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How Homeownership Became the Engine of American Inequality

nytimes.com

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Re: How Homeownership Became the Engine of American Inequality

#131

Post by naravara »

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…

>And empirically, a home mortgage is perhaps the most successful mass-market forced-savings program in American society today, with much higher participation than tax-deferred retirement accounts[2].

You just made an argument for a forced-savings program, not for a home mortgage deduction.

Moreover, I think the issue with savings is a service problem, not an impulse control problem. Tax deferred accounts are complicated to figure out for a lot of people and it can be difficult to keep track of for people who don’t do regular, salaried work. I still have 2 or 3 401ks from previous jobs that I haven’t gotten around to rolling over just because coordinating with them and getting the form filled out is a bit of a hassle and it’s an easy thing to procrastinate on. And I have the advantage of actually knowing how this stuff works!

If it was as easy as just having a chunk of my salary taken out on a regular basis, and made opt-out rather than opt-in, you'd get a way higher participation rate.

Re: How Homeownership Became the Engine of American Inequality

#132

Post by hrxn »

gumby wrote: post #64

The mathematics of the MID are dumb; the optics are what sell it. If it lets someone making, say, $100K a year able to spend 30% more on a house payment, it also enables everyone else making 100K/year to pay that much more. So the same people compete for the same houses. Its main effect is to push up the commissions the agents pay and increase the amount of interest banks earn. It doesn't actually help the person buy…

So, in effect, large, publicly traded corporations would then own the land, as you describe it? You think that's a good idea?

Re: How Homeownership Became the Engine of American Inequality

#133

Post by Eerie »

ianai wrote: post #126
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.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

>For one, I remember the Great Recession.

How old are you?

Re: How Homeownership Became the Engine of American Inequality

#134

Post by JustAnotherPat »

AnimalMuppet wrote: post #101
SaltySolomon wrote: post #68

I really don't get this deduction, it is basically rewarding people to take risk and makes it better to take a morgage than buy the home outright?

No. If you pay $X in mortgage interest, you get $X * Y% back, where Y% is your incremental tax bracket. That is not a net win. It's just less of a loss.

if you put your money in something like crypto instead, you can come out ahead easily.

Re: How Homeownership Became the Engine of American Inequality

#135

Post by AnimalMuppet »

ianai wrote: post #126
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.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

So invest your 401K in a stock index fund.

Re: How Homeownership Became the Engine of American Inequality

#136

Post by zaph0d_ »

ltdanimal wrote: post #112
zaph0d_ wrote: post #89

Earlier quoted context omitted.

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

Yes this is of course a regulatory burden and just a probably unrealistic solution. But the main problem remains, how can someone who is renting get at least some savings out of it?

Re: How Homeownership Became the Engine of American Inequality

#137

Post by dismantlethesun »

njharman wrote: post #91
pkaye wrote: post #14

Earlier quoted context omitted.

The MID barely cancels out my property taxes. Imagine if your investment accounts had to pay 1% tax every year based on its current worth even if you didn't realize any profits.

Imagine other investments supplying roads, police, fire, parks, and education (or at least a place to store kids during work day) for 12 years.

That argument can be made about the usefulness of taxes on anything.

Re: How Homeownership Became the Engine of American Inequality

#138

Post by humbleMouse »

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 might buy a house in cash if you're rich to get a better purchase price and have a quicker closing process. However, you would likely mortgage the house AFTER purchase and then invest that cash in a high dividend stock or some other security.

Only a rich fool would keep a house mortgage when interest rates are as low as 2.5% in some cases. (source: friend who has this interest rate)

For instance - there are some REITs that return dividends higher than 8%. What rich person would want to keep non-liquid capital tied up in home equity when there are plenty of high performing dividend stocks out there?

Re: How Homeownership Became the Engine of American Inequality

#139

Post by kudokatz »

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…

> like the ability to buy the flat after living in it for a certain number of years

The market would price this in, and then renters would just pay more for that right. Why not just leave the system as-is and let them buy if they choose?

OR there would be people getting kicked out of their rentals in order to avoid the "option" to buy becoming active, and then reactive legislation, and then ... a huge spiral of fights over market distortions that layer on top of each other.

Re: How Homeownership Became the Engine of American Inequality

#140

Post by pc86 »

ianai wrote: post #126
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.

I just personally disapprove of 401ks. For one, I remember the Great Recession. They bailed out the banks and left the little guy/gal to ruin. Contemporaneously, all those fancy market valuations stink of an economy about to tank, again. I value investing in stocks/bonds, but in current conditions I would not trust a 401k investment broker.

Then don't talk to a broker. That's a choice, and one you need to go out of your way to make. Invest in index funds and 95% of the work is done.
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