people aren't buying homes with mortgages over 750k. The only people that do so are the "upper middle" or poor rich. But a family making 100k a year is not getting a 750k mortgage.

Also the article used the US middle class definitions. However they failed to state that in the Boston area families do make a good bit more then the national average. I'd say in Boston 150k is still a middle class family income. 2 parents who are teachers make that. 2 parents who are bus drivers in the city of Boston make more then that.

When I think solidly middle class I think of teachers, police men, skilled tradesmen, etc. The household income for those professions in Boston, assuming a 2 income household, is usually well over 100k whereas in other parts of the country it's almost always under that number.

100% correct on all points.

Recent changes to the home mortgage interest deduction will have just about no effect on anyone in the middle class, and very little to no effect on housing affordability for anybody at all. The biggest losers from the changes will be people trying to sell multi-million dollar properties, not people trying to buy them. And if you're selling a multi-million dollar property you're doing just fine, especially in this housing market.

In Greater Boston today, essentially any household of two wage earners who both have college degrees makes at least $100k. Households making less than that either have no college education and/or less than two earners. That being said, about half of Bostonians over 25 don't have college degrees, and a ton of families only have one earner. This is the driver of inequality in our society today, and the source of the fight over "middle class" semantics. Many of the stereotypical "middle-class" jobs actually pay really well. The average "teacher and fire fighter" couple in Boston makes $150k per year easily. The average "nurse and construction worker" couple probably makes even more. These people have no problem affording to live in Boston. But are workers like this middle class? In the traditional sense, yes of course. But looking strictly at the numbers, it's not so clear...

The calculus is totally different for single parents and for dual earner families in which neither earner went to college.

 

[TheRifleman]

100% correct on all points.

Recent changes to the home mortgage interest deduction will have just about no effect on anyone in the middle class, and very little to no effect on housing affordability for anybody at all. The biggest losers from the changes will be people trying to sell multi-million dollar properties, not people trying to buy them. And if you're selling a multi-million dollar property you're doing just fine, especially in this housing market.

In Greater Boston today, essentially any household of two wage earners who both have college degrees makes more than $100k. Households making less than that either have no college education and/or less than two earners. That being said, about half of Bostonians over 25 don't have college degrees, and a ton of families only have one earner. This is the driver of inequality in our society today, and the source of the fight over "middle class" semantics. Many of the stereotypical "middle-class" jobs actually pay really well. The average "teacher and fire fighter" couple in Boston makes $150k per year easily. The average "nurse and construction worker" couple probably makes even more. These people have no problem affording to live in Boston. But are workers like this middle class? In the traditional sense, yes of course. But looking strictly at the numbers, it's not so clear...

The calculus is totally different for single parents and for dual earner families in which neither earner went to college.

Teachers, Fireman, Policeman, Politicans, postman, Nurses depends on if this is privately run but their salaries are paid by the taxpayers. So how are they making double or triple the average person that gets up to work? Like Drivers, Retail, Grocery workers, Dunkin Donuts, workers?

That's why Everett just laid off 100 teachers

 

[Justin7]

One thing that perplexes me about this article is the idea that the tax bill will hurt the middle class trying to buy a house. It wont, middle class people aren't buying homes with mortgages over 750k. The only people that do so are the "upper middle" or poor rich. But a family making 100k a year is not getting a 750k mortgage.

You need to take another look at the law. The deduction for state and local income taxes + property tax is now capped at 10k.

 

[JumboBuc]

You need to take another look at the law. The deduction for state and local income taxes + property tax is now capped at 10k.

The column refers to the changes to the mortgage interest deduction, not changes to SALT.

And the recent tax law will bring more pain. Its sharp limits on mortgage deductions effectively make more expensive the carrying cost of loans that middle-class folks need to purchase a home.

 

[tysmith95]

100% correct on all points.

Recent changes to the home mortgage interest deduction will have just about no effect on anyone in the middle class, and very little to no effect on housing affordability for anybody at all. The biggest losers from the changes will be people trying to sell multi-million dollar properties, not people trying to buy them. And if you're selling a multi-million dollar property you're doing just fine, especially in this housing market.

In Greater Boston today, essentially any household of two wage earners who both have college degrees makes at least $100k. Households making less than that either have no college education and/or less than two earners. That being said, about half of Bostonians over 25 don't have college degrees, and a ton of families only have one earner. This is the driver of inequality in our society today, and the source of the fight over "middle class" semantics. Many of the stereotypical "middle-class" jobs actually pay really well. The average "teacher and fire fighter" couple in Boston makes $150k per year easily. The average "nurse and construction worker" couple probably makes even more. These people have no problem affording to live in Boston. But are workers like this middle class? In the traditional sense, yes of course. But looking strictly at the numbers, it's not so clear...

The calculus is totally different for single parents and for dual earner families in which neither earner went to college.

While there are large numbers of single parents, for families with both parents in the picture both parents work in the vast majority of cases.

I would love to see the average household income of families with two working parents and kids. That takes out the people who just got out of college or high school and are starting up in the workforce and it takes out retirees. And the average income in the Boston area, not the average income of the United States.

If you look at states by GDP per capita Massachusetts is at 65.5k while the USA as a whole is at 50.5k. And Massachusetts as a whole includes the Springfield area, full time residents of Cape Cod, the Worcester area, and the south coast. If you just look at Boston and surrounding areas, even say inside of 495, I'd bet that the GDP and average income is a good bit higher then the state as a whole.

So what i'm saying is that the Urban Institute defining middle class as 35k to 100k, I don't think that is true for the Boston area. 35k is poor in the Boston area for a family, two people parents working full time at Mcdonald's can easily beat that. 30 hours a week at minimum wage with two household earners equals 35k. That's definitively not middle class in my opinion. It's working poor. I'd honestly say that for Boston the middle class for a family would be 60k-200k or something along those lines. I'd say that the average wage for a single earner person without a college degree is probably about 35k a year, or even more in some areas.

Even looking at two earner households, 60k is very low. That's 30k a year.
Many lower level service workers make that and basically all governmental, middle management, skilled tradesmen, and other traditional "middle class" jobs make more then that.

Even a 200k family is not going to be affected by the mortgage interest limit. That just seems like something that the Globe put in their piece because they don't like Trump and not because it was relevant. Of course not being able to deduct the income tax hurts a little, but the higher standard deduction and the slightly lower bracket rates will definitively make up for it. It just seems like the Globe was like "lets bash the Trump tax deal" without it being relevant or true for the argument they were trying to make.

I think a big reason for Boston becoming a place for only rich and poor families is the school system. The Boston School system just does not rate as well as the suburbs. So middle, and upper middle class families are gravitating towards suburbs whose schools rank higher. A family making 120k or so can afford a place in Boston, not in the Seaport but in a place like Roslindale. And with a two income family that's two people making 60k a year. Solidly middle class. Even people without college degrees make that kind of money in this area if we aren't looking at the lowest level service jobs.

I just think that the Globe article had an idea what they wanted to write about and what their beliefs were and looked for evidence to support those beliefs. It also tends to add a bit of sensationalism, which all media outlets add.

I still think that there is a housing shortage in this area, but it's not as dire as it first appears. Any city with a top notch economy is going to be expensive. Boston is an area that pays more on average yet it also costs more. As far as living standards the higher incomes basically make up for the higher rent and other costs of living in Boston. Of course I hope the region keeps building, because I don't want Boston to end up like San Francisco. Though one disadvantage that SFO has is that it's surrounded by water on three sides, Boston is only surrounded by water on one side so there is more room to grow.

I will also point out that Boston outside of West Roxbury makes it much easier to live without a car. If you take a car out of the equation i'd say that it's reasonable for people to pay more then the 30% rule of thumb amount for rent in the area. So while the suburbs are more affordable for the same amount of space, having to pay for two cars takes out a lot of the cost advantage.

 

[Justin7]

The column refers to the changes to the mortgage interest deduction, not changes to SALT.

Perhaps, though a lot of people pay their property tax as part of their "mortgage" so I think it is at least possible that this is what Keane had in mind. Either way, he should have addressed this more clearly.

Still, I was responding to the following:

One thing that perplexes me about this article is the idea that the tax bill will hurt the middle class trying to buy a house. It wont....

The SALT deduction limits are a part of the bill and will absolutely hurt many middle-class buyers.

 

[Justin7]

Even a 200k family is not going to be affected by the mortgage interest limit. That just seems like something that the Globe put in their piece because they don't like Trump and not because it was relevant. Of course not being able to deduct the income tax hurts a little, but the higher standard deduction and the slightly lower bracket rates will definitively make up for it. It just seems like the Globe was like "lets bash the Trump tax deal" without it being relevant or true for the argument they were trying to make.

I just think that the Globe article had an idea what they wanted to write about and what their beliefs were and looked for evidence to support those beliefs. It also tends to add a bit of sensationalism, which all media outlets add.

I agree with most of the rest of your post, but...

We're not talking about the standard deduction. Yes, the standard deduction went up, but personal exemptions were removed so it pretty much evens out.

We're really talking about itemizing though, in which case due to SALT changes and the removal of the personal exemptions, you're now paying taxes on more income than you were before. This bill was written in way that at first glance may look like it's not so bad for the middle class, but if you dig a little deeper it becomes obvious that the bill is primarily benefiting the rich. Unfortunately, the vast majority of Americans don't look beyond a first glance.

You'll bring more home every couple weeks and by the time you file your 2018 returns the midterms will already be over. Jokes on you. All while the deficit spikes, programs are defunded, and we put ourselves in a weak position to deal with the next recession. Don't worry though, the Democrats will be left to clean up the GOPs mess yet again and yet again the GOP will hit them with the same hypocritical nonsense about the deficit they always do. Rinse and repeat.

 

[JumboBuc]

I agree with most of the rest of your post, but...

We're not talking about the standard deduction. Yes, the standard deduction went up, but personal exemptions were removed so it pretty much evens out.

We're really talking about itemizing though, in which case due to SALT changes and the removal of the personal exemptions, you're now paying taxes on more income than you were before. This bill was written in way that at first glance may look like it's not so bad for the middle class, but if you dig a little deeper it becomes obvious that the bill is primarily benefiting the rich. Unfortunately, the vast majority of Americans don't look beyond a first glance.

You'll bring more home every couple weeks and by the time you file your 2018 returns the midterms will already be over. Jokes on you. All while the deficit spikes, programs are defunded, and we put ourselves in a weak position to deal with the next recession. Don't worry though, the Democrats will be left to clean up the GOPs mess yet again and yet again the GOP will hit them with the same hypocritical nonsense about the deficit they always do. Rinse and repeat.

This is not the time or place for discussion of the overall effect and politics of the tax law. That's only going to bring us down into the deep dark depths of archBoston, with all the usual suspects feeling the need to grace us with their rants.

Here's the exact quote from the column (emphasis mine):

And the recent tax law will bring more pain. Its sharp limits on mortgage deductions effectively make more expensive the carrying cost of loans that middle-class folks need to purchase a home.

That's about the mortgage interest deduction, period. Only the mortgage interest deduction affects "the carrying cost of loans." It's not about SALT or personal exemptions or standard deductions or marginal rates or anything like that. And, as tysmith originally wrote, changes to the mortgage interest deduction will have just about no effect on anybody in the middle class, and little to no effect on housing affordability for anyone at all.

 

[tysmith95]

I don't mind informed discussion on this stuff, like whats been shown on this thread. It's when we get into the Rifle uninformed rants that it goes to shit.

Though we should probably just focus on housing costs and ignore broad macro economic and tax code discussions.

 

[TheRifleman]

I don't mind informed discussion on this stuff, like whats been shown on this thread. It's when we get into the Rifle uninformed rants that it goes to shit.

Though we should probably just focus on housing costs and ignore broad macro economic and tax code discussions.

MY RANTS----They haven't raised Interest rates in a decade. FACT

 

[tysmith95]

MY RANTS----They haven't raised Interest rates in a decade. FACT

True. Although I wouldn't say that this is a bad thing, inflation has stayed low and we haven't had a recession since 2009. While the recovery was slow to start out 9 years and counting without a recession is still a strong feat.

Plus low interest rates makes it easier for the middle class to afford mortgages.

But let's not get into a macro economics discussion on this thread.

 

[tysmith95]

Teachers, Fireman, Policeman, Politicans, postman, Nurses depends on if this is privately run but their salaries are paid by the taxpayers. So how are they making double or triple the average person that gets up to work? Like Drivers, Retail, Grocery workers, Dunkin Donuts, workers?

That's why Everett just laid off 100 teachers

Teachers don't make a ton of money. In this area they average 60-75k a year or so. I'd be willing to bet that this is lower then the average yearly salary for people with an equivalent level of education.

And I wouldn't call a dunkins worker or grocery cashier middle class. That's working class, or the working poor imho. The lowest paying industry is fast food service (aka dunkins).

If you want to get upset at salaries look at mbta salaries. They average 88k a year despite most jobs requiring little to no training.

 

[TheRifleman]

True. Although I wouldn't say that this is a bad thing, inflation has stayed low .

#1 Then why are we arguing about the costs of housing if inflation has been low?
#2 Why are we debating on why the Middle class cannot afford Boston anymore?

WTF are you talking about. Shows how clueless you really are and that is why you never saw Trump be elected and I DID.

The last 10 years with low interest rates have only benefitted the rich & corporations.
The only group of people that could secure loans were financially secure (rich people and upper working class)
Also corporations borrowing at ultra low costs then swindling prime property through tax incentives also after the taxpayers dumped billions of tax dollars to build up the area into the Seaport thanks to our elected representives.

What did bailouts and ultra low interest rates create in the end?
INCOME INEQUALITY ACROSS THE NATION. Broken American Families who got their labor swindled through this process.

 

[tysmith95]

The middle class is helped out by low interest rates when they get a car loan, or a mortgage. But yes let's go on a rant about interest rates and income inequality.

High interest rates helps out cash buyers, who are almost always rich, and hurts middle class buyers who can't save up the hundreds of thousands it takes to buy a home.

And with inflation I'm talking about the country as a whole. It's been higher in Boston yes, but thats a reflection that we have one of the best economies in the states.

But interest rates are decided on a Nationwide scale, they won't be decided because housing costs in one region is rising too fast.

 

[TheRifleman]

The middle class is helped out by low interest rates when they get a car loan, or a mortgage. But yes let's go on a rant about interest rates and income inequality.

High interest rates helps out cash buyers, who are almost always rich, and hurts middle class buyers who can't save up the hundreds of thousands it takes to buy a home.

And with inflation I'm talking about the country as a whole. It's been higher in Boston yes, but thats a reflection that we have one of the best economies in the states.

But interest rates are decided on a Nationwide scale, they won't be decided because housing costs in one region is rising too fast.

NO they are not. Low interest rates have destroy the overall value of the dollar which determines the cost of living.

High interest rates would have crushed a lot of rich and corporations that were leveraged to the tilt with DEBT.

High interest rates bring down the value of ASSETS and supports the working class dollar with a stronger dollar vs goods & services because most people in society don't want to work shit jobs.

In America there will always be Grocery Workers, Drivers, Retail workers people that make America RUN on a daily basis.
The Federal Reserve Bank swindled their labor value through LOW INTEREST RATES for a decade. You can see how the results are working especially in Boston.

You personally live in bubble and have no clue.

 

[Justin7]

This is not the time or place for discussion of the overall effect and politics of the tax law. That's only going to bring us down into the deep dark depths of archBoston, with all the usual suspects feeling the need to grace us with their rants.

Here's the exact quote from the column (emphasis mine):


That's about the mortgage interest deduction, period. Only the mortgage interest deduction affects "the carrying cost of loans." It's not about SALT or personal exemptions or standard deductions or marginal rates or anything like that. And, as tysmith originally wrote, changes to the mortgage interest deduction will have just about no effect on anybody in the middle class, and little to no effect on housing affordability for anyone at all.

You don't think that is an odd place to arbitrarily draw your line?

"Yes, by all means let's discuss the new tax law and how this one specific part does not actually affect middle class home-buyers, but we must willfully explicitly ignore that other part of the law that does in fact affect middle-class home-buyers in this thread about housing costs."

 

[TheRifleman]

The middle class is helped out by low interest rates when they get a car loan, or a mortgage. .

This statement is priceless. Yeah stick the middle class moron with a car loan and mortgage payment for overvalued house in the end.
This is why these poor souls never get head.

Yeah bailing out the Wall Street bankers with an unlimited taxpayers credit card and along with swindling all the working class labor value through low interest rates.

Welcome to Boston---We don't accept the Middle class anymore. We are better than you.

Income inequality is the problem with this country. Its that SIMPLE

 

[JumboBuc]

You don't think that is an odd place to arbitrarily draw your line?

"Yes, by all means let's discuss the new tax law and how this one specific part does not actually affect middle class home-buyers, but we must willfully explicitly ignore that other part of the law that does in fact affect middle-class home-buyers in this thread about housing costs."

My issue is when discussions get into "Democrats" and "GOP" and "deficit spikes" and etc. None of that is related to housing affordability specifically. Sure, in a sense, all economic issues are interrelated, but then where do you draw the line? Is a thread discussing housing affordability a fair place to discuss, say, international trade policy? After all, it can affect regional income distribution. What about monetary policy? It affects debt and equity markets, which are related to housing. I'd say no. Broaching these topics only invites rants from the board's resident ranters. And sure enough, like clockwork, we've seen a ranter in action here this morning. To me, discussion of broad-based tax policy issues that aren't specifically tied to housing falls into the same camp as discussions of monetary policy or international trade policy.

And as far as "arbitrarily draw[ing my] line," my line is drawn at what is discussed in the column that precipitated this conversation. I didn't draw the line, Tom Keane did. He claimed that changes to the mortgage interest deduction hurts the middle class, and a few of us have responded that that doesn't make sense.

 

[bakgwailo]

Teachers, Fireman, Policeman, Politicans, postman, Nurses depends on if this is privately run but their salaries are paid by the taxpayers. So how are they making double or triple the average person that gets up to work? Like Drivers, Retail, Grocery workers, Dunkin Donuts, workers?

That's why Everett just laid off 100 teachers

Why are you equating fast food workers, retail, cashiers, etc to highly educated (generally with multiple degrees) trained professionals that are teachers? Same with nurses (which, btw, aren't generally tax payer funded) who generally are highly skilled with degrees. Police and firefighters are also both highly trained and put their lives on the line all the time. Fast food workers and cashiers aren't middle class jobs and won't be.

 

[tysmith95]

This statement is priceless. Yeah stick the middle class moron with a car loan and mortgage payment for overvalued house in the end.
This is why these poor souls never get head.

Yeah bailing out the Wall Street bankers with an unlimited taxpayers credit card and along with swindling all the working class labor value through low interest rates.

Welcome to Boston---We don't accept the Middle class anymore. We are better than you.

Income inequality is the problem with this country. Its that SIMPLE

I agree with you that income inequality is a problem. I don't put the blame on interest rates though. And outside of the city lots of people need a car, and lots of people do not have 10-20k in liquid assets to plop down.

Higher interest rates would hurt the stock market. Yah that helps the rich more then the poor I'll give you that. It would also cause the dollar to strengthen. A big issue with a strong dollar is it makes outsourcing more attractive. A strong dollar means that US labor is more expensive, and the unemployment rate (plus national debt) would most likely suffer.

Higher interest rates also makes borrowing more expensive and savings accounts and bonds more lucrative. What this causes is an incentive for people to save versus spending. Spending helps fuel the economy.

Of course if you run into inflation issues you should raise interest rates. But with low inflation it's best for everyone to keep interest rates low. Central bankers with more information and expertise then you are I argue that roughly 2% inflation is ideal.