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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)

#751

Post by dionidium »

cheriot wrote: post #711
dionidium wrote: post #655

Earlier quoted context omitted.

> How about that principle of one person, one vote. Reality, in my view, is absolutely chock-full of contradictions. I believe in the principle of one person, one vote; and I believe that what I said above happens also to be true. The dialectic doesn't care that we might wish things were simpler or more straightforward.

In a world with stable rents, renters also become long term residents and invested in the community. If someone’s only “invested” financially I doubt that they have the community’s interests at heart.

There will always be transients, students, travelers, and so on. In a world where most people rent and renters are indistinguishable from owners, renting will cease to be a signal that those people are present, but they won't disappear. They'll just be harder to identify.

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

#752

Post by kgwgk »

smcl wrote: post #739
kgwgk wrote: post #636

Earlier quoted context omitted.

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?

The link supports the statement "housing tracked inflation for 400 years". I think the confusion here is the word "investment" is overloaded and could refer to a number of different things regarding property: - you buy the property that you personally will live in - you buy some other property and let it out to tenants or businesses - you are a pension fund, mutual fund, hedge fund, day trader, bank, HFT etc which tr…

I agree. That's why the original statement "Housing was never an investment before recent decades" doesn't make a lot of sense and the justification "Housing tracked inflation for 400 years" doesn't support it even it's correct.

(Btw, not sure if it was implied but the "you" in "you buy some other property and let it out to tenants or businesses" is often a pension fund or mutual fund.)

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

#753

Post by trgn »

pochekailov wrote: post #569
trgn wrote: post #125

Earlier quoted context omitted.

> 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.

> the modern popular vision of future is not worth living for.

The popular vision for the future is _exactly_ technocratic.

> I am a [...] futuristic optimist

Me too. But 50s era techno-fetishization is not the lever to achieve a better future.

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

#755

Post by [deleted] »

vintermann wrote: post #736
toss1 wrote: post #710

Earlier quoted context omitted.

Of course there are more deductions when an object is a BUSINESS instead of a piece of PERSONAL PROPERTY. No, it does not seem the slightest bit lopsided. There is zero difference between the deductability of expenses you mentioned and expenses for any other business. Businesses are generally taxed on their PROFITS , which are [INCOME] MINUS [COSTS]. The regular homeowner is not running a business. The same thing is…

> Businesses are generally taxed on their PROFITS, which are [INCOME] MINUS [COSTS]. Sure. But why does it get such a sweet deal? It's because we want to encourage business, since businesses produce things of value. But how much does a landlord actually produce things of value, and how much is he just extracting value others are producing (a.k.a "rent")? That's an important thing to consider when we look at having th…

[deleted]

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

#756

Post by toss1 »

vintermann wrote: post #736
toss1 wrote: post #710

Earlier quoted context omitted.

Of course there are more deductions when an object is a BUSINESS instead of a piece of PERSONAL PROPERTY. No, it does not seem the slightest bit lopsided. There is zero difference between the deductability of expenses you mentioned and expenses for any other business. Businesses are generally taxed on their PROFITS , which are [INCOME] MINUS [COSTS]. The regular homeowner is not running a business. The same thing is…

> Businesses are generally taxed on their PROFITS, which are [INCOME] MINUS [COSTS]. Sure. But why does it get such a sweet deal? It's because we want to encourage business, since businesses produce things of value. But how much does a landlord actually produce things of value, and how much is he just extracting value others are producing (a.k.a "rent")? That's an important thing to consider when we look at having th…

YES!

The distinction between extractive vs value-creating profits is very important.

That said, it's not automatically a "sweet deal", and identifying that difference is nontrivial. The same activity could be one or the other, depending on how it is done. Your example with a landlord is particularly thorny:

>>But how much does a landlord actually produce things of value, ...?

A good landlord creates a building from nothing, and maintains it in good condition for his/her tenants. What was an undeveloped parcel of land is now homes for all the families who live there. Considering all of the people yelling about lack of housing, that is something of real value. Even maintaining a building in good condition is a very expensive activity, and if the maintenance is not done, the homes will certainly revert to rubble.

So that good landlord is absolutely creating, for both his renters and society at large, serious value.

OTOH, a bad landlord doing superficially the exact same activity can be completely extractive - merely collecting rents and failing to maintain the building(s) in any way beyond what will keep them out of immediate trouble. The bad landlord extracts everything they can for current cashflow and allows the building(s) to degrade towards rubble, an anti-creative activity.

One is definitely creating value that is highly needed in our society, and the other is destroying and extracting it, yet both have the same business type, both have the same income and cost structure, etc..

Even more difficult, the same landlord can look like one or the other in different times - in high-demand times and/or markets, they can charge premium rents and profit while still doing lots of maintenance & upgrades, but in a down market, they may have high vacancy, and still lose money while doing the absolute minimum.

So, how do we tell the difference and tax them differently?

That's a serious question, and one which, if we can find an answer will really help the society improve.

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

#757

Post by Sankozi »

TrueSlacker0 wrote: post #422
2OEH8eoCRo0 wrote: post #234

Earlier quoted context omitted.

> unless your estate is over 12 million dollars(and double that for a married couple), you pay no estate taxes. Why aren't estates just taxed as income to the entity who it goes to? If my father croaks and leaves me $1m it should count as an additional $1m of income to me that year.

"If my father croaks and leaves me $1m it should count as an additional $1m of income to me that year. " If it is $1m in property value, do you count that as still $1m of income? If so unless the child is in great financial situation with a lot of already liquid cash, they would be forced to sell part/all of the property to pay the taxes. If a parent croaks and has a small business, mom and pop style. How would that…

This does not seem to be a difficult problem.

- bank can lend money to pay for the tax - collateral is big enough

- if you cannot pay immediately, state can have share of your property

- ownership could be transferred from the parent to the children before death, so the tax is not that big

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

#758

Post by throwoutway »

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’re confusing things. You do pay property tax regardless. You can deduct that from your income on federal (and probably state) tax return. But you definitely pay property tax. And some states have no income tax but very high property tax, and don’t get any sort of state deduction

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

#759

Post by adamsmith143 »

Supermancho wrote: post #588
adamsmith143 wrote: post #505

Earlier quoted context omitted.

Well this ain't a startup with VC funding. How long can you reasonably have negative cashflow like this before you personally go bankrupt?

Land is often leveraged by creation of negative (or net neutral) commercial enterprises to gamify population growth (and inflation). eg https://www.silverstarcarwashes.com/latest-news/silverstar-c... (this is of 6 planned) Because of the city tax conditions and depreciation schemes available, enough capital will turn a net negative run cost into a positive capital sale in less than 10 years. It's the same thing as fl…

So we went from buying a home to rent out to buying land and you only need to be able to sustain losses for 10 years. Ok great. I'm sure you are already a Millionaire Real Estate Developer by now.

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

#760

Post by mindslight »

grog454 wrote: post #715
mindslight wrote: post #617

Earlier quoted context omitted.

I actually don't understand why the laws are written that way, apart from the political goal of causing W2 workers ("suckers") to bear a disproportionate tax burden. A W2 worker incurs expenses that are necessary to earn their income, including food, transportation, clothing, and healthcare. If they were able to account for these necessary expenses as a business does, the expenses would be directly deducted from inco…

> If they were able to account for these necessary expenses as a business does, the expenses would be directly deducted from income. I thought that's mostly the point of the standard or itemized deduction (which businesses don't and shouldn't get).

For one, no, those expenses aren't deductible even if you do itemize. They're considered "personal expenses" even though they were necessary to earn that W-2 income. If you buy a car and use it at least 50% to get to 1099 client(s) you can deduct that portion of it (including accelerated depreciation). But if your income is coming from W-2 job(s), you simply cannot.

For two, the standard deduction is better seen as a personal exemption (which it subsumed), giving everyone a level of income that they don't have to pay tax on. Especially given that business expenses generally flow through as direct subtractions regardless of the standard deduction.

There is definitely tension between allowing deductions to account for actual income fairly, and the resulting (de facto) requirement that everyone do minutiae accounting for their personal finances.

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