Housing is at the root of many of the rich world’s problems (2020) • Hacker News Board

Re: Housing is at the root of many of the rich world’s problems (2020)

#451

Post by adamsmith143 » Wed, Aug 17, 2022, 7:29 PM UTC

2OEH8eoCRo0 wrote: post #234

idkyall wrote: post #122

Housing in the US has gotten to where it is due to horrible laws effectively allowing total tax avoidance for landlords. Take some investment property. You buy it at some basis price, let's say 500k. You rent it out for 15k a year. Each year you can offset your rental income against deprecation of the property and property taxes - meaning, you pay no income tax on your rental income. ~30 years later, you've deprecate…

> unless your estate is over 12 million dollars(and double that for a married couple), you pay no estate taxes. Why aren't estates just taxed as income to the entity who it goes to? If my father croaks and leaves me $1m it should count as an additional $1m of income to me that year.

Because that 1M has already been taxed either as income or investment. Why should it be taxed twice?

Amounts over 12M are indeed taxed twice.

Re: Housing is at the root of many of the rich world’s problems (2020)

#452

Post by namlem » Wed, Aug 17, 2022, 7:29 PM UTC

Loughla wrote: post #170

marto1 wrote: post #136

Earlier quoted context omitted.

All this is true, but you missed a crucial piece, addressing your "need to engage" - political energy capacity coming from the young. I'll be more than glad to be proven wrong, but I don't think young people have driven any sort of political change in the west for at least the last 20 years. There are many cases where they get used as a lever, but actual movements like "occupy wallstreet" got squashed fairly fast.

100% accurate. While popular society takes small steps forward in regard to social and political changes, the actual politics has not changed from when I was a kid. There are more politicians willing to admit they support gay people, I guess. But that's about it. Deep down where it counts - fiscal policy - nothing changes.

Tens of millions of Americans gained access to healthcare due to policy changes. The IRA just further expanded access to healthcare.

Re: Housing is at the root of many of the rich world’s problems (2020)

#453

Post by namlem » Wed, Aug 17, 2022, 7:33 PM UTC

anovikov wrote: post #246

nostrademons wrote: post #164

Earlier quoted context omitted.

The equivalent to rental income is "with dividends reinvested". Dividends are the cash flows from owning a stock, just like rent is the cash flow from housing. So the 10x capital appreciation from housing is equivalent to the 37x capital appreciation from the S&P 500. You and anovikov reach different conclusions because you're looking at different time scales. You're citing returns from 1870-2015; he's citing returns…

OK, so returns from 1870 to 2015 are same for housing and stocks. Which again proves that there's nothing morally wrong about housing prices, if these investments are replaceable, one can always invest in stocks to save up to buy housing (at least on average, that is).

On the contrary, housing shouldn't appreciate. It's bad for the economy as a whole, and especially for young people, for homes to be an appreciating asset. Housing should be a commodity, not an investment.

Re: Housing is at the root of many of the rich world’s problems (2020)

#454

Post by adamsmith143 » Wed, Aug 17, 2022, 7:33 PM UTC

Supermancho wrote: post #309

adamsmith143 wrote: post #243

Earlier quoted context omitted.

Give me a break. You'd need a down payment of ~400K to have a mortgage low enough to barely break even at $15,000 in rent per year. None of his math makes sense. Of course you would really rent a 500k property at something more like 2500 a month but even then you'd need a down payment near 200k to start making a profit.

Here's a mortgage calculator: https://www.google.com/search?q=mortgage+calculator 500k property at 2.75% is $200k down gets you under 15k (this is very similar to my current mortgage) Now you're going to object that the interest rate isn't that anymore, which is irrelevant. There are numbers that will work which are simply an example to illustrate how depreciation works, and you just don't like the arbitrary scenario…

Mate who cares about rates from years ago. You aren't getting anything under 5 these days. Not to mention those rates are for primary residences, you get even worse rates for investment properties.

The point is if you have 200k to put into a rental property you are already wealthy way beyond an average American.

Re: Housing is at the root of many of the rich world’s problems (2020)

#455

Post by ChrisLomont » Wed, Aug 17, 2022, 7:36 PM UTC

dcolkitt wrote: post #262

datacruncher01 wrote: post #132

It's a simple problem, we turned housing into an investment. Now everyone who owns a home is incentivized to ensure their investment is maximized and that results in a lot of NIMBYism. The simple solution is we need more housing in cities and suburbs. How we get there is an exercise that's taken on by local housing authorities and they are not incentivized to solve the problem. That's because they work for voters who…

> this cannot be solved from the federal level. I disagree. The federal government invests enormous resources into subsidizing home ownership. Everything from Fannie Mae guaranteeing mortgages to not taxing home owners on the imputed value of rent. And I think that's all well and good, home ownership has many positive externalities. But there's zero point subsidizing demand for something when supply in inelastic. In…

>Fannie Mae guaranteeing mortgages

FM does not guarantee most mortgages, only certain govt types like FHA and VA loans, which the govt decided to back in order to help low income people get loans (otherwise the rates would be even higher for them).

FM buys up a lot of mortgages and sells them to investors, then turns around and puts the money back into productive use.

>taxing home owners on the imputed value of rent

What does this mean? You want to tax homeowners as if they paid themselves rent? (Which even then is net zero, so no tax...)

If you want people to pay income tax on the imputed rental value (which is likely not even legal - they are not getting an income from ownership - and courts have held income tax must be on sources of income), then you will increase the cost of home ownership, putting even further out of reach for most people.

>In those cases subsidies don't result in expanded supply, only increased prices.

Yet many places subsidies do result in new housing.....

Re: Housing is at the root of many of the rich world’s problems (2020)

#456

Post by jefftk » Wed, Aug 17, 2022, 7:36 PM UTC

wonnor wrote: post #443

ChrisLomont wrote: post #439

Earlier quoted context omitted.

>you pay no income tax on your rental income And are losing value on the property, which is the point of depreciation. >~30 years later, you've deprecated it down to an effective value of $0 An no one will now rent, since your building has an effective value of $0 since it has become crap. All throughout your list you ignore all the costs involved in being a landlord. Have any friends that have tried it? (I do). Did…

>>~30 years later, you've deprecated it down to an effective value of $0 >An no one will now rent, since your building has an effective value of $0 since it has become crap. Are you really in good faith trying to argue that nobody will rent a house that is 30+ years old?

Maybe they're saying that if you don't maintain a house for 30y it will be unlivable?

Re: Housing is at the root of many of the rich world’s problems (2020)

#457

Post by andrewmutz » Wed, Aug 17, 2022, 7:37 PM UTC

wonnor wrote: post #443

ChrisLomont wrote: post #439

Earlier quoted context omitted.

>you pay no income tax on your rental income And are losing value on the property, which is the point of depreciation. >~30 years later, you've deprecated it down to an effective value of $0 An no one will now rent, since your building has an effective value of $0 since it has become crap. All throughout your list you ignore all the costs involved in being a landlord. Have any friends that have tried it? (I do). Did…

>>~30 years later, you've deprecated it down to an effective value of $0 >An no one will now rent, since your building has an effective value of $0 since it has become crap. Are you really in good faith trying to argue that nobody will rent a house that is 30+ years old?

He's saying that you factored in the depreciation deduction, but never factored in the expenses of related to keeping the property in good shape.

So you either left them out of your math, or you planned to do zero upkeep (hence, "nobody would rent it")

Re: Housing is at the root of many of the rich world’s problems (2020)

#458

Post by namlem » Wed, Aug 17, 2022, 7:37 PM UTC

infogulch wrote: post #357

A couple ideas for how to fix some real estate problems: 1. A zoning rule that requires home owners to live in the owned home. This would prevent remote/foreign money from meddling with local housing in particular areas, and prevents big corps from buying up all the homes and forcing people to lease them out. Some people want to lease though, so that's why I think it's more appropriate as a zoning tool for particular…

None of this would have much impact. What is really needed is to abolish most forms of land use restrictions. Abolish parking minimums, abolish floor-area-ratio minimums, abolish single family zoning, abolish or severely limit community review of new housing developments. Neighborhoods built prior to WWII are nicer places to live precisely because these rules didn't exist when they were built. It was the insanity of post-war high modernist urban planning that destroyed American cities and suburbs.

Re: Housing is at the root of many of the rich world’s problems (2020)

#459

Post by ChrisLomont » Wed, Aug 17, 2022, 7:38 PM UTC

fezfight wrote: post #185

datacruncher01 wrote: post #132

It's a simple problem, we turned housing into an investment. Now everyone who owns a home is incentivized to ensure their investment is maximized and that results in a lot of NIMBYism. The simple solution is we need more housing in cities and suburbs. How we get there is an exercise that's taken on by local housing authorities and they are not incentivized to solve the problem. That's because they work for voters who…

So I think folks overlook just how wealthy certain investors are when they propose the fix is to just build new properties. Those will also get snapped up by investors. To fix the problem, investing in housing needs to be either banned or made very unattractive. You only need one house to live in.

>Those will also get snapped up by investors.

Investors buy around 10-20% (depending on quarter) of all new properties (and likely because they paid to build most of that share).

That's a far cry from 100%.

Re: Housing is at the root of many of the rich world’s problems (2020)

#460

Post by Emma_Goldman » Wed, Aug 17, 2022, 7:39 PM UTC

ChrisLomont wrote: post #439

idkyall wrote: post #122

Housing in the US has gotten to where it is due to horrible laws effectively allowing total tax avoidance for landlords. Take some investment property. You buy it at some basis price, let's say 500k. You rent it out for 15k a year. Each year you can offset your rental income against deprecation of the property and property taxes - meaning, you pay no income tax on your rental income. ~30 years later, you've deprecate…

>you pay no income tax on your rental income And are losing value on the property, which is the point of depreciation. >~30 years later, you've deprecated it down to an effective value of $0 An no one will now rent, since your building has an effective value of $0 since it has become crap. All throughout your list you ignore all the costs involved in being a landlord. Have any friends that have tried it? (I do). Did…

>"Did they become silly rich? Or did they quit because it is a major problem to actually make it very profitable versus other uses of capital and time? I'm a decently saavy investor (in many things), and have watched multiple friends start up rental properties, only to stop once it became clear that tenants destroy things, costs to maintain properties are volatile and astronomical, the work required is significant, and so on."

I'm sorry but this flies in the face of my experience. Most landlords I have met buy properties and then outsource their administration to property management companies. I have never seen or spoken to my last three landlords, none of whom lived anywhere near the same city as the property.

Landlordism is parasitic in the literal sense of the word. Landlords get rent and capital appreciation for doing nothing but possessing an ownership title. The propertyless pay the propertied a premium to live.

In light of both those observations, I would say any enrichment in this case is "silly", and that landlords don't tend to do much - or any - work.

>"If it were so profitable, then tons of capital currently being spent on other uses (tech, medical, finance) would instead go into buying up more housing."

This is a non sequitur. If X is profitable and the market knows X is profitable then it should, in theory, be attracting exactly the amount of capital it merits already. In the UK, where I live, the rental sector has exploded, jumping from 2.8 million households in 2007 to 4.5 million in 2017. [1]

[1] https://www.ons.gov.uk/economy/inflationandpriceindices/arti...