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

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

#631

Post by bps4484 »

mminer237 wrote: post #192
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 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…

"Few rental properties will have under a 3.7% ROI"

This is a leveraged investment (meaning you have a mortage). What that means is for your 20% down payment (the actual money you invest), that 3.7% writeoff on income can be an 18.5% cash on cash yield (ROI) in which you pay no taxes, ever. Few properties on the market can get you a better yield than that. If your ultimate yield is less than that you can roll those losses over year over year, so that then later if/when you get more yield you still* don't have to pay any taxes. It's a really big tax loophole and is the reason Donald Trump pays almost nothing in taxes (and he admitted as much in the presidential debate).

*I own 3 properties in buffalo, one of the best rent to value markets in the US, and it's hard to find better yield than that even in that market. https://simplepassivecashflow.com/rv/

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

#632

Post by bps4484 »

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…

"An no one will now rent, since your building has an effective value of $0 since it has become crap."

This isn't true. You will have put money into the property to keep its value up, also writing off all of those expenses, so that you can still rent it out.

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

#633

Post by muti »

nly wrote: post #628
aorloff wrote: post #561

Earlier quoted context omitted.

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

It's wild to me that Americans can deduct mortgage interest from their tax bill ...

New Zealand only recently passed a law that will phase out rental interest deductions over 4 years

https://www.ird.govt.nz/pages/campaigns/interest-limitation-...

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

#634

Post by toss1 »

robertlagrant wrote: post #558
sbf501 wrote: post #418

Earlier quoted context omitted.

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.

Yes, the question is how much of a boon it needs to be.

The fact of the matter is that people with capital want to invest and grow that capital. It is absolutely false that if that activity is taxed, it will disappear. Just as obviously, if all capital gains are taxed at 100%, it will disappear. The question is the balance - how much to tax it so that the wealthy don't merely get wealthier at everyone elses' expense.

It may also be a good idea to tax underutilized capital, as land is taxed.

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

#635

Post by rory »

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…

> People forget that the average home was ~700 square feet 100 years ago.

Interesting related graph: https://infogram.com/1pqdpn20vkmlelcq6qx7jzwz9pf00g9xnq5

Although we're currently in a frothy situation, scaled out a bit, it's not clear that housing prices are growing more than general inflation when adjusting for square footage. What _has_ happened is A) houses have gotten bigger and B) people per household has gotten smaller.

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

#636

Post by kgwgk »

smcl wrote: post #629
carom wrote: post #413

Earlier quoted context omitted.

The US was a brand new country that was mostly empty. Look at England for some historical data.

Ok but they also provided a link showing how this also applied in Amsterdam, in The Netherlands - a much older and less-empty country.

That link doesn't show that housing was not an investment for centuries, does it?

Why wouldn't you consider an investment something that has a relatively stable value in real terms - at least over a long enough period - and also provides a yield?

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

#637

Post by cheriot »

djbebs wrote: post #622
cheriot wrote: post #600

Earlier quoted context omitted.

> And are losing value on the property, which is the point of depreciation. The house depreciates while the land appreciates. In the US for the last 50 years has been net appreciation for most homes. > 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. Hedge funds have been buying houses at scale since the great rec…

Why do you believe land appreciates?

A house without a major renovation will slowly depreciate yet housing prices in mid to major cities continue rising.

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

#638

Post by cheriot »

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…

> there's zero point subsidizing demand for something when supply in inelastic.

Agree, but that also means cutting those subsidies will not affect supply either. Minimal impact and politically difficult...

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

#639

Post by ch4s3 »

Geee wrote: post #325
ch4s3 wrote: post #87

Earlier quoted context omitted.

> Currency used to be backed by gold, and now it's backed by real estate No it isn't. Mortgages are not the only kind of fractional reserve banking. The currency is also fiat, its backed by the market's belief in the strength of the US government and economy. Gold back currencies also had pricing shocks, inflation/deflation and a myriad of other weird issues. You're parroting the least informed version of Austrian Ec…

Yes, of course. I just left other types of debt out to make the argument simpler. Mortgage debt is a huge part of broad money supply.

But it doesn’t mean fiat is in fact backed by mortgages.

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

#640

Post by namelessoracle »

scythe wrote: post #345
namelessoracle wrote: post #216

Earlier quoted context omitted.

So a family on hard times should be forced to leave their grandmothers home when she dies and hope they can find a new one? Gentrification can easily push a property in the place they've lived their whole lives out of their price range. And the family home might not have been super well kept up so the "windfall" isn't as big as the property values in the area may reflect. This happens now with gentrification in big c…

>I understand a key part of communism is you and your family own nothing No it isn't. https://www.workers.org/private-property/ > Private property, to a communist, is not your shoes or toothbrush, or even your house. > Those things are called personal property and under socialism and under communism they continue to belong to workers in much the same manner as they do now. Criticize people for what they actually beli…

So why does China refuse to sell land to its citizens and only leases?
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