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

economist.com

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

#461

Post by andrewmutz »

Tiktaalik wrote: post #423
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…

> home is incentivized to ensure their investment is maximized and that results in a lot of NIMBYism I'm not sure a lot of NIMBYism comes from the notion of protecting home values. If a home were to be upzoned for apartments the underlying land value would rise significantly, and this would be a significant financial windfall for the home owner. They should want to see their land be upzoned for apts but that's not wh…

Everyone benefits from their own property being upzoned, but loses when their neighbors build upzoned properties. Hence the NIMBYs block other people's development

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

#462

Post by namlem »

throwaway22032 wrote: post #27

Our economic system is set up such that you either hit a bar at which you accumulate capital forever unless you make a mistake, or you're loss-making forever. Once you hit that bar, your job becomes buying up housing like it's a Monopoly board. As an individual you can either choose to win or lose this game. We're not going to change it, at least not within our lifetimes.

Japan changed it. They passed sweeping zoning reform that made it easy to build and prices went down. New Zealand just passed sweeping reform to address their housing crisis as well. Reforms are being passed in the US too. Oregon, California, Minneapolis, Ann Arbor, and others have started to pass reforms.

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

#463

Post by cko »

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…

As a former landlord for nine years, this is pretty correct. I did the tax deferred exchange thing once.

Then I sold for cash (a pretty big no-no in terms of real estate investing) because I didn't enjoy such a concentrated risk.

When I sold, there's something called depreciation recapture. If the 27.5 year depreciation thing was used to offset your income taxes, part of your gains gets taxed as ordinary income. The cost basis of property is also lowered so that the capital gains is higher.

There's also tax trick called cost segregation that lets you depreciate certain parts of your property at an accelerated rate.

Basically, as the OP says, keep doing the 1031 exchange until you're dead and your heirs don't have to worry about depreciation recapture.

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

#464

Post by jefftk »

JamesBarney wrote: post #347
huevosabio wrote: post #338

Earlier quoted context omitted.

In paper, but we constantly underestimate the value of land.

You can't just make up the value of the land. It's pretty easy to figure out unlike say a business.

At least around here (Boston area) there are really three things of value with a lot:

1. The land value.

2. The structure value.

3. The right to have this structure on the lot.

That is, if you tore down the structure you wouldn't generally be able to build anything anywhere near as large, because the building predates zoning.

Assessment ignores (3), and groups it in with (2), which then depreciates. Which isn't right, because (3) doesn't depreciate

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

#465

Post by [deleted] »

adamsmith143 wrote: post #454
Supermancho wrote: post #309

Earlier quoted context omitted.

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.

[deleted]

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

#466

Post by jefftk »

sfe22 wrote: post #169
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…

It is easy to pick an example like this to show the “bad” sides. But what is the alternative? If people had to pay inheritance tax on their family home, how many could not afford such a tax bill and would have to get rid of their family home to please the tax man. Regarding the cost basis rest that is so people can upgrade their house without having to pay a tax bill. This is just deferring the tax not avoiding it. W…

> what is the alternative?

Inherit the cost basis.

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

#467

Post by namlem »

wikitopian wrote: post #425

Let's surround single family urban homes with high density apartment complexes and low income housing, and then act big mad when those people paying all the taxes and propping up the local public schools up and leave. All of these trendy YIMBY schemes are great. All they need is a proviso requiring all the targets of the schemes to stick around while their neighborhoods and schools go downhill.

Dense urban neighborhoods are the ones propping up the single family neighborhoods, not the other way around. The infrastructure costs per taxpayer are way higher in low density neighborhoods. All those extra roads, sewage lines, water lines, power lines, street lights, etc. add up. The single family homes are the leeches not paying their fair share.

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

#468

Post by wonnor »

andrewmutz wrote: post #457
wonnor wrote: post #443

Earlier quoted context omitted.

>>~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")

To claim that you need to spend money equal to the tax-assessed value of the building over the course of 30 years to maintain equal value is slightly less ridiculous, but still not exactly reasonable. The (conservative) rule of thumb is 1% of the property value per year in repairs, which would be 30% of the property value over 30 years. And even then, it seems there's no shortage of fairly decrepit buildings that have no problem finding tenants.

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

#469

Post by carom »

dclusin wrote: post #193
AlexandrB wrote: post #161

Earlier quoted context omitted.

What gets me is the dramatic language. I don't think home values would "massively" decrease with a few multi-family residences in the area. What's funny too is that even if they did, the Andreessen family is one that could easily afford to eat the loss. Meanwhile no one blinks twice when home prices increase 20% over just a few years and put housing out or reach of even more families.

My personal belief is that the housing supply scarcity is having the opposite effect and is actually holding property values down. Let’s say there’s two 1 acre lots that have a market value of $1m each. A developer can buy them and turn them into 8 condos and sell them each $600k yielding $4.8m. Is it possible the developer would pay more than $1m apiece for these properties? Obviously, these numbers are made up some…

This is 100% true up until demand is met, then it will stabilize. Currently though, the more you can utilize land the more it is worth.

Single families can compete against 2 families for the land, it is a lot harder when you can fit 10 units on the same property.

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

#470

Post by namlem »

pochekailov wrote: post #10
mantas wrote: post #2

Not housing per-se, but concentrating too many jobs in few locations. Which causes issues with housing.

It is very good for productivity when many jobs are concentrated in one location. This unlocks the possibility for serendipitous connections. It is awesome when you can meet a founder, a leading engineer, an investor, a designer and a PR person in a coffee line, forming a new company before finishing your morning coffee. Talents concentrated in one place gives significant boost to their productivity. This is called a…

High modernist city planning from the 1950s and 60s was a disaster. No, we should go back to the organic cities of the 1910s and 20s, with their mixed-use, medium density streetcar suburbs.
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