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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

#161

Post by rocqua »

lentil_soup wrote: post #29
rocqua wrote: post #15

Earlier quoted context omitted.

The rules against density have prevented a lot of demand from being met. It makes big cities where people want to live unattainable for many because of price. It also forces many people into long commutes. This makes them less happy, cause large amounts of pollution, and creates huge traffic jams. By increasing density, biking to work becomes easier. Similarly, public transport becomes a lot more effective. In genera…

As a single data point, I live in one of the most dense european cities and home prices are insane. Probably a mix of speculation, tourism and other policies. While density might play a part it's not a silver bullet. As with everything, the solution is probably custom to each city and region

Is that density caused by confining the city to a small footprint? If not, how do the suburbs look? Are there density restrictions on the suburbs?

And on a non-financial view, how is the situation w.r.t. public transport and car usage?

I fully agree that density is not a silver bullet. My point is that artificially reducing density when there is a high demand for living places is bad. Both because of supply and demand, and also because of positive externalities from (voluntary) high density living.

It does seem to sometimes be the case that high density cities increase demand so much that prices remain the same, or increase. That sucks from the perspective of economic equality. However, from a perspective of creating value, this is amazing. It means that these dense cities give the same value (enjoyment of living there) to more people. Especially if (as you say lower in the thread) people aren't moving to the city for jobs, but for the city itself. That essentially shows that the city is just really nice to live in.

Sadly, it suggests that density sometimes does not help economic equality. But it is still a massive improvement to have people want to live in the city so much!

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

#162

Post by michaelt »

luckylion wrote: post #101
tpm wrote: post #61

Earlier quoted context omitted.

"If people didn't own houses then someone would, and that someone is still incentivized to constrain the supply." that does not follow - if that someone does not want to sell them or make profit on the rent, why would he constrain the supply? "What's the actual alternative to people owning their own homes." The state, the city, not-for-profit entities owning them, for example. "I also take issue with this idea that w…

> 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…

> 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

In the 1970s in the UK, some on the left saw council houses as a bit like people see Universal Basic Income these days. That the state should provide everyone with a (modest) rent-free house.

That might seem extreme, but it was actually pretty moderate when the competition was soviet communism. And at the time interest rates were >10% so mortgages were a big risk and put a lot of money into someone else's pockets.

Some of the housing stock built in that time was really good quality; the council built it, and knew they'd have to maintain it, so they went for durable options even when they weren't the cheapest. Modern homes are lower quality in some regards, as the house builders know the maintenance is someone else's problem.

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

#163

Post by blueblisters »

kumarvvr wrote: post #95
yrgulation wrote: post #78

Property ownership is bad. Rent for life, dont leave inheritance to your children so they can rent for life too. All you need in life is clothing, entertainment, a bit of travel to distract you from your tiny living space, maybe a gadget or two and of course onsite work. Oh and praise from you manager to add meaning to your daily grind. Or so “they” say while “they” amass thousands of properties and massive fortunes…

This. I'm from India, and the most important goal for any salaried person in India, is to own a piece of land. Maybe 150 - 200 square yards (decently sized to build a 3 bedroom house). And that land is not seen as an expense, but as an investment. An investment to be handed over to children. And usually, families try to buy about 1 plot of land for each child typically. I think that, no matter where you are in the wo…

A curious phenomenon I have noticed only in India is that rental yields tend to be much lower than any other country. Arguably, if renting is so cheap, it makes more sense to rent than own a house, unless property is expected to appreciate in value indefinitely.

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

#164

Post by JulianMorrison »

hexhex wrote: post #159

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…

Or renting from the government, with rents restrained to break-even.

Honestly, private landlords should not be a thing. Holding a house hostage isn't a job.

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

#165

Post by CalRobert »

Supernaut wrote: post #136
CalRobert wrote: post #100

Earlier quoted context omitted.

Similarly in Ireland, it's crazy that people here wonder why homes are so expensive when we have an asset class free of CGT where ownership gives you a right to object to the creation of any more supply of said asset. What a deal!

I take it you're referring to people objecting to applications for planning permission? You don't have to own your own home to do that. You don't even have to live in the area affected by the proposed structure. And it's also entirely possible that the authorities will dismiss your objection out of hand.

Very true, anyone can object (or speak in support), though local property owners are the ones most likely to have a clear interest in stopping a given development.

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

#166

Post by jcbrand »

hexhex wrote: post #159

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…

I know people who live in cooperatives and I've explored it for myself as well.

You might pay less in a cooperative, but you're expected to be more involved in its internal politics and in keeping things running, so you're likely making up for the lower monetary price by paying with your time and energy.

There are also many opportunities for interpersonal conflicts.

> you constantly have to give up a significant portion of your income so someone else makes profit from basically doing nothing

When something goes wrong in the house I rent (which has happened multiple times), it's up to my landlord to fix it. The landlord also has to spend time and money on upkeep and maintaining the property.

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

#167

Post by donavanm »

airbreather wrote: post #157

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 f…

The US has similar capital gains exclusions and roll overs on primary residences. The transfer (“stamp”) taxes of 1-4% of the sale aren’t directly comparable. However most US locations do have property value taxes of 1-3% per year. Closer to the proposed land value tax scheme that was recommended a few years back. The other huge difference is where property depreciation and losses (negative gearing) can offset other income streams indefinitely. That doesn’t work in the us (and most economists are against mortgage tax deductions in general).

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

#168

Post by hexhex »

jcbrand wrote: post #166
hexhex wrote: post #159

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…

I know people who live in cooperatives and I've explored it for myself as well. You might pay less in a cooperative, but you're expected to be more involved in its internal politics and in keeping things running, so you're likely making up for the lower monetary price by paying with your time and energy. There are also many opportunities for interpersonal conflicts. > you constantly have to give up a significant port…

It depends on the size of cooperative how much you have to be involved --- if it's only one house, you'll surely have to be involved. Other coops have thousands of members, in these you can choose to just be a renter (in fact most people do that in my parents coop, less than 10% go to the annual meetings etc.).

It's certainly true that individual landlords have some trouble with renting out their property. The majority of homes however is held by companies, whose administration deals with renters. Maintenance costs of a single home can be uncertain, but of a number of homes it's very predictable. So the risks of big companies holding properties is manageable, and in no proportion to the profits that big conglomerates such as Deutsche Wohnen make.

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

#170

Post by jcbrand »

hexhex wrote: post #168
jcbrand wrote: post #166

Earlier quoted context omitted.

I know people who live in cooperatives and I've explored it for myself as well. You might pay less in a cooperative, but you're expected to be more involved in its internal politics and in keeping things running, so you're likely making up for the lower monetary price by paying with your time and energy. There are also many opportunities for interpersonal conflicts. > you constantly have to give up a significant port…

It depends on the size of cooperative how much you have to be involved --- if it's only one house, you'll surely have to be involved. Other coops have thousands of members, in these you can choose to just be a renter (in fact most people do that in my parents coop, less than 10% go to the annual meetings etc.). It's certainly true that individual landlords have some trouble with renting out their property. The majori…

I've rented three different properties (2 flats and now a house) in Germany, in three different cities, and each time it was from an individual owner, not some faceless corporation.

I also own a property myself in a different country.

Big companies don't own the majority of homes in Germany[1]. This is just the left-wing version of right-wing people overestimating the number of immigrants in a country.

https://www.quora.com/If-so-few-Germans-own-their-own-home-w...

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