One answer is that the market forces tend to funnel all increases in income to landowners as rent.<p>I was not familiar with this theory until a few days ago, when someone here on HN linked to an online version (edited and abridged) of Henry George&#x27;s <i>Progress and Poverty</i> [0].  I&#x27;ve been reading it since; its clarity is stunning: I feel as if a great veil has been lifted from my eyes.  Whether I&#x27;ll still feel that way in a few days, months, or years remains to be seen, but for the moment, Henry George has me eating out of the palm of his hand.<p>Whatever the general validity of his theory, it certainly seems to explain the SF Bay Area extremely well.  Salaries here sound incredible to people outside the area, but then it costs so much more to live here as to deny the wage earner much of the benefit.  Broadly, we can break the population into three groups.  Renters, obviously, have to pay the market rents, which seem to rise inexorably.  Those who bought houses here years ago, before the big increases in property values, and are still living in them, are the ones who can really enjoy the high salaries they can earn here.  Those who bought property here more recently, on the other hand, have large mortgages, because someone who <i>previously</i> owned the property made a pile of money when they sold it.  In effect, the mortgage is like rent being paid to whichever previous owner or owners saw the property appreciate.<p>George&#x27;s theory starts with Ricardo&#x27;s law of rent [1], which is a truism of classical economics (and another idea I was not aware of until just recently).  One could say it takes that law to its logical conclusion.<p>EDITED to add: while George&#x27;s theory has not been fully embraced by mainstream economics, it hasn&#x27;t been completely rejected by any means.  Joseph Stiglitz, Herbert Simon, and to some extent Milton Friedman are some of its adherents, and Hayek credits George with awakening his interest in economics. [2]<p>[0] <a href="http:&#x2F;&#x2F;www.henrygeorge.org&#x2F;pcontents.htm" rel="nofollow">http:&#x2F;&#x2F;www.henrygeorge.org&#x2F;pcontents.htm</a><p>[1] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Law_of_rent" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Law_of_rent</a><p>[2] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Georgism" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Georgism</a>