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)

#641

Post by [deleted] » Wed, Aug 17, 2022, 10:47 PM UTC

mdavis6890 wrote: post #398

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…

Really the only problem here is the step-up cost-basis at death that you mention. This is indeed a big problem, and the fix is simple: Your heirs inherit your cost-basis as well (likely $0), so that when/if they sell it they have to pay taxes on the whole capital gain. We could also force the payments over some years, by increasing the cost basis and taxing on that amount. e.g. I inherit a property worth $1M and zero…

[deleted]

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

#642

Post by svnpenn » Wed, Aug 17, 2022, 10:48 PM UTC

rory wrote: post #635

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 go…

just need to tap the lid, and the froth goes away. problem solved

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

#643

Post by sytelus » Wed, Aug 17, 2022, 10:50 PM UTC

I didn't bought house for 10 years but when I finally did, I realized the ownership of house essentially meant living in it without actually paying for it. The house appreciated so much that if we sell then it will be like we actually got paid to live in the house! So, the moral of the story is that renting sometimes used to make sense in the past but it no longer does because of massive appreciation that we now expect. This appreciation is also well protected because if government allows fall then people will push that government out. The governments must keep doing QEs to just stay in power. So it's essentially government secured investment to live rent free. This fact then drives obsession to own the house. This creates need to create more money and do series of multi-year QEs.

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

#644

Post by cheriot » Wed, Aug 17, 2022, 10:51 PM UTC

dionidium wrote: post #264

wldcordeiro wrote: post #152

Earlier quoted context omitted.

One thing that's missed in the renter vs homeowner thing is that the rules of election systems favors the homeowner too. Renters move more and will need to register to vote over again and the added inconvenience will stop plenty from even bothering.

A commonsense way to describe what you just said is that homeowners are more stable and stationary and therefore more invested in the long-term future of their communities than renters are, which is an argument that urbanists laugh at, but one that seems very clearly to be true. I think people basically know this, if they're allowed to be honest with themselves. Nobody who ever lived in a college dorm and then spent…

As long as people can't afford to buy they're "less invested" so no reason to address housing affordability... In the modern housing market that's a self fulfilling prophecy.

How about that principle of one person, one vote.

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

#645

Post by stefan_ » Wed, Aug 17, 2022, 10:52 PM UTC

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.

I've had this thought. Like we inevitably need a World War scale event every 100 or 200 years or the system will devolve into the most rent-seeking, unproductive, regulatory capture garbage.

Real estate speculation is just such an utterly unproductive endeavor just on the face of it, it's incredible it got this bad.

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

#646

Post by stefan_ » Wed, Aug 17, 2022, 10:54 PM UTC

nemo44x wrote: post #523

namlem wrote: post #462

Earlier quoted context omitted.

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.

> Japan changed it. They passed sweeping zoning reform that made it easy to build and prices went down Japanese homes are generally prefabricated and have a lifespan of 20-30 years before they are disposed of and a new prefabricated home is put in its place. This is why housing is "cheap" in Japan.

Fucking fantastic, sign me up for it. In the west we instead pay luxury hotel rent for creaking shit homes built 100 years ago, post-war-haste cheap.

Because you know none of it actually pays for the building, it's just all for the artificial scarcity.

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

#647

Post by kareemsabri » Wed, Aug 17, 2022, 10:57 PM UTC

ChrisLomont wrote: post #546

ambernightcrush wrote: post #526

Earlier quoted context omitted.

Both Fannie and Freddie buy mortgages, but your description is much more stringent than in truth. Fannie buys from big banks, Freddie buys from thrift banks; both buy conforming loans(conforming to their standards) which is a large part of the home buying audience. In addition to that, the non-conforming loans that you listed e.g. FHA and VA. Those government-backed loans are for special populations. These mortgages…

>Both Fannie and Freddie buy mortgages Yes, I said as much. The OP claimed they guaranteed mortgages, which they do not. I'm decently aware of the MBS market - I developed MBS pricing algorithms in the late 90s/early 00s for putting houses in tranches after a friend at a mortgage company asked for help with algorithms. Turns out the problem was NP-hard (a lattice based linear programming problem if I recall), but goo…

I don't think this is true.

> At Fannie Mae, we provide liquidity to the single-family market by purchasing and guaranteeing mortgage loans made by lenders and issuing debt securities and mortgage-backed securities that attract global investors to finance U.S. housing.

https://www.fanniemae.com/about-us/what-we-do#:~:text=At%20F....

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

#648

Post by kelnos » Wed, Aug 17, 2022, 10:58 PM UTC

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…

> Each year you can offset your rental income against [...] property taxes

The ridiculous thing is that, since the SALT deduction cap went into effect (and so narrowly avoided the axe this past week, ugh), people who live in states with high property taxes end up being able to deduct only a small amount of their property taxes on their primary home, but if they own investment property, they can typically still deduct all of it -- and I believe they can deduct on their state taxes as well, whereas the SALT deduction is only available at the federal level.

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

#649

Post by ThrustVectoring » Wed, Aug 17, 2022, 11:03 PM UTC

coxmichael wrote: post #564

ThrustVectoring wrote: post #411

Earlier quoted context omitted.

> 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.

Yes, businesses produce actual value. The problem is in what you're diverting from, the ground rents extracted by artificial housing supply constraints. Whether you pay your landlord $X or $Y has zero direct effect on the total amount of real goods and services produced and consumed by the economy as a whole, it's purely redistributive. So if you reduce the total amount of rents paid to landlords, you are enriching renters at the expense of landlords without changing the total size of the real economy, and there's no real goods and services freed up to then be productively used by businesses to generate actual value.

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

#650

Post by ChrisLomont » Wed, Aug 17, 2022, 11:08 PM UTC

reillyse wrote: post #586

ChrisLomont wrote: post #534

Earlier quoted context omitted.

>“ An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations.” Yes, I got that. Housing has been such for well over 100 years, right? It is not treated as a service or utility because, well it is neither of those things at all. Even if you somehow forced it into such a market, the value would still likely be the same cost to a homeowner, since th…

Right. But let us pretend that the we all decided to treat shoes as an asset class. Everyone (with shoes) is counting on their shoes increasing in value. So the government becomes focused on raising the prices of everyone's shoes. It institutes restrictions on the amount of shoes that can be made (so as not to crash the market). Supports the market by subsidizing mortgages so people can purchase shoes at high prices…

>Everyone (with shoes) is counting on their shoes increasing in value. So the government becomes focused on raising the prices of everyone's shoes

That is not how reality works. Prices go up because people are paying them - it has nothing to do with government. A seller wants the highest price, no matter what the govt or local markets do, and a buyer wants the lowest price, no matter what govt or local markets do. Each is competing against other sellers and buyers. At no point is the govt telling a seller they're too low or a buyer they're not high enough. If either side dislikes the deal, they walk.

It has nothing to do with being an asset class - the causality is the other way. Houses are valuable, are a significant amount of money for most people, and increase in value because, if nothing else, inflation - thus they're an asset. So is holding cash (which actually deflates in value, yet is an asset), so are bonds, stocks, annuities, pensions, and on and on.

As to the shoe example - here's more what happens:

People would all love it for their cars to increase in value, but in reality they do not. The govt is not making this market out of magic to satisfy people's desires - houses increase in value at slightly above inflation because the market values them so.

By your reasoning, govt is magically making prices go up, but the market would not simply follow along.

And, if the govt were magically making prices go up against market wishes, they're doing a terrible job at it - housing only increases around what other assets do - and that's the market doing it.

People have tried using govt or other forces to misprice markets, but that never lasts very long before wise investors pull the rug out and crash it.

History has a lot of examples of people both trying to fake high prices for force low prices by law and losing out to the market. The market commands vastly more resources than any govt to put things in check.