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)

#561

Post by aorloff » Wed, Aug 17, 2022, 8:56 PM UTC

fhrow4484 wrote: post #547

rory wrote: post #434

Earlier quoted context omitted.

You're skipping over the (extremely important) part where you take out a mortgage on property. So you buy the $500k property with $125k in cash and a $375k mortgage (25-30% down is typical for investment mortgages). Depreciation *plus mortgage interest expense* leads you to (for tax purposes) more or less break even on this investment after 10 years and so you pay no tax. After those 10 years are up, you've now paid…

The mortgage interest deduction has a cap though, right? https://turbotax.intuit.com/tax-tips/home-ownership/deductin... seems to indicate there's a cap on the amount, as well as number of homes (only primary and secondary, not third, fourth etc) Or are people going around those caps somehow?

The mortgage interest deduction is for your primary home. Investment property mortgage interest is a business expense

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

#562

Post by oogali » Wed, Aug 17, 2022, 8:56 PM UTC

TrackerFF wrote: post #336

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…

When purchasing real-estate in a hot area, the real money comes from increasing prices. Some cities have had something like 10% - 15% annual growth, for 10 years straight. Banks are also much more forgiving when it comes to down-payment, when they know it's going to be a rental, and you already have other rentals as collateral. In essence, purchasing a rental unit with only 1%-5% down payment up-front, is kind of lik…

If the bank knows it's a rental, it's considered a commercial mortgage with a minimum of 25% down.

And if you're lying to the bank by saying it's a residence when it's meant for rental -- you've just committed fraud (it's one of the clauses in your mortgage).

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

#563

Post by supertrope » Wed, Aug 17, 2022, 8:57 PM UTC

namlem wrote: post #433

ROTMetro wrote: post #292

Earlier quoted context omitted.

I left California because I couldn't afford to own a home there.

Which is why California needs to fix the policies that led to its housing shortage. There is no inherent reason for California to be so expensive, it is a deliberate policy choice driven by local governments.

Maintaining the character of a neighborhood as single family houses. Even as prices exceed $1,000,000.

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

#564

Post by coxmichael » Wed, Aug 17, 2022, 8:58 PM UTC

ThrustVectoring wrote: post #411

coxmichael wrote: post #251

Earlier quoted context omitted.

I feel like this kind of zero-sum argument does the rounds quite frequently. The reality is that housing is the main mechanism used by the older wealthy folk for their pensions, and subsequently transfers wealth up through the generations. What we need is a way for all that unproductive capital used to directly fund the businesses of the young, growing the real economy (rather than the financial). Alongside that, add…

> What we need is a way for all that unproductive capital used to directly fund the businesses of the young, growing the real economy (rather than the financial). You're conflating financial "capital" with real productive capital here. In real terms, non-productive financial assets simply do not matter; whether landlords extract a billion or a trillion dollars makes not a whit of difference in the real goods and serv…

Again, there’s the idea that wages and businesses produce nothing. They don’t.

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

#565

Post by commandlinefan » Wed, Aug 17, 2022, 8:59 PM UTC

Emma_Goldman wrote: post #460

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…

>"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, a…

> any enrichment in this case is "silly", and that landlords don't tend to do much - or any - work

Hm - the same could be said about your 401(k), but you probably expect to live off of it at some point in your life, right? At worst, buying and renting properties is a (risky) investment.

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

#566

Post by bsedlm » Wed, Aug 17, 2022, 9:00 PM UTC

thehappypm wrote: post #509

bsedlm wrote: post #344

Earlier quoted context omitted.

I think taxes stopped making sense since 1971 when the USD became a fully fiat currency. if the government can print money, what's the point of collecting money through taxes?

This is actually a really interesting question. There’s a really good argument to be made that taxes are actually a huge part of why dollars have a stable value. Let’s say you buy a house for $1 million. 1% interest rate means you have to pay $10,000 every year to your local tax board. That means that you need to acquire US$10,000 or you lose your home. That means you need to earn USD. If the USD hyperinflated, 1% of…

very interesting...

now add in asset forfeiture driven by legally mandated black markets and the picture is ever so slightly more complete.

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

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Post by distances » Wed, Aug 17, 2022, 9:00 PM UTC

bern4444 wrote: post #476

pdonis wrote: post #302

Earlier quoted context omitted.

> I hate to go all "citation needed" on you, but I'm not sure this is true. Given the number of people that rent in large cities all over the world for their entire lives, I don't know why you would find my claim doubtful. Many people seem to want to live in large, densely populated areas, and for most people that is always going to mean renting. > Much like freedom of car-free movement, housing ought to be a fundame…

Most of the people renting in a large city are doing so because buying is so expensive and unattainable. Not because they prefer renting.

And if it's attainable, does it make financial sense? I rent an apartment now, and to buy a similar would be roughly 1000 times the monthly rent. I would have to bet very heavily on appreciation before that made financial sense, even with the leverage of a mortgage.

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

#568

Post by yrgulation » Wed, Aug 17, 2022, 9:01 PM UTC

lotsofpulp wrote: post #555

yrgulation wrote: post #548

Earlier quoted context omitted.

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…

“the US is big”

Thats what puzzles me.

What changed in the dynamics of the american society in such way that new cities are no longer built? I get it in europe there barely and land left to develop, but the us and canada have plenty.

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

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Post by pochekailov » Wed, Aug 17, 2022, 9:02 PM UTC

trgn wrote: post #125

pochekailov wrote: post #10

Earlier quoted context omitted.

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…

> I think we should return to the 1950s ideas of a futuristic cities and invest in building giant arcologies Ugh, I hope not. The 50s was the most infantile era, completely preoccupied with convenience and efficiency and big things that go wrooar. The vision of the future in the 50s was so cringey.

I am proud to be an infantile person, I want a lot of convenience and efficiency, and I want a lot of big, shiny toys.

I think the modern doom and gloom era is very depressing. I am a technocrat and a futuristic optimist.

For me, the modern popular vision of future is not worth living for.

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

#570

Post by lotsofpulp » Wed, Aug 17, 2022, 9:03 PM UTC

yrgulation wrote: post #568

lotsofpulp wrote: post #555

Earlier quoted context omitted.

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…

“the US is big” Thats what puzzles me. What changed in the dynamics of the american society in such way that new cities are no longer built? I get it in europe there barely and land left to develop, but the us and canada have plenty.

The adjacent comment by kenned3 addresses this.

> Everyone wants that 3,000 square foot house, and naturally it has to be within walking distance from work.

The density that was built 100+ years ago was built pre cars. The cities that are dense are dense because they happened to develop at the right time.

Now, everyone in the political process of building a new city is going to question where they are going to have space for large cars, which leads to parking lots, 35ft+ or 10m+ wide streets, and of course quarter acre lots for detached single family homes with garages and driveways.

Creating a new Manhattan type region is simply out of the question due to costs. If the nation cannot even do proper upkeep on existing Manhattan, then there is not much chance of digging all the rail tunnels and etc etc for a new Manhattan.