Gene Balk has done it again. He noticed important information about our city—this time from tax data, analyzed by the Economic Opportunity Institute—and it shows that over 51 percent of Seattle residents earned less than $50,000 in 2014. This is not all. Those who earn the kind of money you need not to be rent-burdened, nearly $100,000, made up only 19 percent of tax filers. And just under 4000 filers would be affected by the Seattle income tax passed by the council a few months ago. Seattle does not sound as rich as much of the talk that's going around.
What can we make of this information? Well a lot, if it's compared with information from another Seattle Times' post: "Seattle leads nation in home-price growth for 10th straight month." All in all, home prices in this city have "skyrocketed 78 percent" in just five years. Here is another piece of information from Seattle Times: "In all, rents in the city of Seattle are up 57 percent in the last six years." In 2011, it was around $1000. Today, the average renter is paying $1,749 a month.
And there is even more to think about. Again, according to Balk: "From July 1, 2015, to July 1, 2016, Seattle had a net gain of nearly 21,000 people—57 a day, on average. That pencils out to a 3.1 percent population increase for the one-year period." Though Seattle's population has increased significantly from 2014, it's not enough to radically transform the city's income profile. We can expect that the number of people who earn less than $50,000 has fallen, and those who earn more than $100,000 has risen but it's unlikely that, as stock-market people like to say, the transition has been disorderly.
Are you getting the picture? None of this is adding up. And we have no good explanation for why there are huge gaps in the population, income, and price data. There is clearly a huge demand for housing that matches middle- and working-class wages, but it's not being supplied. And at the same time, home prices are entering a sphere that's easily accessible to only about 4000 people. But if the market was operating in a down-to-earth manner, we should be see a collapse in total prices because of the high demand from medium-range incomes. Even a luxury car like Tesla can't survive by selling solely to rich people. How are homes able to do this?
Of course neoclassical forms of economics cannot explain any of this, which is why when I met with the affable King County Assessor John Wilson earlier this week, I was not surprised to learn that there really isn't a theory to explain rising home values and the dislocation of local incomes from rental prices either than the economy is "red hot." What Wilson could say with confidence is once prices rise, the old prices end up in the rear-view mirror. Meaning, it's hard to go back to normal prices once you have left reality. The thing missing from current theories is, of course, finance and speculation—an important aspect of the local, national, and international economy that has the aspect of the fantastic for many urbanists in this city. It seems they have completely forgotten the spectacular rise and fall of Washington Mutual already. They can't at all recall how its mortgaged-backed securities, financial assets packaged here in our very own backyard, were sold to yield-hungry investors around the world. And many of them got burned by these assets, which turned out to be toxic. As a consequence, Mutual become Morgan. And only this month, did the Germans stop trying to get all of their fantastic money back from the "dark energy" that was once in the heart of our downtown.
But over 100 years ago, when capitalism had completed its monopoly form in the US and Europe (by way of railways), one economist who is not taken seriously these days, wrote:
But the fact that some instruments of labour are localised, attached to the soil by their roots, assigns to this portion of fixed capital a peculiar role in the economy of nations. They cannot be sent abroad, cannot circulate as commodities in the world-market. Title to this fixed capital may change, it may be bought and sold, and to this extent may circulate ideally. These titles of ownership may even circulate in foreign markets, for instance in the form of stocks.Indeed, he was on to something.