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Comment by rifung | Hacker News Reader

> As we’ve pointed out at City Observatory, there’s an inherent contradiction between the goals of promoting housing affordability and using homeownership as a wealth building strategy. Affordability requires that housing be stable in price; a good investment needs to appreciate. If housing is a great investment, its because its becoming less affordable. If housing stays affordable, it is, by definition, not an investment that generates gains.

I have thought about this before and really think we should stop treating home ownership as an investment. However, I can't think of a way to do that which is fair to those who bought homes already..

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Why does policy need to be "fair" to investors? New government policies move asset values (including real estate values!) in both directions all the time. Investors -- including homeowners -- are not entitled to an investment that always appreciates.

This belief that we cannot do a thing unless that thing benefits wealthy homeowners is harmful.

In this case I believe it would have to be "fair" due to the political power of home owners in most areas of the United States. The fastest way to lose every vote from Suburbia is to lower the value of their greatest investment.

And this is how we get real estate bubbles. It’s already back to the “it’ll always go up” stage even after 2007, in most areas with decent jobs that might afford some security or ability to pay mortgages.

As a general rule of thumb, screwing people by changing the rules on them harms investor confidence. The promise of future stability is an underrated part of our economy. See the FDIC. This is why many legal changes go to great pains to grandfather the old rules.

That's not to say the rules could never be changed. But just imagine being, for example, a small time landlord in the UK. Recently the rules changed, and you can no longer deduct mortgage interest as an operating expense from the rents you collect. Old mortgages are not grandfathered. This means a lot of existing rentals are suddenly & out of nowhere going to be losing their owners money. Thanks, government. Maybe it needed to happen, but it's a bit chilling to have that kind of rule change happen on you.

> Why does policy need to be "fair" to investors

I guess this is just an ethical question? I don't think it would be fair to those who recently bought a home if we just wiped out a substantial proportion of their assets.

> This belief that we cannot do a thing unless that thing benefits wealthy homeowners is harmful.

You perhaps misinterpreted my comment. I don't think they will benefit at all from a solution, but I would think a good solution should not be too devastating to any given person.

I'm less concerned about wealthy home owners than I am for those who just got a mortgage.

I agree why don't we just make a extremely burdensome property tax for non-primary residence properties that are not worked/workable land such a farm land? Maybe 5x property tax on your second property, 10x on your third, etc. Maybe it only kicks in and ramps up after a set number of months to allow developers to buy properties and develop them for sale but make it hard to hold them for too long in order to get a 'legit' owner in the house who will actually make it their home.

Do you want more blight? This is how you get blight.

Relaxing zoning rules is an "easy" one. It doesn't deprive anyone of a home.

Alternatively, if you want to get a bit more radical we could turn all property ownership into 99 year leases from the state, as is the case in Singapore, potentially reducing the length of time on leases over time to spread out the pain. Though it would be a long process.

I would also support legislation that reduces transaction costs on buying/selling homes, which actually suppresses the price of homes because it takes a longer term commitment for buying to make sense.

Yes, this is unfortunately one of the great mistakes (or intentional deeds, depending on how you look at it) of US economic policy of the last few decades.

> I have thought about this before and really think we should stop treating home ownership as an investment. However, I can't think of a way to do that which is fair to those who bought homes already..

Correction: fair to those who bought homes recently, rather than 20 years ago and are sitting on top of unrealized capital gains.

Levy solid capital gains taxes retrospectively, use that money to compensate recent buyers. Those that made a killing are still ahead (although less so), those that made losses are compensated.

Phase in high land value taxes (not property taxes) when personal residences are sold

This is the correct answer.

I guess my first question is, when we say home ownership is a good investment, do we mean it will make you rich? Or that it will keep up with inflation and be cheaper than renting in the long term?

The latter is hardly incompatible with affordability, and can still be considered a sound investment.

Yes this article makes some good points but the rhetoric is all wrong. Here, this guy says it much better than I can:

>Home is where the cartel is. I use the word “home” not “housing” advisedly. Homeowners understand their actions not as monopolizing the housing market but as protecting their homes and neighborhoods from the market. The libertarian “deregulatory” rhetoric by which market urbanists sometimes make their case is counterproductive. Telling people to think of their homes as a commodity upon which market forces should be brought to bear in order to ensure production of housing services at competitive prices is obtuse. People purchase property, rather than renting, largely to gain security and control, to escape the vicissitudes of the market. The worst place to emphasize “deregulation” is in dense urban environments, where almost every sort of action has spillovers.

Policies like up/rezoning which decrease current home prices in order to lower rents are directly redistributionary and I think you have to make your case in those terms and I just don't find redistribution on the basis of age that convincing.

http://www.interfluidity.com/v2/6287.html

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