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Maybe treating housing as an investment was a mistake

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Re: Maybe treating housing as an investment was a mistake

#781

Post by pdonis »

cornholio wrote: post #769
pdonis wrote: post #682

Earlier quoted context omitted.

> This problem can only be solved politically, with the state taking a major role in the supply of housing The state already takes a major role in the supply of housing, as you yourself acknowledge. That's the problem, not the solution.

The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests. The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream, you either get some sort of favela or the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA.

> The upper levels of government can and should correct the failures of the lower levels which are captive to local homeowner interests.

They have been, for decades. That's where things like the Community Reinvestment Act, which played a significant role in causing the crash of 2008, came from. Not to mention the decades-old policy of encouraging mortgages by funding them with money printed by the Fed's printing press.

> The ideea that you can eject the state from regulating the use of a resource with so many externalities is a pipe dream

No, what is a pipe dream is the idea that governments can somehow fix problems with externalities or market failures. They can't; they make them worse. That's because governments are not magical entities that somehow always do what is best. They are organizations run by human beings, and their incentive structure is even worse than that of free markets.

> the residents re-invent a much more exclusionary and bigoted version of the state, for example the HOA

While I'm no fan of HOAs, at least the people in them have skin in the game, being members of the community themselves. However flawed this model is, it's still preferable to having unelected bureaucrats in a city a thousand miles away micromanaging people's lives.

Re: Maybe treating housing as an investment was a mistake

#783

Post by wonderwonder »

judge2020 wrote: post #677
wonderwonder wrote: post #656

Earlier quoted context omitted.

A landlord increasing rent is capped by comparables in the area. It's not realistic for a landlord to increase rent by over $3,300 a month. They would never be able to rent it. So while they can increase rent it still has to be competitive with comparable rentals.

If you're already in a lease, chances are they will try to rent it for a few percent more than what they'd list it for on the open market. Many people are not attune to moving every year, especially if it's a house instead of an apartment, and will weigh the costs (incl. mental) of moving with the money they have left in their budget.

Sure, but in the meantime all of the repairs have been completed vs the renter being unable to come up with 40k and their house remains flooded and damaged.

Even simple maintenance likely covers the increase. I spend at least a $1000 a year just on ac maintenance. Add in lawn care and that's another $1500 (you could of course do it yourself). Need trees trimmed $2000 or 1 fell into your house?. Roof leak, $5000? Water heater, $3000? AC needs to be replaced, $8000? Someone backed into your mailbox? These are all large bills that many renters could not cover. Many of these happen in the same year.

Re: Maybe treating housing as an investment was a mistake

#784

Post by s1artibartfast »

aeturnum wrote: post #742
s1artibartfast wrote: post #622

Earlier quoted context omitted.

>I agree that the sort of investment you are describing makes sense - but in practice those kinds of investments are out-competed by ones with better yields. I think that is a an advantage, not a disadvantage. There is no need for housing investments to have competitive yields. If you can make a profit building houses which have more value to buyers than your cost of inputs, someone will make them. It just won't be a…

> There is no need for housing investments to have competitive yields I personally agree but you are not describing the economic system we live in. > I don't worry that people will stop making socks, shoes, or food because the profit margin in that business is lower than the market yield. This happens all of the time - but the market finds another equilibrium and continues to provide the good. > It is like saying tha…

>I personally agree but you are not describing the economic system we live in... This happens all of the time - but the market finds another equilibrium and continues to provide the good

I just dont think we are on the same page here or think this is accurate for our system. The 1% profitable sock factory doesn't shut down because some investor somewhere starts making 100% ROI on bitcoins or tech stock. A carpenter doesn't lay down his tools because fund manager somewhere is making big bucks. I agree the prevailing rates on capital can have impacts on new growth in capital intensive industries, but that doesn't mean you wont be able to find a homebuilder if you have cash in your pocket.

>Generally agreed - this would be more efficient. I also do not want it. It's more efficient in every way. There are significant economies of scale. There is a reason armies do not have each individual soldier cook their meals.

I don't think resources like labor and time are truly fungible and can be treated as interchangeable. Efficiency is relative to the measure of value and the person making the valuation.

If I don't value my time or even enjoy cooking, paying someone to do it is not efficient for me, even if there are huge economies of scale. It might be efficient in terms of total hours to some central planner, but their valuation of my time and labor is not the same as mine. I am still paying money for labor that would otherwise be free. It may be horribly inefficient.

There is no maximally efficient platonic system without a universally imposed definition of the measures being optimized.

Re: Maybe treating housing as an investment was a mistake

#785

Post by pc86 »

goosinmouse wrote: post #604
gwright wrote: post #293

Earlier quoted context omitted.

I'm not saying there isn't a disparity but a comparison like this would need to include taxes, maintenance, and utilities on top of the mortgage to be comparable to a rent (well utilities may or may not be included).

And at the end of 3 years the homeowner will have 3 years of equity and the renter will have nothing.

And the homeowner has to stay there unless they can get someone to buy it, while the renter can just leave.

They're completely different situations.

Re: Maybe treating housing as an investment was a mistake

#786

Post by krferriter »

bityard wrote: post #625
angarg12 wrote: post #551

Earlier quoted context omitted.

I'm a new immigrant to the US, and housing is my single biggest worry together with my work visa. Our household income is north of 300k, but housing still seems unaffordable. It might sound like whining, but we only achieve this level of income recently, so our lifelong savings are in the low 6 figures. We got no assets or property abroad, and no family that can help us to get in the property ladder. Even old, basic…

I don't mean to be blunt, but if modest homes in your area are $1m, then you are in a VERY high-cost-of-living area and what you see here is not at all typical of the rest of the country. Where I live, a charming 1200sqft starter home in a blue collar neighborhood goes for $150-$200k.

A lot of jobs are in high cost of living areas. The reason they're high cost of living is because there are jobs there, the demand to live there is high, and they haven't built nearly enough housing. Some bay area municipalities have essentially not added any housing in the last 50 years. They made it illegal, because incumbent property owners don't want more people to be allowed to live there.

And it's not just the bay area. The populations of Cambridge and Boston have gone down since 1950, because a series of laws were passed that put tight restrictions on residential construction that reduced the allowed density and effectively made almost all of the existing housing stock illegal (but it was grandfathered in) and anything more dense than that, like even building a 5 story residential building in a lot zoned for 4 stories, when that lot is surrounded by 4 and 5 story buildings, is an expensive, long process of arguing with the zoning board and going through arbitrarily subjective design review processes.

Re: Maybe treating housing as an investment was a mistake

#787

Post by AstralStorm »

vjk800 wrote: post #661
anonymouskimmer wrote: post #88

Earlier quoted context omitted.

I don't know. An unclogged pipe is used multiple times per day.

A point that used to be made a lot in copyright wars discussions a decade ago was that most "old fashioned" professions (like plumber, carpenter, architect, etc.) only get paid once, not every time someone uses their product, whereas creators of digital goods somehow are entitled to get money every time someone uses their creation. Super star musicians and software engineers making obscene amounts of money is a direc…

The ignored corollary is that the market for these products will get saturated much more quickly, and thus the product needs to change to stay relevant. Plus there's a low(ish) bar to entry.

How long has a quality carpentry been sold now? Cost of entry is also relatively stable.

Music styles change every decade now and it is speeding up as marginal costs of entry fall. Likely similar with other entertainment, which is why every entertainment corporation is now looking for lock-in.

Re: Maybe treating housing as an investment was a mistake

#788

Post by amrocha »

Grimburger wrote: post #743
bmitc wrote: post #236

Earlier quoted context omitted.

I agree with that. Investment homes, second or maybe just third homes, etc. should be taxed rather extremely aggressively.

So you punish renters for the benefit of prospective homeowners? Not everyone wants to buy.

Every time a housing discussion comes up someone comes in with this argument. If you stopped to think about it you'd realize how silly it is.

Renting doesn't need to be handled solely or even at all by the private market.

Re: Maybe treating housing as an investment was a mistake

#789

Post by fnordpiglet »

BurningFrog wrote: post #688
fnordpiglet wrote: post #275

Earlier quoted context omitted.

I don’t understand this. There are a lot of places in the US, and certainly globally, where housing prices decrease. There are also plenty of folks who got soaked in 2008 and lost everything, and no one helped them. How precisely does “the government” do this house price propping up? Via loan guarantees to ensure liquidity in the mortgage market? These make houses affordable and accessible to most people. Without loa…

> How precisely does “the government” do this house price propping up? Primarily by not allowing construction of new housing supply.

All the economic research I’ve read says repealing zoning laws induced no meaningful decrease in home price. That makes sense - home builders build to maximize profit and aren’t in the business of devaluing property they buy to develop. They develop it in a way that appreciates prices to improve their margins. But like this piece there seems to be some view that market forces are shaped by immoral behavior on someone’s part, rather than simply that’s how things work in a world of scarcity.

We will see how things go in California! Maybe the anti NIMBY dream of style sky high SRO arcologies will come true and everyone will be living in communal peace in their bleak windowless cement efficiency. My bet is prices continue to rise for as long as people move into the region and developers don’t buy into the egalitarian view of affordable housing any more than they ever have.

Re: Maybe treating housing as an investment was a mistake

#790

Post by gwright »

Workaccount2 wrote: post #668
gwright wrote: post #373

Earlier quoted context omitted.

I'm not so sure. There is a Planet Money episode that talks about the effect the digital spreadsheet had on accounting employment: > Thanks to spreadsheets, there are 400,000 fewer accounting clerks than in 1980, but 600,000 more regular accountants. Might something like GPT-6 cause employment to shift to higher value job responsibilities? https://www.npr.org/sections/money/2015/02/25/389027988/epis...

People raise arguments like this frequently, but in every other case throughout history people were made obsolete by tools that intelligences use. Never before has the intelligence part been made obsolete though.

Well you've changed the assertion a little bit there. I shared that one particular technical innovation shifted the mix of jobs towards more skilled jobs. That doesn't say anything about any individual person of course.

Your statement says that "people were made obsolete", which I take to mean that some people are individually unable to switch to the more skilled jobs.

I think the effect on current employees due to technical innovation is a reasonable issue to be concerned about but it's not the same phenomenon as the job "mix" changing towards more skilled jobs, even some that didn't exist before. The two phenomena aren't mutually exclusive either.

We don't have too many stagecoach drivers these days but we do have a lot more "drivers".

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