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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)

#551

Post by commandlinefan »

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…

> once it became clear that tenants destroy things

Or/and just refuse to pay rent for years while you try to evict them.

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

#552

Post by toss1 »

naasking wrote: post #530
toss1 wrote: post #416

Earlier quoted context omitted.

The rebuttal by mminer237 is much closer to right [0]. Also it isn't even as good as mminer237 mentions, as many states also have a much lower exemption, and there is work in congress to get rid of the step-up in basis (a bad thing, imo) and to reduce the $12MM lifetime gift & estate exemption (a very good thing). So yes, there are some advantages, but OP is vastly exaggerating as if it is some freebie to landlords w…

Perhaps you'd like to address rory's reply here which explains how the original post would actually work: https://news.ycombinator.com/item?id=32500536

ummm, the mortgage interest deduction does NOT apply to rental properties, only your primary residence or a 2nd home that you spend at least 14 days or >10% of the time you rent it out. So, if you are talking about a fully rental property, it is incorrect.

I'm not saying that there are no advantages or deductions, only that this character is trying to portray it as the govt basically giving landlords all the funding to become landlords. If that were the case, he should simply do it — there's plenty of no/low money down ways to get into it —, but I notice that he is not doing it. It just smacks of a lot more attitude than fact.

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

#553

Post by oogali »

UncleOxidant wrote: post #409
mminer237 wrote: post #192

Earlier quoted context omitted.

You don't write off your rental income. You depreciate the rental property over 27½ years and write that off against your rental income. Few rental properties will have under a 3.7% ROI where depreciation would cover all the income. At best you might be paying half tax. In your example, you'd pay no tax, but you'd lose out on the potential income you could have had with better investments (and lose about 6 years' wor…

A 1031 exchange also has to be completed within 45 days. That's pretty tight.

Identify 3 candidate properties within 45 days.

Close on one property within 180 days.

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

#554

Post by francisofascii »

obblekk wrote: post #179

Have we considered just building new cities? It would be cool if the state could run a contest, have a rural county sign up to reform their zoning laws, and in exchange receive 100 year tax relief guarantees from the state to build a new city. America used to build new cities from scratch all the time up until WW2. This creates competition between cities (new entrants) resulting in better policies all around. And the…

You don't even need to build a new city, you just need to take an existing rust belt city and make it a cool place to live again. Gentrification, but instead of just a neighborhood, it would be with an entire metro area. Pittsburgh might be a recent example of this.

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

#555

Post by lotsofpulp »

yrgulation wrote: post #548
nemo44x wrote: post #542

I'm not sure people understand how expensive it is to build what we consider a house in the West. Materials are unbelievably expensive and if you go cheap you're going to be replacing a lot of them soon. Labor is through the roof expensive. People forget that the average home was ~700 square feet 100 years ago. It's 2400 today. How many people would be willing to put a family of 4 or 5 in a 700 square foot home today…

Where in the west? In europe we use concrete and bricks, while the us something else. I believe anyone in the construction business will be able to explain that the most expensive part is the land actually. At least in europe. In the uk for instance, the exact same new house, exact same materials, can be 100k GBP less in a cheaper area. Or even half in extreme cases.

It is the same in the US. While labor and materials do cost more, the greatest increase in costs is for the land. But since the US is big, there are huge disparities in land cost. While a laborer or materials might cost 2x or 3x more in a popular area than in an unpopular area, land will be 10x more.

Actually, the labor and land costs invert if you go to really unpopular areas, where the land is much cheaper, but no one lives there so labor is much more expensive.

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

#556

Post by supertrope »

pessimizer wrote: post #228
datacruncher01 wrote: post #200

Earlier quoted context omitted.

I agree with you, that's a whole other problem. But housing like many goods is still subject to supply and demand. The investors buy the properties because they are actually good investments in situations where housing is in demand, and that's true in all the major cities where we're not building enough housing and appropriately sized housing. If we increase the supply, if we make smaller housing units so there are a…

Everybody has a place to live. Housing isn't scarce. When housing is scarce, people are homeless or living in extremely tiny spaces. They are not. The problem is that people wouldn't be able to afford to own the places where they live. Housing is only "scarce" in desirable places, and that's simply tautological. The sum of unfulfilled desires is the contrapositive of scarcity. Housing is a market in which a very tiny…

By this logic oil & gas will never run out because rising prices will incentivize new extraction technology and formerly too expensive reserves will come online. Or supply will dwindle and the price rationing system will ensure it goes to the most productive use and energy consumers will switch to cheaper substitutes.

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

#557

Post by kenned3 »

nemo44x wrote: post #542

I'm not sure people understand how expensive it is to build what we consider a house in the West. Materials are unbelievably expensive and if you go cheap you're going to be replacing a lot of them soon. Labor is through the roof expensive. People forget that the average home was ~700 square feet 100 years ago. It's 2400 today. How many people would be willing to put a family of 4 or 5 in a 700 square foot home today…

Well put.

Adding to this.

The government is always there, with its hands out looking to get a slice of the real-estate market.

- Property taxes

- Land transfer taxes

- Development fees

And once you buy your house, any attempt to improve it could trigger more government involvement. Building permits, inspection fees.

Your point is spot-on. I think a big part of it is "keeping up with the Joneses". Everyone wants that 3,000 square foot house, and naturally it has to be within walking distance from work.

Lastly - Location is a a major problem.

Here (Ontario) the common complaint is "i cant afford to live in Toronto" - Living in Toronto is NOT A RIGHT. No one owes you "affordable housing" in Toronto to avoid a commute. A Lot of people commute on the GO train daily..

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

#558

Post by robertlagrant »

sbf501 wrote: post #418
toss1 wrote: post #416

Earlier quoted context omitted.

The rebuttal by mminer237 is much closer to right [0]. Also it isn't even as good as mminer237 mentions, as many states also have a much lower exemption, and there is work in congress to get rid of the step-up in basis (a bad thing, imo) and to reduce the $12MM lifetime gift & estate exemption (a very good thing). So yes, there are some advantages, but OP is vastly exaggerating as if it is some freebie to landlords w…

Thank you. > If you want a general complaint, perhaps the angle is that capital is taxed much less than labor, under some notion that lower taxation is necessary to get people with capitol to actually deploy it in investments. Yes, I recall when cap gains taxes dropped significantly during GWB and was, sadly, happy. Of course, I was just a dumb 20-something and didn't realize how much of boon to the wealthy it was.

It's a boon to anyone whose job was created by it as well, and whose life was made cheaper by capital investments in automation and/or scale.

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

#559

Post by golemiprague »

Everybody here comment about the US and their tax or zoning issues but those problems exist everywhere, it is not like houses in London or Berlin are cheap, even with entirely different laws regarding, renting, taxes and zoning. There are also other issues like population growth, city planning and transportation. Many cities in Asia get it right and the prices there are more reasonable, Tokyo is a good example, but you need a combination of all the parameters above, changing just one of them is not going to work.

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

#560

Post by ChrisLomont »

wonnor wrote: post #468
andrewmutz wrote: post #457

Earlier quoted context omitted.

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 hav…

>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.

No one wrote that either. You're reading what you want to argue into what is written yet again.

> which would be 30% of the property value over 30 years

Ignoring increasing property value, compound interest, opportunity cost, that plenty of places put this between 1 and 4%, and that pretty much all places indicate the rate increases as the property ages, and that this rate is for owners whereas tenants are statistically worse on property, then sure.

For example, State Farm [1] recommends between 1% and 4%, which would vastly increase your estimate. And tenants are statistically worse on property than owners

In reality it's a far larger cost over 30 years than 30% of the original price.

[1] https://www.statefarm.com/simple-insights/residence/how-to-b...

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