Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How Homeownership Became the Engine of American Inequality

nytimes.com

Post reply on HN
Print view View original

191–200 of 222 posts

Re: How Homeownership Became the Engine of American Inequality

#191

Post by TheCoelacanth »

rootusrootus wrote: post #102
dcdanko wrote: post #34

Earlier quoted context omitted.

Surely the MID would need to be slowly phased out or just capped?

I would think so. Assuming it was politically feasible at all, it seems like it would need to be phased in. Or at least announced quite publicly that loans originated after a particular date could not have their interest deducted. It's not particularly fair to existing homeowners to eliminate the deduction after they've already purchased a house.

> Or at least announced quite publicly that loans originated after a particular date could not have their interest deducted

That would probably cause a crash in the housing market and leave many homeowners underwater on their mortgages. Phasing it out gradually seems like a better approach to me.

Re: How Homeownership Became the Engine of American Inequality

#192

Post by pyoung »

succstressful wrote: post #163
pyoung wrote: post #79

Earlier quoted context omitted.

Does your company offer a 401k matching program? If so, that is basically an instant 100% return. If they are not matching, then you might be right, but if their is a match on the table, it probably makes sense to max that out.

This advice is common. It should come with the caveat to investigate the vesting timeline for that 401k match. One of my former employers matched at a great rate, but that contribution did not vest until you had spent 4 years at the company. Given the rate of turnover at lower-seniority positions in the industry (PR agency), it was entirely unrealistic for more than half of the employees there to ever expect to see t…

That is a good point. I did a quick internet search, and it looks like the max number of years for cliff vestings is now 3 years, which for most people is fairly reasonable. For gradual vesting, it looks like they can spread it out over 6 years, which seems a bit much, but at least you are vesting some of it over time.

[1] https://www.irs.gov/retirement-plans/plan-participant-employ...

Re: How Homeownership Became the Engine of American Inequality

#193

Post by jupiter90000 »

arielweisberg wrote: post #2

When I crunched the numbers for the mortgage interest deduction it really didn't seem that compelling. It replaces the standard deduction so the first 12,500$ in mortgage interest does nothing for you. After that it's just a minor reduction in taxable income and your tax burden is only reduced by a fraction of your mortgage interest. Not enough to cover the costs of maintaining a home and the tendency to consume more…

When I was thinking of buying a home, some people said "it's great because you can deduct your mortgage interest and property taxes." I haven't seen it help more than the standard deduction yet, and even if I do it may only reduce my taxable income by a few grand.

The only thing I can come up with as to why people think the deduction is so great is that people can be really bad at math and think removing tax on perhaps a few grand of income is a huge deal.. for the few thousand that are returned, I'm sure at least that much will be spent in home maintenance/repairs/tools/etc... I may sell soon and go back to renting.

The only part that makes it work out is home value appreciation, which is somewhat speculative and overall seems worse/equal to other standard investments.

Re: How Homeownership Became the Engine of American Inequality

#194

Post by terminlvelocity »

If they wished to show the effects of the MID, I wish they would have started by comparing a renter vs. a homeowner that were in more similar circumstances.

Of course a family with 2 adults that are 10+ years older and waited a decade longer to have kids are going to be in a very different financial situation than a 26 year old single mom that makes 13% of the income of the couple. How does such an apples-to-oranges comparison remotely demonstrate that the MID is the "engine of American inequality?"

But perhaps the point is that the renter has no chance of escaping her current situation? The story of the homeowners proves that it is absolutely possible to do so. Recall that Asare grew up poor. While we don't know much about his wife's background, we do know that the two were also renters for years, before a nonprofit program helped them buy their first house.

Re: How Homeownership Became the Engine of American Inequality

#195

Post by rconti »

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…

But it only drives housing prices up so it's not really an incentive.

Re: How Homeownership Became the Engine of American Inequality

#196

Post by spaceflunky »

pg314 wrote: post #190
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…

The point of the article is that the upper middle class is profiting disproportionally from the MID, while the poor don't. From the article: > What this means in aggregate is that households with at least six-figure incomes receive more than four-fifths of the total value of mortgage interest and property-tax deductions. Your arguments about the "rich" and multi-billionaires miss the point.

But are "upper-middle" class really the problem here? Again, look at the distribution of mortgages, at most someone is writing off like $40k worth of interest, which will net them $20k a year. Does that really make the whole housing market that much more expensive?

Why not attack the bigger problems, like off the top of my head...

how housing has become a commodity and large equity firms and snatching up real estate...

the amount of foreigners buying homes...

the fact that we've barely built ANY housing in major cities in the past 30 years...

how our population has grown significantly, but our housing stock hasn't...

how people are living longer and staying in their homes longer for lack of better options...

Re: How Homeownership Became the Engine of American Inequality

#197

Post by rconti »

pkaye wrote: post #14
arielweisberg wrote: post #2

When I crunched the numbers for the mortgage interest deduction it really didn't seem that compelling. It replaces the standard deduction so the first 12,500$ in mortgage interest does nothing for you. After that it's just a minor reduction in taxable income and your tax burden is only reduced by a fraction of your mortgage interest. Not enough to cover the costs of maintaining a home and the tendency to consume more…

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.

MID pays for my property tax (bay area).

Without a property tax payment, my mortgage payments are very close to what rent should be.

In fact, a couple of years on, it's already less than rent for a comparable place.

Re: How Homeownership Became the Engine of American Inequality

#198

Post by fixxer »

clarkmoody wrote: post #20
fixxer wrote: post #3

Earlier quoted context omitted.

Sounds like we should increase it to make home ownership more attractive, resulting in greater civic engagement from the population ("skin in the game").

I think you forgot the /s Seriously. The global financial crisis of 2007-08 wasn't that long ago...

One has nothing to do with the other.

The financial crisis was the result of expansion of credit. What I suggest is a reduction in the tax burden of owning a home.

There are many valid reasons to be against my suggestion; the subprime crisis is not one of them.

EDIT: There was definitely some sarcasm in my suggestion. This is a hot button topic for a lot of progressives because the impact of being able to right off one's interest payments is viewed as regressive. I see arguments both ways.

Re: How Homeownership Became the Engine of American Inequality

#199

Post by smileysteve »

ProfessorLayton wrote: post #156

Removing the mortgage interest deduction is the third rail of politics. Until most people are renters, I realistically don't see it ever going away, and is one of the few major benefits widely available [1] to the middle class. The US is still reeling from a strong racial divide, particularly in regards to homeownership. As stated in the article, banks would literally redline neighborhoods that weren't white enough a…

It can however, be implicitly reduced. The rumours of the trump plan include doubling the standard deduction and removing the state tax deduction. Minus other major itemized deductions, this will reduce the MID usage.

Re: How Homeownership Became the Engine of American Inequality

#200

Post by fixxer »

at-fates-hands wrote: post #32
fixxer wrote: post #3

Earlier quoted context omitted.

Sounds like we should increase it to make home ownership more attractive, resulting in greater civic engagement from the population ("skin in the game").

Isn't this kind of what happened in the 2008 collapse? Laws were loosened to allow more people to get into more risky loans to get homes. It incentivized a lot of people to take on mortgages they normally wouldn't qualify for. I'm not talking about low income earners either. I had several friends who are upper middle class earners who suddenly purchased mansions on the lake, only to lose their house months later when…

> Isn't this kind of what happened in the 2008 collapse?

Not at all.

The housing crisis resulted from credit expansion. Specifically credit was extended to people that should not have been able to take on risk. A secondary cause was the structure of the debt (long term risk with short term volatility).

I'm suggesting reduction in one's tax base based on interest paid for existing debt, not the creation of new debt.

Post reply on HN