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Maybe treating housing as an investment was a mistake

goodreason.substack.com

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Re: Maybe treating housing as an investment was a mistake

#111

Post by arcticbull »

kurthr wrote: post #92
VHRanger wrote: post #7

Earlier quoted context omitted.

Japan has plenty of societal ills, but at least Tokyo has been doing amazing on this front.

Every time I see this I have to laugh. If you live in Tokyo, I'd love to hear your anecdotal experience. I have stayed and visited japan for the last 35 years, and find all of the "Tokyo is so affordable and buildable" is hilarious. The breathless articles I read about it leave out fundamental aspects (the incredible density, the absolute destruction 70 years ago, the corruption [especially in Shinjuku], the size of…

> and the fact that most people who can leave Tokyo to raise children do (even if it means commuting 2hrs each way every day on a train).

Is that why the population is 14M - 34M in the metro? Bigger than every American city and about the size of all of Canada combined? They just can't get out to where it should by all accounts be cheaper? Is there a fence or something?

Re: Maybe treating housing as an investment was a mistake

#112

Post by photon12 »

lotsofpulp wrote: post #72
photon12 wrote: post #38

Earlier quoted context omitted.

Yes, there is an inconsistency in the amount of effort expended to survive versus the outcomes of that effort. I can't reconcile them in my head. I'm watching my friend trying not to physically deteriorate and have some modicum of comfort while I sit here on my couch living off savings from the job I recently quit. Nothing I do can be so much more valuable than what he does.

One can define effort in that way, and arrive at the conclusion you did, but it is not what cognitive dissonance is typically used to mean. But that definition of effort as it relates to the ability to “survive” does not seem useful to me. It takes a lot of effort to manually dig a ditch compared to using an excavator, but you would not pay the person that shows up with a shovel more than the person that shows up wit…

I used to dig ditches in places where excavators couldn't go for a living, and I'm familiar with the contract rate differences for that type of labor and equipment.

My point is that the disparity is such a chasm that my brain can't reconcile it. We aren't talking about ditch digging, we are talking about serving food to the people of Seattle. All the software engineers in Seattle, in my experience, love to frequent dining establishments. Their quality of life is dependent on the labor of people serving them. There's no way I can accept the disparity as "just the way it is." My gut can't take it.

Re: Maybe treating housing as an investment was a mistake

#113

Post by SoftTalker »

dfxm12 wrote: post #58
photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

What sucks is a lot of young renters with steady jobs can afford to pay off a mortgage month to month, but they just can't afford that down payment (especially the 20% needed so as to not need to get mortgage insurance)! I was in that position for a while. Every time it seemed like I could afford to put that money down, the housing prices went up! It took a handful of years of renting cheap places (with roommates), l…

That’s normal. I bought my first house in the early 1990s. Saving the down payment was tough. I lived in a real shithole apartment, anything nice and the rent ate up too much of my cash flow. And I I had to pay PMI, but the monthly payment was still cheaper than rent.

Re: Maybe treating housing as an investment was a mistake

#114

Post by yonran »

This post makes a good point, in particular that one generation’s house price appreciation (really, land rent and price appreciation) is the next generation’s shelter price inflation. And the obvious solution is higher land taxes and more incentives to construct new housing.

However, I would add nuance that using the word “investment” as synonymous with price appreciation is only partly true because any investment’s value comes from capital gains or dividends. And I dispute his claim that if buying is a good investment, then prices need to increase faster than inflation (although expected rent growth due to supply restrictions may be priced in in the example of Littleton, CO). A house can be both affordable to all generations and a good investment, just as a laptop or a pickup truck or any capital good can be both broadly available and a good investment. You buy a car instead of leasing it because it is a good investment even though it depreciates and even though there is a healthy market of auto leases. Kevin Erdmann has a clear-eyed series on the role of landlords even in a healthy housing market, which is much like the role of lessors of any capital good https://www.mercatus.org/economic-insights/expert-commentary...

The key variable that he is forgetting in the nytimes rent calculator is rent inflation. In almost any market, there will be rental investors, and that’s a good thing; otherwise you would not be able to rent a house. What really matters for the long-term health of the country is making sure that rents don’t increase (YIMBYism) and turning inevitable central city rents into public goods (Georgism).

Re: Maybe treating housing as an investment was a mistake

#115

Post by FredPret »

photon12 wrote: post #6

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall. I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate…

First let me say that rent and real estate should go way down and Seattle should make it easier for people like your friend to live there.

Second, there is no direct connection between work done, value added + money earned. The connection is a loose correlation at best.

As an example, you can do back-breaking labour painstakingly paving roads with one cobblestone at a time, 16 hours a day, for decades. Or you can write a dozen lines of code that speeds up a critical business process. One is super hard and makes little difference in the world, and thus pays almost nothing. The other is easy if you know how and adds enough value that there's scope for lots of money to be involved.

Re: Maybe treating housing as an investment was a mistake

#116

Post by lalos »

Easily fixed with a tax system:

1) first home tax-free - the address you submit your yearly taxes on. Incentivize people to own at least one home.

2) second property you pay taxes for both homes now - no more tax free benefit since you are able to afford more than one place.

3) more than 2 properties you pay taxes for all of them times some factor 0.05*N houses. Fudge around with the factor to allow more supply for all the first home buyers since now it it is more expensive to hold multiple properties.

Not sure if this falls under Georgism.

Re: Maybe treating housing as an investment was a mistake

#117

Post by fnordpiglet »

This ascribes morality to an amoral thing like population growth and markets. Buying anything is an investment. That’s what investment means - you take resources and invest them. The growth in value of an investment in a market is an artifact of supply and demand. Not all homes rise in value, some decline, and many are fairly stable over time. Likewise rent doesn’t rise steadily everywhere.

The absurdity of the story here is reflected in the person with the rent vs buy calculator trying to see which decision makes the most sense, then feeling a moral outrage that in order to make money the price of the house has to go up. This is like being morally outraged that X-Y is only positive if X is greater than Y. You certainly can be, but what’s the point and why on earth would you talk about that publicly?

By the way, home prices are most easily thought of as a proxy for rent utility. If you can buy a house on debt and rent it for more than the principal risk and debt cost then you’ve got an arbitrage opportunity and prices will go up. Likewise if you can’t and you’ll lose money prices will go down because prices are too high. So complaining about house prices and rent as orthogonal ignores that they’re intertwined.

Mark Twain gave the advice to invest in real estate, they’re not making any more of it. Ignoring that you should never take investing advice from Mark Twain, there’s truth to it. Lack of affordability has to do with scarcity - if everyone is moving to San Francisco and expecting to be able to buy a beautiful Victorian in the Castro, expect the prices and rents to be sky high as there’s only so many and there will never be more than there was effectively 50 years ago. There’s nothing immoral about this. It might feel unfair in some “the universe owes me a beautiful life” way, but it’s actually not unfair. It might feel unfair that someone working for the city who moved into the Castro in 1970 got a great deal on a beautiful house while you live in a SRO in the Tendergroin with 15 roommates working as a senior principal engineer at google, but it’s actually not. It’s just the way things are. If you don’t like it, it’s not the city workers fault for being a nimby that you can’t afford their house, or that the city they live in attracted so many wealthy people and the value of their house exploded.

There simply no morality at play here. There’s no way not make ownership of property not an investment. There’s no entitlement to affordable housing. We can work to make more house available so more people can afford it, but we also probably can’t ensure everyone on earth can move to San Francisco and have a nice house in Noe Valley.

Re: Maybe treating housing as an investment was a mistake

#118

Post by mjr00 »

andrewmutz wrote: post #62
mjr00 wrote: post #10

> While the rich are more likely to own homes, tons of middle class and poor people also bought homes and planned their lives under the assumption that housing prices would go up. Tanking housing prices would destroy their trust in the system that they bet everything on. This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their ho…

> You'd be destroying everyone's retirement plans and there'd be major economic repercussions I think that exaggerates it. Most retirees aren't profiting from the home they own if they live in it. The "income" from it is just imputed rent. So if the housing supply increases dramatically, that imputed rent drops, but it doesn't matter since the cost of housing drops as well.

Many (most?) retirement plans involve downsizing from the large home in a (sub)urban area where they raised children and worked for most of their life to a lower-cost area in a lower-cost house. If my SFH is worth $1,000,000 and my retirement plan involves selling and moving to a $500,000 condo, that's $500,000 of money in my retirement account. If politicians implemented a policy that slashed housing prices in half, suddenly I'm going from $500k->$250k, which means I only have $250k from the downsizing. This is a significant impact to my retirement plan.

Re: Maybe treating housing as an investment was a mistake

#119

Post by nemothekid »

zachthewf wrote: post #69

Lately I've been thinking that perhaps the solution to the housing shortage is a technology that makes it easy, cheap, and extremely fast to build housing that is both attractive and illegal. Uber and Airbnb were both pretty much illegal from the get go, but ultimately worked because they were incredibly popular. They forced the laws to change to accommodate what people actually wanted. Similarly, living in tents and…

This is a technical solution to a political problem. The cost of building housing isn't the problem. As the article complains, the problem is housing is an investment and as other commenters have pointed out, our government has pretty much protected this asset class and all of America has the expectation that pricing will continue to go up.

If you flood the market with competitive homes you will destroy housing at an asset class; people understand this so they will block any technological improvement that would make housing cheaper.

Re: Maybe treating housing as an investment was a mistake

#120

Post by czbond »

tlholaday wrote: post #39

Policy solution to intractable social differences: Fund UBI with 2.5% SALSA, problem solved. https://www.radicalxchange.org/concepts/plural-property/ Yes, new problems appear. Maybe new problems are less vexing.

Didn't money printing of 2019-2022 show that UBI will cause price inflation, lower velocity of money, and thus cause all prices to inflate across the board?

UBI sounds great, but once fully in play across a population - market forces cause base prices to increase to meet UBI for a near net zero benefit.

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