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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

#301

Post by dionidium »

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…

"If you go off and build skyscrapers. Maybe some people want to live in skyscrapers but if the result of this policy is that the middle class who used to be able to live in a nice semi/detatched house are now living in flats in a skyscraper that is a massive detriment to their quality of life."

What this fails to acknowledge is that the demand for density doesn't change when you outlaw it. All you've done is taken away people's choices, mandated your own preferences, and still in the end all the same demand for more housing goes on existing just the same, anyway, so prices continue to rise.

It may be true that all things being equal most people prefer detached single-family housing, but all things aren't equal! And so we have to acknowledge the tradeoffs and take the demand for more density seriously. (The fact that in order to get detached single-family housing in high-demand areas you have to make the alternatives illegal is I think pretty strong evidence for this.)

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

#302

Post by bena »

adrianb wrote: post #232
est31 wrote: post #59

Earlier quoted context omitted.

rent dwellers on the other hand can move whenever they want while home owners are chained to their property. Each time they sell and buy a new property they run a risk of buying lower quality than advertised, selling under value, and they do lose money in fees. Also, home ownership doesn't make you immune from gentrification due to property taxes. Especially if you "only" own a flat in a multi storey building, then y…

> home owners are chained to their property As someone who moved across 4 countries in 10 years, I had the same opinion. Then I noticed that people who moved as often as me had no trouble to move out, rent their mortgaged apartment for more than monthly payments or sell it at a profit.

Yeah, I keep hearing about how homeowners are "chained", but I'm on my second house and I've also rented in between houses.

One apartment had an 18 month lease and the other an initial 12 month lease, with the option to renew on an 18 month, 12 month, or month by month basis. That means, unless I was willing to incur heavy penalties, I couldn't move until the lease was up. Even now, we're kind of paying a mortgage and rent because there's a couple months of overlap.

Whereas, when I sold my house, I called a realtor, said I wanted to sell and it happened when it happened. We closed in March on our current house, I could sell it today if I wanted.

I think home-ownership and rental both have their places. And someone mentioned a housing co-op situation. That's new to me. That's likely worth exploring a bit as well.

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

#304

Post by neilparikh »

bena wrote: post #279
neilparikh wrote: post #271

Earlier quoted context omitted.

Your comment is a massive strawman of the article. The core problem is that once you have a majority of the population owning an asset, they're incentivized to pull the ladder up behind them, and make it difficult for the non-landed to also buy the asset, to make the value of their asset go up. > Owning your own home is, in my view, the first step towards financial freedom. Sure, for those lucky enough to be able to…

Uh, if I buy a property, yeah, I kind of want to make it difficult for someone else to buy it. Seeing as I seek to own it long enough to live on it. There is nothing about the previous "landed" status of my neighbors that will affect the value of my property. Not to mention, if you're seeking to reside, not speculate, the "value" of the property is kinda immaterial.

> There is nothing about the previous "landed" status of my neighbors that will affect the value of my property.

Suppose everyone who wanted to had the ability to own land in New York (obviously not possible geometrically, but for sake of argument). Do you think that property in New York would still be worth the same?

Land only has a buying price/rent because there is an unmet demand. This is a principle economists realized centuries ago: https://en.wikipedia.org/wiki/Law_of_rent

> Not to mention, if you're seeking to reside, not speculate, the "value" of the property is kinda immaterial.

The modern property ownership system basically forces homeowners to be speculators. If you have to pay hundreds of thousands (or even millions!) to buy a home, are you really going to be okay if it takes a massive hit (or doesn't go up in value as much as expected)?

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

#305

Post by bluGill »

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…

Renting and buying can both turn out well depending on your individual circumstances. If you buy you eventually have a house rent free. However if your rent you probably spend less on rent - so invest that difference and you end up with about the same.

With real estate "location location location". In some areas there are situations that will make one or the other better. Everybody has their own life goals, and that in turn will feed into what is better for you.

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

#306

Post by chii »

RobertoG wrote: post #142
NiceWayToDoIT wrote: post #97

Huge difference is that wealthy/landlords buy properties with debt and operate with cash-flow while for them liability creates wealth. For working people properties on mortgage are just expense. https://www.singsaver.com.sg/blog/robert-kiyosaki-advice-on-...

Until you pay the mortgage. Then, your bigger expense, rent, disappear and you can start saving. Also, the thread of homelessness disappear from your life. That's something never will happen if you keep just renting.

> rent, disappear and you can start saving.

that's not true. At any point in time, the cost of the capital is going to be comparable to rent. If you owned 100% if equity in the house, what you're "losing" is the potential rental income from the house, in exchange for the free rent you don't have to pay, plus the difference in the income from investing in the stock market (assume a maximally diversifed portfolio). AKA, imputed rental income.

The only bit you save is the tax that you didn't have to pay, if you actually earned the imputed rental income from your own property.

It's an illusion that living can be free. Renters pay in straight hard cash, so it's easy to count that cost. Owners pay in opportunity cost lost in the locked up capital in the house, or the interest payment (or some combination of interest and lost opportunity cost of capital).

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

#307

Post by emteycz »

lucian1900 wrote: post #122
fogihujy wrote: post #106

Earlier quoted context omitted.

In general, large public housing projects may seem very nice at first, but once the maintenance costs start going up (20-30 years later) it will become increasingly difficult for a publicly owned business to avoid increasing rent. Old buildings are simply quite expensive to maintain, especially when regulations require that buildings are occasionally renovated and brought in line with recent changes in regulations. I…

You have described very well the limits of social democracy, indeed. Ceding any ground to markets and capital ends up eroding any gains won by the working class. Similar happened after capitalism was restored in Eastern Europe. Even though housing was built and maintained just fine for many decades, very little was built or maintained after 89 since there was no profit in it.

This is absolutely false. I have lived in many of these communist buildings, and the reality here is that these buildings are built so extremely badly and without any consideration of the surrounding that nothing can be done. The communists used toxic materials, didn't care about maintenance and simply built a wall where a maintenance shaft should've been, didn't care about safety, didn't care about families sharing master bedroom walls, etc etc. Thus these buildings are waiting for end-of-life to be torn down. That's typical of communist 'efficiency' - loud boasting of unbelievable achievement while shit's all fucked up.

Every building that reasonably could be repaired is beautifully reworked today, because construction is expensive and working with what is already there is almost always cheaper, if at all possible. However profit is not really the main argument as these buildings are typically owned by the inhabitants nowadays, and they should have the choice of what to do with their own property, don't you think?

The thing that shocks me most about my childhood photos is how the city looked absolutely horribly terrible - every building was mid-destruction, no paint anywhere, valuable historical buildings with falling walls and destroyed windows, etc; even the damn child nursery had paper boxes in few windows instead of glass! I'm very happy that I didn't notice it much back then and when I was teen most buildings got at least painted over. Growing up in the environment of my younger childhood must've been extremely depressing.

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

#308

Post by sumtechguy »

effie wrote: post #240
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…

What is "financial freedom"? You still have to work, use state currency, pay taxes. Did you mean owning your own home is the first step towards being wealthy?

I can take a stab at that.

I paid off a house a few years ago. My flexibility with work and money went way up. I personally went from 10k CC debt and a house mortgage to well over a million in assets and rotating debt (for points) in a very short period of time. I did not really change my lifestyle at all. I went from planning out how to buy small items (which is normal BTW) to mostly 'do no think too much about it'.

Financial freedom was once put to me by an interesting 'when you feel like it' ladder. 1 eat whatever you want 2 buy whatever cloths you like 3 buy nice electronics whenever you feel like it 4 buy a used car with cash 5 buy a nice used car with cash 6 buy a nice new car with cash 7 travel whenever you like, and stay at an OK hotel 8 travel wherever you like, and stay at a nice resort 9 ...

I am somewhere between 5 and 6 now. Had a bit of a setback and slid back to 4/5 a few years ago. 5/6 is normal for my point in life I am at with my income. If I had less income that ladder is slower to go up. Also as you go up cash becomes less of 'how do I get more' and more 'how do I use this to buy me time'. My level up to 5/6 only happened because I paid off that house. My setback is because of a choice to move somewhere else.

But think about it this way. Whatever your rent/mortgage is. Think of having that amount of extra cash per month. Think how quickly you could use that to level up if you kept a similar lifestyle you have now.

Financial freedom is a matter of perspective on how you view material wealth. Some people never feel free because they are always looking to ladder up. Some people are fine at the low levels because they see material wealth as a burden.

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

#309

Post by dionidium »

tlarkworthy wrote: post #68

Next up, living in families shown to be inefficient, newborns should be matched in a skills based auction at birth. => There is more to life than supply and demand, and home ownership has a hidden effect on societal responsibility, wellbeing and a life milestone

> "There is more to life than supply and demand,"

Supply and demand isn't proscriptive; it's descriptive. It's not like we get to choose whether we live in a society where the principles of supply and demand hold. They hold either way.

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

#310

Post by chii »

neilparikh wrote: post #264
chii wrote: post #231

Earlier quoted context omitted.

> inherently unjust. Why is it inherently unjust? The owner paid to have the building constructed. That took upfront capital. Asking the renter to pay for the use of this capital doesn't sound unjust to me. Is renting out a car you purchased inherently unjust?

> The owner paid to have the building constructed. Much of the rent paid in big cities is not for the construction or maintenance costs, but the land value. Did the owner construct the land?

> Did the owner construct the land?

The land itself had to be acquired somehow. The very first owner paid for an army to take the land from the indigenous population that "owned" it, and that "cost" is a chain that is linked all the way to today (and at every step of the transaction, somebody profits by increasing the price a bit).

So either you raise another army today (at an even greater cost) to acquire the land, or you pay the asking price from the current owners.

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