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Home ownership is the West’s biggest economic-policy mistake

economist.com

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Re: Home ownership is the West’s biggest economic-policy mistake

#151

Post by yetihehe »

WalterBright wrote: post #141
yetihehe wrote: post #32

Earlier quoted context omitted.

In practice, speculation maximises value extracted by speculators. But yes, "maximum bearable" price is stable.

All sellers maximize the sale price.

Original sellers are makers. They create and sell at reasonable price. Speculators only buy to sell at higher price, thus their only reason to exist is to be the one between people who value something more than it's previous price and those selling at previous price. And they want to buy at lower price before other people can buy at that lower price. They don't contribute anything. They just insert themselves and sell not at reasonable price, but at max price than can be paid.

Re: Home ownership is the West’s biggest economic-policy mistake

#152

Post by Phenix88be »

Mengkudulangsat wrote: post #70
DocTomoe wrote: post #50

Earlier quoted context omitted.

Seen from another angle, homeownership (once the mortgage has been paid) grants freedom, while a rent-dweller will remain a slave to his landlord forever, with Damocles's sword named "Eviction and homelessness" always dangling over their heads.

I'm a millennial and I plan to rent forever because I value the ability to move out whenever I liked. Even homeowners can't escape that sword of Damocles you describe. IMO as long as you have assets (stocks, cash, etc.) that you can periodically liquidate to cover expenses, the form of those assets doesn't matter.

You can move out whenever you like and own the house: just rent it to someone and move.

Re: Home ownership is the West’s biggest economic-policy mistake

#153

Post by ganafagol »

Traster wrote: post #48

I don't think this article makes a logical argument at all. It says house ownership is bad because it gives people a vested interest in constraining the supply of housing. That's true but that's not a problem. If people didn't own houses then someone would, and that someone is still incentivized to constrain the supply. I'm also not sure that reducing home ownership is a good idea - "let's make everyone poorer" doesn…

What's astonishing is how drastically different cities in different countries look like.

Take Paris or Berlin with their 5-8 floor buildings as far as the eye can see. That's a moderate density for a modern city, leaves space for green spaces, infrastructure and is so dense that everybody can sort-of affort it while not so dense that everybody is just anonomous. You can still know all neighbors in your building by name. (That there is a problem with exploding rents is a separate issue.)

As contrast, take the average north american city with a million residents. most either live in a detached house or in a 30+ floor skyscraper. Of course the detached houses rather close to a city center won't have much space around them, so you hav 1.5 bushes and then there is the fence and next house. The lots are worth millions and out of reach for most unless the go super deep into debt and have a lot of luck. Or you live in an anonymous skyscraper silo. There is an alternative to all this, but all that's happening is that excuses are ruminated back and forth.

Re: Home ownership is the West’s biggest economic-policy mistake

#154

Post by gadders »

In the UK at least, the process to increase the housing supply is horribly broken. Given a choice between a) a brownfield site near to an existing town, or b) hundreds of acres of fields in a lovely piece of countryside, planners seem to choose option B every time.

It's no wonder their plans get objected to all the time.

Re: Home ownership is the West’s biggest economic-policy mistake

#155

Post by ChuckNorris89 »

stepbeek wrote: post #53
WalterBright wrote: post #16

Earlier quoted context omitted.

> I agreee that speculation on property solely as an asset is an issue Speculation helps create a liquid market and stabilize prices.

The article lays out that Germany - a market where property isn't speculated on - has stable houseprices. This is in contrast to English-speaking countries where speculation has caused houseprices to grow beyond the reach of most millenials. It doesn't strike me that speculation has led to stable prices here.

>The article lays out that Germany - a market where property isn't speculated on

Excuse me?! Has the author actually done any research into the real estate markets of the big German cities or is he just making this stuff up?

Germany is not safe from real-estate speculation, I can guarantee you that, otherwise 80sqm flats in Munich wouldn't have reached 1.1 Million Euros[1].

[1]https://www.t-online.de/finanzen/immobilien-wohnen/immobilie...

Re: Home ownership is the West’s biggest economic-policy mistake

#156

Post by Tade0 »

brobdingnagians wrote: post #80

Even from the title, the implication is that "home ownership" is a "policy" from the government rather than just a natural state of people acquiring and improving the land. It implies the government can simply revoke home ownership by a new policy. Property ownership and improvement isn't a privilege "given" to us by a benevolent government with their immaculate "policies" from time immemorial. People are the source…

Technically this is a rather new concept, since in feudalism peasants would not own the land they worked and lived in.

Re: Home ownership is the West’s biggest economic-policy mistake

#157

Post by airbreather »

In Australia we have "stamp duty" as part of the cost of sell-buy, when you add on agents commission etc it can easily cost over 10% in fees and charges to move next door. Or more to the point, closer to work or aging parents etc.

With capital city houses easy running into 1-2 mill, that's a lot of money and is very retrograde and an impact to productivity due to longer commutes etc.

This is one of the key limiting factors to mobility caused by ownership.

Add in the family home is exempt capital gains taxes, the whole market is out of whack.

Re: Home ownership is the West’s biggest economic-policy mistake

#159

Post by hexhex »

There is a solution to the housing problem besides home ownership and renting: Housing cooperatives. These are still relatively common in Germany, my parents live in a flat owned by a cooperative and are consistently paying less rent than I pay for my college dorms, despite living in the center of a major city.

The cooperative was founded by workers in the 19th century and has a single purpose: To provide affordable housing, satisfying the needs of their members. It isn't subsidized by the state, its business model is simply to distribute the expenses for building and maintaining the flats to their members.

Home ownership has the disadvantage of being too inelastic and imposing the risks of owning a house to individuals. Renting from a private company on the other hand means you constantly have to give up a significant portion of your income so someone else makes profit from basically doing nothing.

Cooperatives strike me as the best solution to this dilemma. It's of course not surprising that the Economist doesn't mention this at all, the flaws of their argument have been sufficiently demonstrated by other commenters. The basic recognition that home ownership is flawed is an important point though IMO.

Re: Home ownership is the West’s biggest economic-policy mistake

#160

Post by luckylion »

tpm wrote: post #124
luckylion wrote: post #101

Earlier quoted context omitted.

> if that someone does not want to sell them or make profit on the rent, why would he constrain the supply? Why wouldn't that someone want to make a profit? > The state, the city, not-for-profit entities owning them, for example. That'd just make each individual eternally indebted to the state, at the whims of bureaucrats and vulnerable to political punishments while the costs wouldn't come down by much, because the…

> Why wouldn't that someone want to make a profit? Because they are not a for-profit company or institution? Public housing is often owned or managed by such entities. Also there can be other incentives besides direct profit; a city can build flats to encourage people to move and live there. The city will profit from the economic activity this will bring. In that case the city has a motive to have a larger, not a sma…

> The city started this program at the beginning of the 20th century when 300'000 people didn't have a place to live - it's obviously much better now. So maybe it's not a completely broken way of doing things?

Hard to say. How would Vienna look, and how many people would be able to live there at what cost if it hadn't? I'm absolutely not opposed to the state getting involved when there's a crisis, or the investments required are too large, e.g. creating the first power plants, railways etc. But if you let it remain with the state, you typically get crumbling infrastructure at high prices with lots of bureaucracy.

We have public housing in Germany, and it's nice-ish because the rents are cheap. But generally, the bureaucracy is large, the inefficiency and corruption runs rampant, the quality is subpar and they're constantly at risk to be sold off when the next mayor wants to spend money on a new air port or some policy their voters like.

The interest of the state are not aligned with those of renters. The state could certainly build great apartments, but only for a small number of citizens, while the rest would have to fund it. It then becomes a lottery: are you lucky enough to get one of the lottery apartments? Congratulations. For everyone else: well, sucks. We can remove the middle man bureaucracy in that case, just make everyone spend half their money on the lottery.

If you want the interests to align, just use a private entity, like cooperative housing. And the best thing about that? It's completely voluntary, no need for state involvement, no need to force others to fund it etc.

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