How much rising population has raised rents - Politics | PoFo

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How much immigration and rising population has affected rents

I was looking at a YouTube video of a Japanese guy talking about his financial situation in Japan, when I stumbled across him saying that his rent for his apartment was the equivalent of $651 a month.

He lives in Tokyo. This is not some cheap place to live. Tokyo was considered the most expensive city in the entire world to live in the 1980s.

I don't know about you but $651 seems like a wonderful bargain price to me. If I could find a one-bedroom apartment for $651, I would immediately grab it. This would be very reasonable.
You try to compare the rent in any decently sized American city, it is much higher than this.

He says that $651 rent includes gas, water, and electricity, and Wi-fi internet connection.
Now, Japanese living spaces tend to be pretty small and compact by American standards, but he said in the video that his apartment was pretty spacious for one person. He does say he found a great unit.
He also shows a quick video pan-around of his living space, and it looks pretty good by Japanese standards. By American standards, I think it would be considered a small compact apartment, but not too tiny. It has a little entry hallway, a bathroom, a narrow living area openly connected to the kitchen, and one bedroom.

He paid 69,000 yen (equal to US$651 per month) for the apartment. His starting salary just after graduating for college, and after taxes, is $2,025 (which works out to be $24,300 a year). He says this is pretty average.


So why is the cost of rent so much higher in America than Japan?

I believe it has to do with the people. The population in the US has been rapidly increasing over the last several decades, due to high levels of immigration. This is also the case in other countries like Canada, Australia, and many countries in Europe. This has created an imbalance of people to available housing. Creating a housing shortage. When there is a housing shortage, and new buildings start having to be built, it drives the prices up.
In Japan, by contrast, they have a much stricter immigration policy. The population in Japan has actually been decreasing due to people having fewer children. (In fact, Japan's population has been decreasing more than any other developed country)
What this does, I think, is leaves open housing space. So with more availability, prices go down.

It's gotten to the point where in many parts of America the young generation can't afford to go out living on their own because the housing prices are too high. Or if they do go out on their own, they have to cram together into a small shared space with a roommate, and even then they are in a precarious situation where they struggle to afford the cost of rent, and they likely could find themselves having to move back to their parents if anything goes wrong.

If the cost of rent for a one-bedroom apartment was only $651, that would be much more reasonable, then I think they could afford to live on their own.

(Now, just a quick disclaimer, I don't necessarily recommend you try to go live in Tokyo. This price is for Japanese people. They can be very reluctant to rent to foreigners, so the rents may likely be higher, or the options available to you will likely be much more limited to the less desirable areas with more noise)

So you notice anything here? American middle class birth rates are going down because the younger generation can't afford housing space and they are postponing and not starting families. (Remember, it's the younger generation where most of the children come from)
But housing prices are going up because population is being brought in from outside, from other parts of the world.

In a way, it's almost like bringing in one group of population is displacing another group of population from being born.
As if the economy and demographic population pool is seeking to reach some point of equilibrium. More people, conditions become more difficult to start families, fewer children.
Having to build new housing is still more expensive than older already existing housing. So if new housing has to be built, it will end up increasing the prices for everyone. But of course especially for those who will move into the new housing.

There are also constraints on the availability of land and building space in the areas where people want to live and where most of the job opportunity is concentrated. It doesn't help that immigrants typically settle in the big cities that already have limited space.

If you are still not understanding this, maybe let me try to explain a different way. Suppose there is an oversupply of people and the demand starts moving up the price of rents. Well then, new apartment buildings are not going to be built until those rising rents start reaching a certain threshold that justifies the cost of constructing new buildings.
Construction of new buildings is a release valve to prevent prices from rising too extremely high, but it is not a release valve that will prevent prices from rising at all.

Since old buildings are still generally cheaper to live in than the newer buildings, what happens is there becomes a market "shortage" of the older buildings which are more affordable than the newer buildings, and that ends up pushing the price of older buildings up, approaching towards the price of the newer buildings. The end result is that the older buildings often don't end up becoming much cheaper than the newer buildings.

Or in other words, the construction of the newer buildings didn't completely relieve the pressure on prices of the older buildings going up.

I know even after all of that, some of you might still not be able to understand. Let me try one last time...

Building more housing will, of course, help keep the price of housing from going too high above a certain amount, but it will not prevent the price of housing from rising at all.

Having to build new housing is more expensive than people living in older houses that already have been in existence. So this should be intuitive, in a mathematical sense.

Imagine you were a landlord and you had two units. Then two more people wanted to live in your buildings, so you decided to pay for two more units to be built. Well then, you'd have to raise the rents on all of your tenants to cover the cost of the new building.

If you didn't raise rents, then it wouldn't be profitable to you to build more units.

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