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A Growing Problem in Real Estate: Too Many Too Big Houses

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Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#41

Post by pjc50 »

Blackstone4 wrote: post #4

We have a similar issue in the UK since there are large houses being occupied by older couples whose children have left. Since annual property taxes are low (~4k - we call it council tax) and tax on buying property (stamp duty) is high, there is no incentive to move to a smaller place.

The UK also has Stoke-on-Trent giving away houses for £1 in a desperate attempt to unblight the place.

The UK's problem is not so much lack of houses (although the planning system really doesn't help) as a combination of over-financialisation and over-centralisation. People believe that all the high-paying employment, entertainment, and oligarch money is in London. It's also the default destination for immigrants. As a result you've got people trying to live in sheds there. Meanwhile everywhere from seaside towns to Birmingham gets treated as second-class citizens, with inadequate public transport and little inward investment.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#42

Post by tomatocracy »

imgabe wrote: post #29

Why is this a problem? Some very rich people become a little bit less rich. None of them seem to be in danger of falling into penury over only getting $1M for their house instead of $2M. Sounds like the supply and demand working the way they're supposed to.

At a macro level and over the long term, even if prices fall and this means that slightly less rich people can buy them instead, big houses are more expensive and more work to look after and maintain and there is a limit to the number of people willing and able to do that. The ultimate end result could be that some of these houses become derelict, which isn’t really good for anyone.

This is what happened to a good number of the large country houses in England after food prices fell in the late 19th and early 20th century.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#43

Post by bilbo0s »

alkonaut wrote: post #28
pjc50 wrote: post #5

This is not only "first world problems", but 1% first world problems. Well, maybe 5%: given > For their retirement in a suburb of Asheville, N.C., Ben and Valentina Bethell spent about $3.5 million in 2009 to build their dream home: a roughly 7,500-square-foot, European-style house with a commanding view of the Blue Ridge Mountains. Put $3.5m into https://dqydj.com/net-worth-percentile-calculator-united-sta... and yo…

I don't get why you'd want to build an enormous house for your retirement ? If anything, I long for the day my kids leave and I can move to a "simpler" place where I don't need to worry about, or pay for, maintainnig a detatched house. What does a rich older couple do in 7500sq ft/700sq m? I'd run out of ideas for rooms after about 200 sq m, and then I'm left to clean the remaining 500 sq m. anyway...

My last kid is leaving for college in less than 2 months, and I'm right there with you. I need a place big enough for me, and for the visit of kids. (And hopefully, grandkids?) But that's nowhere near 700 sq m.

To be honest, I didn't even need 700 sq m to raise kids in. Some people are just so rich that enormous homes like that make sense to them. But then they are so out of touch that they don't realize that very few people even want lives like that.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#44

Post by tomatocracy »

pjc50 wrote: post #41
Blackstone4 wrote: post #4

We have a similar issue in the UK since there are large houses being occupied by older couples whose children have left. Since annual property taxes are low (~4k - we call it council tax) and tax on buying property (stamp duty) is high, there is no incentive to move to a smaller place.

The UK also has Stoke-on-Trent giving away houses for £1 in a desperate attempt to unblight the place. The UK's problem is not so much lack of houses (although the planning system really doesn't help) as a combination of over-financialisation and over-centralisation. People believe that all the high-paying employment, entertainment, and oligarch money is in London. It's also the default destination for immigrants. As…

It’s largely internal migration driving that effect in the UK, not external migration or financialisation. Children go to university and never come back. The good jobs ARE largely in London and the South East, and people follow their friends creating a network effect too.

It’s also not new - it’s been going on since the end of the Second World War pretty much.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#45

Post by TheOtherHobbes »

imgabe wrote: post #29

Why is this a problem? Some very rich people become a little bit less rich. None of them seem to be in danger of falling into penury over only getting $1M for their house instead of $2M. Sounds like the supply and demand working the way they're supposed to.

That depends on whether they took on a mortgage. If they're indebted and were considered a low-risk borrower, then it matters very much if a lot of them suddenly become a default risk.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#47

Post by woofie11 »

bilbo0s wrote: post #36
imgabe wrote: post #29

Why is this a problem? Some very rich people become a little bit less rich. None of them seem to be in danger of falling into penury over only getting $1M for their house instead of $2M. Sounds like the supply and demand working the way they're supposed to.

Yep. Functions as it should. It almost seems like a majority of people expect that the nature of supply and demand should not apply to real estate.

Which is a fair expectation to have.

Free markets are nearly optimal for commodities, restaurants, and similar sorts of goods, as well as many competing small businesses.

They grind along for IP, utilities, and some sectors of education, as well as large businesses.

They break down almost completely for large-scale finance, real estate, medicine, and other sectors of education.

Curiously, much of this was predicted by Adams in Wealth of Nations (read his sections on real estate; they sound downright dystopian). Even more curiously, China has privatized all the sectors where free markets work, kept public all the ones where they don't, and their economy exploded. The US economy exploded with free markets when it was driven by essentially commodity manufacturing. As IP, finance, and real estate became more important, it began to fall behind.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#48

Post by tomatocracy »

NeedMoreTea wrote: post #11
Blackstone4 wrote: post #4

We have a similar issue in the UK since there are large houses being occupied by older couples whose children have left. Since annual property taxes are low (~4k - we call it council tax) and tax on buying property (stamp duty) is high, there is no incentive to move to a smaller place.

That was one of the advertising, rather than real justifications for getting rid of the rates - which was on ownership rather than occupation, and replacing it with first the poll tax - and we know how popular that was. Then council tax. It was nothing other than a massive subsidy for the most wealthy as the top band is reached so early - it's only slightly less regressive than the poll tax was. The Tory campaigns we…

Part of the idea of the ‘poll tax’ was also to increase accountability of local government by making it more transparent - ‘why do you charge twice what the neighbouring council does?’

Council tax actually is relatively progressive when you consider that council tax benefit is also part of the system. Very few areas have a large number of band H homes - parts of central London do, but even there you might be surprised how small a number you’re talking about - there are only c15k in the City of Westminster for example, the borough which includes the whole of Mayfair and Belgravia.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#49

Post by TheOtherHobbes »

smcl wrote: post #21
Blackstone4 wrote: post #16

Earlier quoted context omitted.

I feel that it was not "extremely misleading" within the given context which referenced older couples in larger properties. In this case, they are the ones typically paying the council tax. I agree with you that the UK needs property taxes to be paid for by the owners. This would help reduce speculation and encourage utilisation of the existing housing stock. But as another post has mentioned, objections include "thi…

You need to be careful when dismissing caution about the elderly who have - through whatever means - found themselves living in a valuable property. The following are just as likely: - a wealthy individual with many properties who can easily afford a few extra hundred quid a month - someone living just above poverty level in a property in a previously modest area that, thanks to a gentrification, has exploded in valu…

I think if someone is in a huge house they're barely using and possibly not even maintaining, there isn't a massive issue with gently incentivising them to move somewhere smaller.

There especially isn't an issue with a redistributive land tax rather than a property tax. That would take money from corporate landlords and move it back into the rest of the economy.

You have to balance your caution with the reality at the other end - which is people living in slum conditions and/or sheds, or being homeless.

Re: A Growing Problem in Real Estate: Too Many Too Big Houses

#50

Post by bilbo0s »

mruts wrote: post #25
masklinn wrote: post #20

Earlier quoted context omitted.

> McMansion is a pejorative term for a large "mass-produced" dwelling The subjects of the article: > Ben and Valentina Bethell spent about $3.5 million in 2009 to build their dream home: a roughly 7,500-square-foot, European-style house with a commanding view of the Blue Ridge Mountains. > Robin and David Saltman moved from New Jersey to Ponte Vedra Beach, Fla., where they spent more than a year custom-building their…

The title of the article is literally: "A Growing Problem in Real Estate: Too Many Too Big Houses." Since mcmansions are large (as you said), I think they are relevant to the discussion.

Masklinn kind of has a point. Clearly, the subjects of this article are not "mcmansion" people.
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