Comment by MrPowers | Hacker News Reader

Comment by MrPowers | Hacker News Reader

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This quote seems disconnected from recent observations:

> the big government spending programmes of the post-Covid era present a new opportunity to try and push money into more productive sectors, which could ultimately bring wealth and growth back into alignment

We've seem some huge big government spending programs recently (monetary expansion and fiscal stimulus) and it's pretty clear the money has flowed into speculative asset classes, equities, and real estate. The conclusion is a non sequitir. Government spending programs have arguably caused the real estate bubble, not sure why more of them would have a different impact.

Here are some government programs that would probably help lowering housing prices:

* allow for multifamily housing

* remove the mortgage interest deduction

* implement land taxes instead of property taxes

* have the Fed stop purchasing mortgage backed securities (in the midst of a housing bubble)

* get the government out of the mortgage securitization business

Perhaps it's because I'm one of those dirty rotten real estate agents, but I'm not understanding your motivation with this set of recommendations you posit.

>* allow for multifamily housing

Zoning is entirely a local matter, so sure, talk to your local city / county / state if you prefer there to be more allocation for multifamily. It isn't something that the feds have any control over.

>* remove the mortgage interest deduction

So what's your goal here, given that historically this was the single biggest tax benefits to the (ever-declining) middle class.

>* implement land taxes instead of property taxes

Real estate is predicated on the concept that adding value to the land increases its value. So... what exactly become the merit of taxing land over property? If you tax property, the value of the land is included in that tax.

>* have the Fed stop purchasing mortgage backed securities (in the midst of a housing bubble)

Real estate is local. I'm sure there are markets that are in a bubble, but that doesn't mean that every market is experiencing that.

>* get the government out of the mortgage securitization business

These programs by and large benefit the non-wealthy by providing a degree of stability in the mortgage market that make it worthwhile for lenders to lend. Wealthy investors generally don't care - they are paying cash, working out seller financing arrangements, borrowing from hard money lenders, or have long-term bank relationships such that they have all the access to conventional money they need. It's the less fortunate and middle-class that get hurt when government programs are restricted.

> Real estate is predicated on the concept that adding value to the land increases its value. So... what exactly become the merit of taxing land over property? If you tax property, the value of the land is included in that tax.

An issue with property taxes as they are currently implemented is that they discourage development. Someone who owns a parking lot in downtown Los Angeles will pay very low property taxes on that land relative to someone who has built a large apartment building (even setting aside Prop 13). If the owner of the parking lot decides to build an apartment building on it, their property taxes will go way up. So the county is punishing the property owner for developing on that land, even though it's socially desirable.

The idea is that the land value is value that is created by the property's location, not anything the owner has specifically done. In other words, it's value created by the rest of the society that the owner has captured. However, development on the land is produced by the owner. A land value tax captures some of the value produced by society as a whole and does not tax value that was created by the owner. This incentivizes owners to develop on their land. (Or more properly, doesn't disincentivize development.)

>>* remove the mortgage interest deduction

>So what's your goal here, given that historically this was the single biggest tax benefits to the (ever-declining) middle class.

Weird, I've mostly read that it disproportionally helps the rich. Examples:

[1] https://www.stlouisfed.org/open-vault/2018/may/why-economist...

[2] https://www.forbes.com/sites/artcarden/2019/06/28/should-we-...

[3] https://fivethirtyeight.com/features/the-tax-deductions-econ...

> So... what exactly become the merit of taxing land over property? If you tax property, the value of the land is included in that tax.

If land--but specifically not improvements to that land--is taxed then there's relatively more incentive to make productive use of the land. $1 of investment to improve the productivity of land by building housing or whatever is tax advantaged over $1 of investment to try to hold onto appreciating land in hopes it goes up.

> Real estate is predicated on the concept that adding value to the land increases its value. So... what exactly become the merit of taxing land over property? If you tax property, the value of the land is included in that tax.

Check out Henry George; given it's HN, check out Scott Alexander's blog on Henry George: https://astralcodexten.substack.com/p/your-book-review-progr...

> remove the mortgage interest deduction

Removing the mortgage interest deduction (for owner-occupants) would widen the gap between commercial landlord’s ability to buy a property and an owner-occupant’s ability to buy that same property. (It’s spectacularly unlikely that mortgage interest for commercial landlords would become non-deductible as a general principle of tax code allows the deduction of ordinary and necessary business expenses in pursuit of profit. Mortgage interest for commercial landlords is clearly such a business expense.)

So, if you would like to favor owner-occupants over commercial landlords, you should be in favor of, not opposed to, the mortgage interest deduction for the former.

From: https://www.irs.gov/businesses/small-businesses-self-employe...

> What Can I Deduct?

> To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

Fun fact -- the majority of bank loans are also for real estate, further bidding up the price of housing.

The Great Mortgaging is a great source on this: https://www.nber.org/system/files/working_papers/w20501/w205...

Just look at this scary chart: https://www.fortressofdoors.com/content/images/2021/10/2021-...

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