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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

#181

Post by heresie-dabord »

fergie wrote: post #34

> a generation of young people who cannot easily afford to rent or buy and think capitalism has let them down Thats not some irrational misconception- capitalism has indeed let these people down. Capitalism, a set of social policies that prioritises the needs of capital over the needs of people, is literally a system that is designed to concentrate ownership. Under capitalism the best way to make money is to own, or…

Disclaimer: I dislike the Econo-Mist.

(Reading link: https://archive.is/Txnc4 ; thanks to user neonate.)

There is more than one "generation of people who question capitalism". Why reduce the critique to a single generation?

> A trillion dollars of dud mortgages blew up the financial system in 2007-08.

How about the bad banking system that enabled this rottenness? Even I understand that "corrections" happen.

> America’s GDP could be 4% higher. That is an enormous prize.

It is not the only "prize". Cities have been vibrant because they have been liveable. Quality of life is a benefit of a healthy community. I want to live somewhere in peace with clean resources and necessary services, without the threat of eviction. I like having a good job but I would not trade my health or the health of family and friends just for a job.

The hollowing of communities for the "prize" of a wealthy elite's profit is a threat to Democracy. Not all NIMBYism is to be deplored -- some of it is lucid resistance.

Is the argument then that "cities" are more "vibrant economic units" than they are communities? I don't agree. Quality of life has a cost.

Some of the things that needs to happen: investment in public transportation, incentives for distributing employment geographically (telework and distributed spaces), policies to protect quality of life, and taxes that distribute fairly the cost of maintaining community and services.

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

#182

Post by elric »

dbetteridge wrote: post #174
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…

I mean the article agrees with you? It primarily talks about the unfairness of the current system, the NIMBY problem reducing housing stock and the issue of regulations intended to curb new building reducing the stock of houses so that only the elite and existing homeowners can afford them. The section on renting/alternatives is mainly just a discussion about alternatives to the current unfair approach and some cases…

> a minimum 5% deposit + 3-5% stamp duty

Oh wow. I had to read the rest of your comment twice to understand that you were saying these seem high to you. They seemed really low to me. To put it into perspective, you need a 10-20% deposit in Belgium (depending on various factors) and there's a 6% tax for an old house (10% up until very recently) or 21% for a new house. It's basically impossible to buy a house if you're young or single or come from a poor family. I feel your pain.

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

#183

Post by kumarvvr »

blueblisters wrote: post #163
kumarvvr wrote: post #95

Earlier quoted context omitted.

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.

Most homes are purchased for the purpose of living in them. Additionally, monthly rental income is less than a quarter of loan payments, assuming 80% of total is taken as loan, which is true in most cases.

Loan tenures are about 25 years, so most families take a home and pay the loans during their active service life.

About 10 or 15 years down the line, one or two floors are added to tge house, for rental purpose. Here too, rental is less than half of construction cost. Again, intent is for very long term appreciation of the asset, rather than a passive income source.

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

#184

Post by cryptica »

Ir0nMan wrote: post #79
dr_dshiv wrote: post #37

What if renters could have a way to pay more to gain partial ownership of their property? E.g., could progressively own up to 10%. That woulf allow for more of the feeling of ownership and allow renters to participate in the appreciation. That would mitigate some of the negative impacts of gentrification. Has anyone given this sort of renter-ownership blend a thought?

Imagine a system where renters could put up a small fee, say 3-5% of the homes value, then just continue paying their monthly "rent" payment as usual. However, each time they pay that monthly rent a portion of that payment goes directly to them as equity. That way years later they could move and benefit from that equity position or after a certain period of time, say 30 years, own the entire home outright. Oh wait...

This is very different because what the previous comment is suggesting is that it will be impossible to rent out a property without losing ownership of it after x years. This would make it very unappealing to rent out a property and it would cause property prices to crash.

On the other hand, mortgages only cause property prices to go up because it allows people who could otherwise not afford a house to buy one outright (creating higher aggregate demand). At the same time, it makes it more appealing to own a house because you can collect rent on it and prices always go up because banks keep making loans to people to drive up your property's price.

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

#185

Post by kumarvvr »

blueblisters wrote: post #163
kumarvvr wrote: post #95

Earlier quoted context omitted.

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.

One reason for less rentals, is the cultural norm of home ownership, which is often seen as a very reliable and solid sign of income stability.

Another reason is lack teeth in laws that implement rental agreements. In fact, most owners hardly take any rental agreements or leases.

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

#186

Post by scambier »

dgudkov wrote: post #175
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…

>...doing nothing This is unfair. There is nothing wrong with passive income. Owning shares or bonds, or having a bank deposit is also "doing nothing" yet no one would blame anyone for it.

Are you seriously comparing owning shares with taking advantage of the need to have a home to take ~30% of someone's monthly income?

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

#188

Post by pc86 »

dbetteridge wrote: post #174
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…

I mean the article agrees with you? It primarily talks about the unfairness of the current system, the NIMBY problem reducing housing stock and the issue of regulations intended to curb new building reducing the stock of houses so that only the elite and existing homeowners can afford them. The section on renting/alternatives is mainly just a discussion about alternatives to the current unfair approach and some cases…

Buying a house for 10% down all in would be a dream in the majority of the US. Yes, FHA or FDA allow 3.5% or even 0% down in some circumstances but you're going to end up in an undesirable area (FDA) and be paying hundreds a month for mortgage insurance (both FHA and FDA). Which, while it sounds like something everyone should have, is you paying for the bank's insurance in case you default on the mortgage. To avoid this insurance you need 20% down after all fees so with realtors' commissions and all the pre-purchase expenses you're much closer to 30% down all in.

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

#189

Post by jariel »

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…

I'm down-voting you because you haven't made an argument in the face of the issue.

The flaw the assumption is that somehow 'buying' a home that is 15x your annual salary, that takes your entire life to pay off, is some kind of 'freedom'.

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

#190

Post by pc86 »

elric wrote: post #182
dbetteridge wrote: post #174

Earlier quoted context omitted.

I mean the article agrees with you? It primarily talks about the unfairness of the current system, the NIMBY problem reducing housing stock and the issue of regulations intended to curb new building reducing the stock of houses so that only the elite and existing homeowners can afford them. The section on renting/alternatives is mainly just a discussion about alternatives to the current unfair approach and some cases…

> a minimum 5% deposit + 3-5% stamp duty Oh wow. I had to read the rest of your comment twice to understand that you were saying these seem high to you. They seemed really low to me. To put it into perspective, you need a 10-20% deposit in Belgium (depending on various factors) and there's a 6% tax for an old house (10% up until very recently) or 21% for a new house. It's basically impossible to buy a house if you're…

Is that tax added into the mortgage as a lump sum (meaning you pay interest on it for the life of the loan) or is it added to the payment each month?
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