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

economist.com

371–380 of 497 posts

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

#371
post #298

Earlier quoted context omitted.

I love, as an Australian, waking up in the morning seeing the Australians all talking. During the day it’s all North Americans, but obviously this is a game of time zones. Anyway. I just wanted to say that, and also, this issue is seemingly everywhere. I’ve been in Toronto Canada for over a decade now and prices have gone crazy for almost that entire time. When i arrived a house in the city was 350-400k, that same ho…

I'm an Australian in London so for me its only mid afternoon :D Goddamn those are some crazy numbers, how does anyone even begin to afford that? You'd be saving for 20 years just for a deposit....

I'm an Aussie in Europe now as well. Back when I lived in Sydney the average price of a home near where I lived was about 1.3 million, now I checked the prices last week and the estimated price is 2 million.

Somehow there was only a small dip in prices during the pandemic and now the property market is back on the boil again.

I honestly don't think any family without high dual incomes can actually afford a home now close to the city. The only places that are close to affordable for middle income families are far away from the centre.

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

#372

Henry George and Progress and Poverty have a better solution. See a recent review on Scott Alexander's blog: https://astralcodexten.substack.com/p/your-book-review-progr...

This makes sense, but if he sees rent as an immutable law of progress, then he is simply advocating for the creation of a new rentier monopoly in the political class. This is exactly what he decries as the violent theft of land by English nobles and colonial forces. I’m sure that the nobles would have told you that they were saving the commoners from all those evil landlords, and the colonization of India was actually freeing them from oppressive local warlords.

The main thrust of economic discovery over the last 200 years is that self-sovereignty is the main driver of social prosperity, not authoritarianism, nor collectivism. There is a natural tax on land, which is the cost to defend it, or perhaps the cost of support to a community that will respect a right to ownership. Put that way, the situation is not that the government ‘allows’ landlords to collect rent, it is that the government reverses this by forcing the community to pay for the legal and physical defense of the land, which is given to them for free.

If you removed any central authority, you would get exactly the situation that George is looking for, which is that the landlords would have to pay the community the full value of the rent so that there would be no benefit from recognizing a new owner, and thus all members of the community would be willing to enforce ownership rights. Of course this could also be chaos, so formalization of these agreements turned into government, which made some people very powerful, who found that they could make lots of money renting land if they collected income tax to pay their cost of ownership.

So I’m wary that invocation of his ideas may lead to a violent revolution that will end up in exactly the same place place we came from, which is a powerful class of rentiers using the threat of violence to extract maximum value from productive people.

But still I like the Georgian idea, and I think it can probably be expressed through an insurance bond that secures the physical defense of the property through payments to the community, and a collateral to compensate for any loss of ownership. There should also be room for externality compensation, or possibly even further, conservation fees (Pigou). We have remarkable possibilities for fully-voluntary governance with smart contracts.

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

#374

I would pin the failure on how we view home ownership as an investment vehicle. There's little inherently appreciable to a building. In fact they depreciate over time and require constant investment to maintain. The location however can appreciate, which we all agree on. But we never say out loud the underlying mechanism. Locations appreciate in value specifically because more humans want to own it. Viewing homes as…

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

#375
post #5

The title is clickbait, I presume. I can't read the full article either, but in the introduction it already says that the problem is that not enough houses have been built. And in my opinion, that plus regulation failure are at the root of the problem. Who actually owns the houses is of lesser importance.

Don't some homeowners object to increased supply because they believe it hinders appreciation of their homes?

I don't see much of a difference between individual home ownership and people or businesses that own many houses. The latter group is more powerful, and might have more influence on politics through lobbying.

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

#376
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 people didn't own houses then someone would, and that someone is still incentivized to constrain the supply. Yes, but constraining the supply is done through political means: planning laws, green belts, individual objections to developments, voting etc. All of those in theory are based on "one man one vote", so if you concentrate ownership of supply you drastically reduce the number of votes it gets. > the middl…

> People in Singapore really love their flats.

That's an awfully big assumption to make. I recently mer a few dozen Signapore residents and not a single one of them love their flats at all. They wish they could get married to someone in a country where they have more opportunities.

You seem to be jumping to a lot of conclusions.

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

#377

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…

Upvote! Private property ownership and intergenerational wealth transfer is the foundation of middle class, and bigger middle class leads to better education for the masses, and a more democratic society!

Like I tell my wife, we are working to pay off our house (and hopefully another soon) for our kids, not for us. Sure I could rent and maybe there are benefits to that in a short term view, but in a generational view there are huge benefits to my children if I am able to give each of them a house (to live in or sell and buy another, I don't care) and then they are able to make things better for their kids, etc.

Add up all the money you have spent on rent and mortgage payments and pretend it just never happened. It's life changing to have that.

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

#378

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…

This could partly due to an aging population. People hold on to assets longer, getting more appreciation before they sell to the younger generations.

It’ll balance out when our lifespans max out somewhere (perhaps never?), and productivity is improving with technology as well, likely helping the situation somewhat.

This is not the only factor however.

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

#379
post #279

Earlier quoted context omitted.

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 r…

The problem is that it's not logistically possible. The very thing you want us to ignore for the sake of argument is the crux of the issue.

New York is a port. Ports become cities, because access to the rest of the area is kind of needed to access the rest of the area. Ports are valuable.

> 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)?

Unrealized losses aren't real losses. It's one of the things that confuses me about cars as well. I buy a car, I drive it for as long as possible. I'm not looking to resell it. Same with property. As long as when I sell it, I'm not losing money to sell it, I'm good. Because I'm not selling to make money, I'm selling to divest myself of the obligation of ownership for some reason.

And it's important to note that I said that I'm not losing money to sell it. If I owe on it, I want to sell it for enough to cover that and any closing costs on my end. Other than that, I don't really care. I'm not a real estate investor.

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

#380
post #279

Earlier quoted context omitted.

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.

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. You can make the property you own hard to buy or easy to buy; that's obviously up to you. The problem is that landowners pass laws that make it difficult for prospective owners to buy any property or for current owners to build new units on the land they already own. Thi…

I was being cheeky because the way he framed it, it seemed like he was saying that making it difficult for someone to take your property is a bad thing.
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