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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

#321

Post by effie »

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.

Germans and Swiss are renting the most and do not have a dread of homelessness. The dread comes in when you can't find work that will pay for rent. Not when you don't own a house.

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

#322

Post by kumarvvr »

andrepd wrote: post #282
kumarvvr wrote: post #183

Earlier quoted context omitted.

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. He…

> Most homes are purchased for the purpose of living in them. [citation needed]

I myself am an example, so is everyone in my social circle.

edit: Also Myth 5 in the following article.

https://economictimes.indiatimes.com/news/et-explains/six-my...

Edit 2: An 1800 sft, duplex house, built in a 150 square yard property, cost about Rs. 13 million. And that is in a city like Hyderabad. Costs about double that in Bangalore, the top IT city in India and probably more in a city like Mumbai & New Delhi.

An average salary of an IT employee, with about 10 years of experience is about Rs. 3 million per year. Banks give a loan of about Rs. 10 million on that house, and employees usually source the remaining amount from further loans or high interest borrowings. Cumulatively, with current interest rates (have been stable for a decade now), EMI on a 13 million loan is about 0.13 million per month, meaning more than half of an employees salary, 1.56 million, goes to EMI payments.

Average rental value for that property is about Rs. 25000 per month, or Rs. 0.3 million per year. So hardly enough for covering EMI. Tenure on the loan is usually 20 to 30 years.

So, for most families, with wife and husband working, owning one house is within reach, but two is beyond capacity. With so much of income going to EMI, most choose to stay in the house rather than rent it out.

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

#323

Post by frockington1 »

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?

No but he bought it when others did not. Envy is rarely going to yield better results

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

#324

Post by harperlee »

kwhitefoot wrote: post #249
harperlee wrote: post #111

Earlier quoted context omitted.

> 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 Higher density has pros and cons. Living in higher density areas can increase quality of life significantly, if you can walk to work, groceries, pharmacy, restaurants, friends, etc. See https://www.theguardian.com/world/2020/feb/07/paris-mayor-un...…

I can walk to all those things even though I live in a 130 m2 house with an 800 m2 garden full of mature fruit trees. There are four supermarkets within 2 km, the doctor and chemist are 1 km away. In many countries it isn't necessary to sacrifice living space for convenience. It is largely a political choice for the country as a whole even though it is an economic one for most of the individuals. Even in densely popu…

I never posited a false dichotomy, I just said there’s a spectrum of conveniency and that it is related to density. The more density the more things closer, by definition, though; and the bigger the demand for real estate, so people end up with less space due to physics and pricing.

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

#325

Post by iudqnolq »

norswap wrote: post #252
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…

Reminds me of this recent book review on "Georgism", an economic doctrine that states that land ownership is responsible for most of capitalism's evil: https://astralcodexten.substack.com/p/your-book-review-progr... Interestingly, Georgism agrees with you: the problem is that since land appreciates in value (as the supply is fixed and demand increases), there is an incentive to hoard it speculatively. George proposes…

Georgism has interesting extensions. I see the core point as things that were originally allocated arbitrarily/with force should be taxed highly. If your ancestor was a knight who seized some land by force you should have to compensate the rest of society to keep it.

You can extend it to pollution. Polluting is taking some of a common resource (the environment) from everyone else, so polluters should compensate society proportionately.

You could even extend it to network effects in tech. If you have users just because you were first and made it hard to leave, that's something unearned you took from society that you should compensate us for. I think this one is more of a stretch and sadly probably wrong.

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

#326

Post by StevePerkins »

simonh wrote: post #266
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…

The problem is not the practice of home ownership, it is the _policy_ of massively subsidising home ownership through regulations and tax breaks, while also isolating it from actual market forces such as by blocking increased supply. The article is specifically arguing against those policies, not home ownership itself. If you want to own property because you believe in free market capitalism that's fine, I happen to…

In the United Status, the tax break on mortgage interest was effectively eliminated during the previous administration (by the Republicans, ironically enough).

When you file taxes, you can take the "standard deduction" that everyone gets. A downward adjustment to the amount of your income that is taxable. Or you can "itemize" your various tax breaks, if they add up to a total greater than the standard deduction.

Historically, home ownership has been "subsidized" in the sense that the interest one pays on mortgage loans is one of the things that can be itemized. And historically, that was usually enough to push you above the standard deduction amount.

But now, the standard deduction amount has been raised to such a high level that only the wealthy and very upper-middle class have any reason to itemize anymore. Typical mortgages now are no longer enough to get you any special treatment on taxes, beyond a renter who also takes the standard deduction.

Of course, this outdated talking point will probably stick around for years, though...

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

#327

Post by nemo44x »

bidirectional wrote: post #265
satellite2 wrote: post #127

Earlier quoted context omitted.

Generally you buy the land under the house as well, and this is the part of the pack that is appreciating.

Much of that appreciation should be taxed away as the landowner unfairly benefits from public spending elsewhere. If a government decides to invest public money in building a good new school in an area, it is not right that the landowners benefit from free appreciation while the renters are forced to pay more.

Much of it is. Property taxes never end and in my experience only go up. Land owners are also bound to the area and assume all the risks associated with that. Renters can just get up and leave with no financial risk.

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

#328

Post by frockington1 »

JayPeaEm wrote: post #209
jariel wrote: post #189

Earlier quoted context omitted.

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'.

Agreed. I think they're only looking at it from a financial freedom point of view. But I, too, don't see a 30-year keeps-with-inflation anchor as freedom.

What's the alternative? You need a place to live. I guess you can rent but that is constantly increasing and you get 0 equity out of it

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

#329

Post by Ekaros »

nemo44x wrote: post #319
Ekaros wrote: post #126

Homes logically really shouldn't be an appreciating asset. After build(including warranty fixes) they should be in best condition they ever will be(unless further invested). And then just wear down from there and require maintenance to even keep functioning. So after 10, 20 or 50 years it should cost less, not more. I wonder how will this look in let's say 100 or 200 years. That is after we have reached full urbaniza…

The materials and labor required to build them gets more expensive though. So while the materials wear down over time, those same materials get more expensive. And some of those materials, especially structural, will last a long time if taken care of. Furnaces, water heaters, etc go to 0. But foundations, framing/walls, flooring, etc can last hundreds of years.

Part of it is increased size of properties. And increased regulation. But I wonder what are we doing as civilization if the building materials aren't cheaper. Why haven't we gained significant efficiency gains there? Labour really should be in inflation though...

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

#330

Post by splithalf »

kwere wrote: post #293
dslkfjg wrote: post #268

Earlier quoted context omitted.

Population is going down in the developed world. The housing supply is not. If you can't afford housing where you live, then it can only be because more people are demanding housing where you live, having left where they were previously living. The solution to the "problem of home ownership" is to stop making areas undesirable places to live. Portland springs to mind but there's San Fran. NYC, L.A. but it's not just…

dont fool yourself, big capital always preferred "pragmatic" regimes over accountable democracies.

That’s like the point.
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