Priced out of home ownership • Hacker News Board

Re: Priced out of home ownership

#181

Post by lr1970 » Mon, May 27, 2024, 7:35 PM UTC

oooyay wrote: post #164

speeder wrote: post #104

I live in Portugal and here the situation is outright ridiculous. 1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up. 2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "wors…

I live on a sleepy street that's half dense housing and half single family homes. Density will likely take over more than half of the street some day because the city has been relegating more dense housing to the working class areas of the city, which is where I happen to live. [1] Of those single family homes there is one that was owner-occupied for a year when we moved in. Since, it's been locked up and has had no…

> It perplexes me, and the rest of our neighborhood, how someone can float a mortgage, much less an investment mortgage, without a renter.

In the USA it is happening all the time because, surprisingly, landlords have little skin in the the game. LLC is the name of the game. Each investment property is "owned" by its own LLC that bares 100% of risks and liabilities associated with the property and shields the landlord from the creditors. The property is financed entirely through commercial loans from the banks or other lenders. If the property does not generate enough profits for the landlord they quietly take all the liquid assets out of the LLC and stop paying their loan and property taxes. It takes long time (often years) for banks and local governments to start legal proceedings against the said LLC. During this period of time the property is sitting there boarded up. Finally the LLC files chapter 7 -- liquidation and all its assets, close to zero at that time, are given to the creditors.

You may ask why the banks give loans to such high risk entities? First of all, if the property is bringing profits the loans are being paid of and it is the majority of the cases. Secondly, if the loan fails the banks do not have much skin in the game either. They slice and dice the loans and package them into "real estate investment vehicles". Then they sell the packages similarly to how they did it before the financial crisis of 2008. The terms and abbreviations are different now but the gist of it is still the same.

EDIT: typos

Re: Priced out of home ownership

#182

Post by objektif » Mon, May 27, 2024, 7:36 PM UTC

Workaccount2 wrote: post #23

andrewstuart wrote: post #5

Society in UK, USA, AUS,Canada has been destroyed by housing as a financial instrument instead of……. housing. And politicians love every dollar of price increase. There’s the homeowners and the renters/serfs and nothing in between. Dead society, nothing to aim for or live for.

Politicians love every dollar? Regular people own the overwhelming majority of homes, and they love every dollar of increase. The finger pointing at corporations or politicians is totally misguided. It's the locals who collectively are invested in their homes and collectively (through the votes they cast) create the disastrous situation we are in. Even the most bleeding heart liberal is all about "protecting the char…

This is very accurate. Thanks for speaking out.

Re: Priced out of home ownership

#183

Post by hombre_fatal » Mon, May 27, 2024, 7:38 PM UTC

esel2k wrote: post #149

I am not an economist but if we would treat house ownership something that is beneficial for the whole society (less traffic from commuters, less homeless etc) and remove the speculations/foreign investments around housing? Why not apply the following: - every house not used for primary living place is highly taxed (removing all speculative ownership) - charge foreign investors heavily (australia will do this soon) -…

Are speculators the problem is it the fact that housing prices are always expected to go up due to such limited supply? Instead of targeting a symptom, like speculative investment, why not target the root problem of prices always going up so that people can afford housing?

Re: Priced out of home ownership

#184

Post by lwansbrough » Mon, May 27, 2024, 7:38 PM UTC

bryanlarsen wrote: post #176

lwansbrough wrote: post #171

In my opinion, there can only be one solution to this that will come sooner or later. A great correction following simplified zoning & building legislation. Federal governments across the west need to take control of building and zoning. Planning can remain a city/state/provincial affair, but it must be done under standardized and simplified building and zoning legislation. We are wasting unfathomable economic potent…

Federal would require constitutional change, so it'll never happen. But it's the right idea -- move it up the chain so that it's not a hyper-local issue. IOW, at the state level rather than city/county. This has seen some success in California: https://cayimby.org/legislation/

The Canadian government is currently facing this problem. Provinces have constitutional authority over building and zoning. One way they're trying to get around it (though in my opinion, no party is taking this seriously and all efforts thus far have fallen laughably short of where they need to), is by incentivizing the adoption of federal policy by conditioning federal housing grants on the adoption of new federally guided policy.

This is the way for the west, if we're being serious. Once we've taken a few breaths and accepted that we don't want to be authoritative, we can see that incentivizing provinces is the right move.

In my opinion, the federal government should be designing simplified building and zoning guidelines and offering unprecedented grants (on the order of tens of billions) to provinces in a first come first serve manner. Have provinces compete on urgency to receive the most funds, tapering off the offer the longer provinces hold out.

Re: Priced out of home ownership

#185

Post by jandrewrogers » Mon, May 27, 2024, 7:42 PM UTC

oooyay wrote: post #164

speeder wrote: post #104

I live in Portugal and here the situation is outright ridiculous. 1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up. 2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "wors…

I live on a sleepy street that's half dense housing and half single family homes. Density will likely take over more than half of the street some day because the city has been relegating more dense housing to the working class areas of the city, which is where I happen to live. [1] Of those single family homes there is one that was owner-occupied for a year when we moved in. Since, it's been locked up and has had no…

> It perplexes me, and the rest of our neighborhood, how someone can float a mortgage, much less an investment mortgage, without a renter.

This may easier to explain than you might expect. Anecdotally, the people I know in a similar position own all those properties free and clear, there is no mortgage. Consequently, the carrying costs of that empty house are quite low and easily afforded. Also if the mortgage is very old. I know someone with a single-family home in Silicon Valley they don't live in with a mortgage of ~$1000 per month; you can imagine how low the property tax bill must be.

While I am sure there are people with several rental properties mortgaged to the hilt, I don't think it is that common.

Re: Priced out of home ownership

#186

Post by pdonis » Mon, May 27, 2024, 7:44 PM UTC

formerly_proven wrote: post #61

jeffbee wrote: post #59

None of the measures mentioned in the article — lower interest rates, lower transaction fees, down payment subsidies — will lower costs. Every one of them will raise prices. You can only fix this with supply: build homes.

The good ol' "subsidize demand" approach to reducing prices. And if prices continue to climb? Well, just subsidize demand harder and in more diverse ways. I assure you, eventually price will fall. You just haven't subsidized the demand side enough yet.

The GP didn't say "subsidize demand". They said "increase supply". They're different things.

Re: Priced out of home ownership

#187

Post by AlexandrB » Mon, May 27, 2024, 7:44 PM UTC

omgJustTest wrote: post #46

2008 was low of the low for home values. In my view a few things have happened since: 1.hyperconsolidation in lenders 2. Real estate orgs have worked together to eliminate downward price pressures. 3. NIMBYs and generally “home ownership associations “ have created so many barriers to building & reaped the profits in their own home values. Some good news is that most populations are slowing or declining on the globe,…

Now imagine all this, but 2008 was barely a blip and not a low for home values - that's Canada.

Re: Priced out of home ownership

#188

Post by phoehne » Mon, May 27, 2024, 7:47 PM UTC

speeder wrote: post #104

I live in Portugal and here the situation is outright ridiculous. 1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up. 2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "wors…

I'm not sure if it's the case in your location, but sometimes foreign buyers come in and buy properties they don't expect to inhabit (unless something goes really bad in their country). Europe and the US have strong rule of law systems that prevent the state from just taking property. (The government charging you with a bogus criminal charge to justify taking their property in in their home country). It's also an asset that they can hold, even if it's not income generating, and even if it loses some value. (Because it's still better than most of the assets they have access to in their country). This is not always the case in every situation, but it's common. (Ed. as one person pointed out below, there is also a lot of money laundering that takes place. In that case, the property does not need to make any income).

Re: Priced out of home ownership

#189

Post by pdonis » Mon, May 27, 2024, 7:48 PM UTC

Stranger43 wrote: post #95

In a lot of ways this is a problem creating itself. The reason Home Ownership is desirable is that the pricing of houses go up faster then both inflation and depreciation caused by wear decreases the utility value of a dwelling, and the reason that houses are expensive is that the state actors are invested enough in this cycle to make sure it never really breaks. In a real functional market there would be no real ben…

> In a real functional market there would be no real benefit to house ownership over long term leases.

More precisely, there would be no net financial benefit to home ownership over long term leases, so people would use the free market as a tool to naturally sort themselves according to their non-financial preferences: people who valued the non-financial benefits of home ownership over the non-financial benefits of renting would own homes, those whose preferences were the reverse would rent. That would not mean nobody would own the homes they live in.

Re: Priced out of home ownership

#190

Post by woodpanel » Mon, May 27, 2024, 7:49 PM UTC

oooyay wrote: post #164

speeder wrote: post #104

I live in Portugal and here the situation is outright ridiculous. 1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up. 2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "wors…

I live on a sleepy street that's half dense housing and half single family homes. Density will likely take over more than half of the street some day because the city has been relegating more dense housing to the working class areas of the city, which is where I happen to live. [1] Of those single family homes there is one that was owner-occupied for a year when we moved in. Since, it's been locked up and has had no…

I think the answer to your perplexity lies somewhere buried here:

> The couple that own it own several properties across my city

Without knowing which city you’re talking about I can assure you this is rather common.

The moment a property becomes just one out of many (assets) in your portfolio your necessity to let becomes a mere annoyance.

Many of the housing market imperfections could be at play here, but it certainly doesn’t help that renters are increasingly unable to afford to become first time buyers.