How Homeownership Became the Engine of American Inequality • Hacker News Board

Re: How Homeownership Became the Engine of American Inequality

#111

Post by rlanday » Tue, May 09, 2017, 5:51 PM UTC

zaph0d_ wrote: post #89

kcorbitt wrote: post #25

So this article advocates for the removal of the mortgage interest tax deduction, because subsidizing home ownership leads to a larger economic divide between owners and renters. As a renter, I appreciate the intent, and I also appreciate any measure to simplify the tax code. That said, I also see compelling arguments in the deduction's favor. The sad truth is that most Americans are terrible at saving and in very po…

The problem with renting is, that it will return to you a temporal value(a space to live in each month, after the month this value is basically gone), whereby buying a house will return a lasting value, which you can even use by selling the house. In order to tackle this, the law should be implementing mechanisms to return value to the renter, like the ability to buy the flat after living in it for a certain number o…

If you want to live somewhere for 15 to 20 years and guarantee you won't be kicked out, you should buy the place. Not everyone renting wants to live somewhere long-term.

Re: How Homeownership Became the Engine of American Inequality

#112

Post by ltdanimal » Tue, May 09, 2017, 5:51 PM UTC

zaph0d_ wrote: post #89

kcorbitt wrote: post #25

So this article advocates for the removal of the mortgage interest tax deduction, because subsidizing home ownership leads to a larger economic divide between owners and renters. As a renter, I appreciate the intent, and I also appreciate any measure to simplify the tax code. That said, I also see compelling arguments in the deduction's favor. The sad truth is that most Americans are terrible at saving and in very po…

The problem with renting is, that it will return to you a temporal value(a space to live in each month, after the month this value is basically gone), whereby buying a house will return a lasting value, which you can even use by selling the house. In order to tackle this, the law should be implementing mechanisms to return value to the renter, like the ability to buy the flat after living in it for a certain number o…

This falls apart pretty quickly when you think about the fact that the government would be forcing someone to sell something they own

Re: How Homeownership Became the Engine of American Inequality

#113

Post by wnissen » Tue, May 09, 2017, 5:51 PM UTC

macmacaka wrote: post #71

Is this the right TL;DR of this article? "Homeownership leads to inequality". "Inequality is bad". Therefore, "Home ownership is bad". Therefore we should make home-ownership as hard as possible. So when nobody owns a home, everybody is equal. Sounds about right.

The subsidy is enormous compared to the cost of other housing programs, and it almost all goes to well-off or rich people. So, no, your TLDR is not accurate, as it points to homeownership as an important wealth-building mechasism for those who can afford it. Furthermore, since the FHA was straight-up refusing to insure mortgages in black communities until 19-freaking-68, there is a strong historical effect of perpetuating racial inequalities by making only whites eligible for housing subsidies. We spend more than four times as much on mortgage interest than Section 8 housing subsidies.

TL;DR: The mortgage interest deduction is a welfare payment that you have to be rich (and until 1968, white) to get. Maybe we shouldn't spend $71 billion a year on it.

Re: How Homeownership Became the Engine of American Inequality

#114

Post by rootusrootus » Tue, May 09, 2017, 5:52 PM UTC

shados wrote: post #42

clavalle wrote: post #4

I'd be willing to bet that if we eliminated the home mortgage interest deduction completely it would barely move the needle of what homes people choose to buy or the number of renters vs. owners. I would love to see the numbers, though.

Its like municipal taxes. People don't get about the cost of the house itself. They only care about the monthly payment (or well, the total cost of ownership, since the deduction only directly affect you yearly). This is kind of like municipal taxes. Take the city of Cambridge in Mass, which has an absurdly low tax rate. Compare it with some of the cities near by (eg Somerville). A similar property in a similar locat…

I have no doubt that some folks get out a calculator and plan out their budget based on the deduction, but I think many do not. Anecdotally, myself and the people in my group of friends who also own houses, we budgeted for the mortgage payment irrespective of tax benefits and just smiled on tax day. I really try to avoid as much as possible relying on outside variables like tax deductions when planning my budget. I go in conservatively and then appreciate the benefits while they last.

Re: How Homeownership Became the Engine of American Inequality

#115

Post by spaceflunky » Tue, May 09, 2017, 5:53 PM UTC

zardo wrote: post #104

spaceflunky wrote: post #77

This article is incredibly misguided for several reasons... 1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. 2.) A lot of rich people don't really pay income taxes like middle class people do. This is s…

>1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. Looking at the distribution of loan amounts would only be meaningful in the context of the distribution of home sale prices. Obviously fewer loans are m…

Right, but who would take out a $750k loan on a $8.5M house?

I concede I lack the data to prove my point, but common sense would tell you that these loans are almost all within the middle class home bracket.

Re: How Homeownership Became the Engine of American Inequality

#116

Post by tanderson92 » Tue, May 09, 2017, 5:53 PM UTC

accountyaccount wrote: post #61

kemiller wrote: post #49

Removing the MID would make middle-to-upper-middle-class people poorer, and so reduce inequality that way, but would it help poor people at all? The net monthly cost of housing would stay the same, just shift the proportion of your payment that goes to the government vs the bank. It's true that it's regressive, but I'm skeptical that's a huge factor. I think it would just help landlords, who would retain the ability…

I think adding an upper limit to MID would serve everyone well.

It is currently in-place at $1m of mortgage debt, and this fact was mentioned numerous times in TFA. It was mentioned in the article that Rep. Keith Ellison wants to move that number down to $500k.

Re: How Homeownership Became the Engine of American Inequality

#117

Post by pjmorris » Tue, May 09, 2017, 5:54 PM UTC

> "It is difficult to think of another social policy that more successfully multiplies America’s inequality in such a sweeping fashion."

> "In 2015," "That same year, the federal government dedicated nearly $134 billion to homeowner subsidies."

The article author isn't thinking of the Fed's various QE programs, which have subsidized lenders through the purchase of ~1.8 Trillion in mortgage-backed securities over a five year period after the financial crisis. MID is a drop in the bucket next to that.

If you treated the 1.8T as a single 30 year mortgage at, say, %3.5 interest, that's about a 10 Billion/month mortgage payment we're collectively carrying to bail out whoever sold those MBS to the Fed. That's about the same as the aggregate homeowner subsidies mentioned in the article.

Re: How Homeownership Became the Engine of American Inequality

#118

Post by ianai » Tue, May 09, 2017, 5:55 PM UTC

kcorbitt wrote: post #96

komali2 wrote: post #62

Earlier quoted context omitted.

Regarding 2: I cannot wait to pay off my debts (scheduled in September!) and start putting money in IRA and 401(k) :) Every time someone asks me if I'm using the 401k I always feel sheepish answering "no... because I have debts with a higher interest rate than I'd get on the return..." Nobody seems to buy it but I've run the math again and again, it's just true.

Totally, there are people who have higher-leverage savings strategies than investing in a 401(k), like paying off debt in your case. In the end, the most important number to track is your savings rate (total consumption / total income). If you have a savings rate of at least 25% and can maintain that throughout your working career, don't worry, you'll retire rich. :)

The articles subjects definitely highlight that. But it also highlighted income inequality. If people don't earn enough they have no chance at saving. High rents are not helpful. They should be talking about ways to incentivize lower rents.

Re: How Homeownership Became the Engine of American Inequality

#119

Post by bigpeopleareold » Tue, May 09, 2017, 5:55 PM UTC

KboPAacDA3 wrote: post #56

What's done in Europe?

In Norway here, many municipalities do not have property tax. Oslo implemented it recently, but only for property greater than a certain limit (and there is a push, of course, to remove it.) You can tax write-offs on interest from mortgages and also writeoffs and hire interest if you save in a BSU account (Bolig Sparing for Ungdom, or House saving for the young, which only applies to those 18-34.) Also, I think you can get any rental income written off if you rent a room or a basement apartment for 7000 NOK or less.

The fact is now, Oslo is experiencing what people are calling a housing bubble. Prices are also impossible given salaries (given conversion rates, they do not compare to the prices like in NY, for what it is worth.)

All these things tend to point to two directions: a) there is such a drive to own your own home here that it has done something to housing prices and b) they want people be maintain debt. Unlike the US, you can write off credit card and personal loan debt. It's a nice thing to be able to do but I'd presume that encourages a credit boom.

Re: How Homeownership Became the Engine of American Inequality

#120

Post by njarboe » Tue, May 09, 2017, 5:55 PM UTC

kcorbitt wrote: post #25

So this article advocates for the removal of the mortgage interest tax deduction, because subsidizing home ownership leads to a larger economic divide between owners and renters. As a renter, I appreciate the intent, and I also appreciate any measure to simplify the tax code. That said, I also see compelling arguments in the deduction's favor. The sad truth is that most Americans are terrible at saving and in very po…

I think the ease of getting a home equity loan and the ease of refinancing (see Rocket Mortgage, etc.) has reduced this forced saving dramatically. If you don't have the saving mentality, it is easy to get in the habit running up credit cards, paying high interest, getting a home equity or refi offer in them mail, deciding "save money" by cashing out any home equity built up to pay off the higher interest credit cards, repeat as necessary. This cycle is even more tempting in places where the price of homes have rapidly appreciated and the cost of living is going up much faster than wages or the official inflation rate.