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Comment by datacruncher01 | Hacker News Reader

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 are currently living in the area opposed to future people who aren't contributing to the vote.

States are going to have to step in and override cities that aren't being effective, this cannot be solved from the federal level. They are going to have to say, these permitting processes are too restrictive, homeowners can add backyard units or convert their homes to duplexes/etc, and make it easy for apartment builders to buy a few homes to make small apartment complexes even if the neighborhood hates it or the city has been stalling on that kind of development.

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> 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 those cases subsidies don't result in expanded supply, only increased prices. For example even if diamonds are good, it wouldn't make sense for the government to match first time diamond buyers payment, because the supply of diamonds is inherently limited. All it would do is drive up prices.

Modest proposal: the federal government should revoke all of its housing subsidies in any municipality that restricts the supply of housing. San Francisco would be more than free to continue to block development. But if it chooses to do so, then San Francisco home owners should no longer be eligible for Fannie/Freddie mortgages, no longer be able to tax deduct mortgage interest, and should have to pay income tax on the imputed rental value of their home.

>Fannie Mae guaranteeing mortgages

FM does not guarantee most mortgages, only certain govt types like FHA and VA loans, which the govt decided to back in order to help low income people get loans (otherwise the rates would be even higher for them).

FM buys up a lot of mortgages and sells them to investors, then turns around and puts the money back into productive use.

>taxing home owners on the imputed value of rent

What does this mean? You want to tax homeowners as if they paid themselves rent? (Which even then is net zero, so no tax...)

If you want people to pay income tax on the imputed rental value (which is likely not even legal - they are not getting an income from ownership - and courts have held income tax must be on sources of income), then you will increase the cost of home ownership, putting even further out of reach for most people.

>In those cases subsidies don't result in expanded supply, only increased prices.

Yet many places subsidies do result in new housing.....

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 are assembled into MBS and then sold to investors; the banks that originated the loans get their liquidity back.

>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 good heuristics from the literature and some special sauce outperformed their current (at that time) pricing.

Around the time the whole market blew up I was considering going to hedge funds, and was working out details of how all the math, science, and computer algos work to prepare for interviewing. After the market crash, I moved on more into scientific and R&D computing. But I still read papers in the area out of curiosity.

But the fact is the market is not "guaranteed" in any sense - which is likely good as 2008 showed.

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....

>I don't think this is true.

They do guarantee some loans, as I wrote above. The marketing blurb you copies cleverly does not state they will guarantee any mortgage loan.

If they did, the housing crisis would not have been such a crisis - the crisis happened when so many investors realized the loans they bought could crash and cause them massive losses - precisely because FM does NOT guarantee all loans.

They guarantee certain loans (conforming loans), and charge a fee to investors for this when they purchase MBS from Fannie Mae. Conforming loans make up under 40% of all mortgage loans. Of all conforming loans made, Freddie and Fannie end up purchasing about 60% of those.

It may be that they stopped buying loans they deem too risky, but that didn't use to be the case.

Well, what you said is this.

> FM does not guarantee most mortgages, only certain govt types like FHA and VA loans, which the govt decided to back in order to help low income people get loans (otherwise the rates would be even higher for them).

And this.

> The OP claimed they guaranteed mortgages, which they do not.

So it read to me like they don't guarantee mortgages save for the "special" mortgages for underserved groups (FHA/VA). In fact, they do. They guarantee all the loans they buy, as far as I know. They only buy conforming loans. Conforming loans are another way of saying, loans that they will buy (and guarantee). Of course they don't guarantee loans they don't buy.

I used to work at a mortgage originator, and we sold the majority of our loans to Fannie and Freddie.

> Of all conforming loans made, Freddie and Fannie end up purchasing about 60% of those.

This is true, because private investors pay more than Freddie and Fannie for conforming loans.

Sorry for any confusion - what I wrote was "FM does not guarantee most mortgages" in reply to the OP claiming FM guaranteeing mortgages is subsidizing the housing market.

(And I ignored that FM is not the Federal Govt for now...)

From the stats of conforming mortgages being 40% of mortgages and the FM only buying 60% of those, FM is at most guaranteeing (to investors, for a fee) around 24% of mortgages. That's well under 51%, right?

So FM not guaranteeing most mortgages is true, and it's not even close.

> FM does not guarantee most mortgages,

What? Of course Fannie and Freddie guarantee the MBS they issue. Which is an implicitly a guarantee from the US government. Otherwise they'd trade at much wider credit spreads, which would in turn lead to higher rates for home buyers. You don't have to take my word for it, here's the New York Fed's own words:

For agency MBS, the GSEs and Ginnie Mae promise full and timely payment of principal and interest, a guarantee that is either explicitly or implicitly backed by the federal government[1]

> You want to tax homeowners as if they paid themselves rent?

Alice, who has a 20% income tax rate, owns a house and rents it to Bob for $25k/year. Bob also has a 20% income tax rate, owns an identical house and rents it to Alice for $25k/year.

In total the government collects $10k/year in tax revenue from Alice and Bob from their rental income. Now let's say Alice and Bob swap houses and move back into their owner-occupied properties. This is an economically identical situation (remember the houses are identical). Both still own one home. Both are still consuming housing that's worth $25k/yr to them. Yet the government collects no tax revenue. Exempting the implicit value of rent is a subsidy favoring owner occupied housing.

> imputed rental value (which is likely not even legal)

The IRS already taxes tons of benefits based on the imputed income, even if no cash changes hand. For example, if your employer provides you life insurance, you have to pay income tax on the actuarial value of the policy even if you don't die during the coverage period.[2]

> then you will increase the cost of home ownership,

Not if the supply of housing is completely inelastic. Any increase in housing taxes will result in a commensurate fall in the sticker price that matches the tax increase. Economists have known this since Henry George.

[1]https://www.newyorkfed.org/medialibrary/media/research/staff...

[2]https://www.duq.edu/assets/Documents/benefits/_pdf/Imputed%2...

>> FM does not guarantee most mortgages,

>What? Of course Fannie and Freddie guarantee the MBS they issue

Yes, they guarantee the MBS they issue, which is on a minority of all loans. The fact remains they do NOT guarantee most mortgages. They guarantee conforming loans, which are around 40% of all mortgage loans. And of all conforming loans, they only end up buying ~60% of them. So they at most guarantee around 24% of all mortgages, which is certainly not most mortgages.

>Alice, who ....

Ignoring the other side where landlords write stuff off and renters get tax breaks. On the ownership side, you're also missing lots of tax changes.

So not identical.

Also, the govt has an interest in property ownership as they have solid evidence that people owning property in a region make them less more stable. So there's very good reason to provide tax incentives for policy reasons. It's been shown that tax incentives, dollar for dollar, are pretty good incentives compared to most other forms of government spending to affect policy.

>The IRS already taxes tons of benefits based on the imputed income, even if no cash changes hand.

And they have tons the other way too - all because they desire to affect outcomes. So that they can do it is not really strong evidence to if they should do it, unless you address all the reasons they desire to do it.

>Not if the supply of housing is completely inelastic.

Which it is not [1]. "most areas that are widely regarded as supply-inelastic are, in fact, severely land-constrained by their topography" which is not most of the country.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1193422

>Both still own one home. Both are still consuming housing that's worth $25k/yr to them. Yet the government collects no tax revenue. Exempting the implicit value of rent is a subsidy favoring owner occupied housing.

Why stop at rent? Alice cooks at home? Tax implicit cost of dining out.

Alice goes shopping? Tax implicit delivery cost.

Alice conceives a child? Tax implicit IVF cost.

Alice gives birth? Tax implicit adoption cost.

Alice dies? Tax implicit execution cost.

> Exempting the implicit value of rent is a subsidy favoring owner occupied housing.

When I go kayaking it costs me $35/hr for renting the kayak, which is income for the rental store and (presumably) they pay income tax on that.

Except I don't really pay because I bought my own kayak so I get to go for free whenever.

Your proposal amounts to abolishing the whole concept of property ownership.

This is interesting. I wonder if it would work to make all FHA loans be required to be NEW properties/units. So the only way to get access to the money is to expand the housing. I'm sure there are consequences but I need to think them through a bit more.

I don't know about policy consequences, but one political hurdle is that this would be attacked as "welfare for the rich" or something along those lines, since new construction is generally more expensive than existing units.

Yeah, I haven't thought everything through yet. However, the hope that this would force more of the new housing to be more affordable. A poor person isn't going to be buying a luxury condo so I was trying to think of a way to incentivize builders to increase stock and create more affordable housing. There are definitely some second order effects.

OP doesn't talk about subcidies, but instead about the fact that the federal level needs to force the city level to build for example smaller apartments/houses, or build denser or whatever. However, cities and the ones already living there don't like it because it will bring in poorer people, which drives down the tax income and increases the costs, makes the neighborhood less attractive etc.

> 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...

> It's a simple problem, we turned housing into an investment.

People are not natural economists and will basically dig in to support the status quo until that status quo changes, at which point they'll support the new one. Americans, for example, buy new cars at an average new price of $40k and for most of my life accepted uncritically that the value of those cars would plummet the second they were driven off the lot. They did not lobby for supply restrictions that would prevent it. They didn't ask their politicians to prop up "car values." They didn't try to avoid it, at all. They just accepted it.

They would do the same with housing, if they weren't already conditioned not to.

https://en.wikipedia.org/wiki/The_Market_for_Lemons

There's a legitimate reason why a car immediately loses its value. People are more likely to sell cars that have something wrong with them. The market price for a car that you just drove off the lot is not the market price for an average car of that age, it's the market price for the subset of cars of that age that people want to sell. Because a car in that subset is more likely to have something wrong with it, its value is lower. Even if you personally are not selling the car because there's something wrong with it, it's hard for the buyer to know this.

If people had magic X-ray eyes that could tell that the car you just drove off the lot doesn't have more problems than an average new car, then its sale price would be similar to a new car. But they don't.

That is one reason, but there are many.

* You get to option the car with exactly the features/colors you want.

* People will pay a premium for something brand new.

* Financing for used cars usually carries a slightly higher interest rate.

* The actual cost at the dealership can vary significantly depending on the make/model/dealership

During beginning of COVID I drove a Tacoma off the lot for ~29k out the door and at the end of COVID I had several offers to buy it from me used with over 10k miles on it for anywhere from $30-31.5k. At that time you could still buy it new for ~29-30k.

In fact the only reason why I bought new in the first place was because even a 10 year old tacoma is worth the better part of a new one. Guess it depends on your market but the premium for new looks pretty tiny or negative to me.

I don’t understand the downvotes. Your conclusion is wrong but you make a good contribution. Thanks for the anecdata.

I too have seen this phenomenon, and I think it’s pretty common recently because the used car market is really out of whack. In my case, last year I bought a lightly used Sonata for about $30k with 12k miles, and today I could still trade it for about the same price with 31k miles on it.

Where you’re wrong is that this phenomenon doesn’t apply in general to the used car market but only in the last few years because of the chip shortage shrinking the supply of new cars. Short supply in turn increased demand for used cars, raising the prices.

That sounds reasonable to me, but it didn't stop the cost of used cars from skyrocketing during the pandemic, due to the supply-chain-induced shortage of new cars. When the car market started looking a lot more like the housing market, so did its prices.

In that situation, the value of all cars went up, both new and used. The value of a used car was still much less than the value of a new car, you just didn't notice this because new cars didn't have their prices raised to correspond to the increased value.

That's not true, I could show you offers of my used truck being worth more than a brand new truck of the exact same generation of model in the exact same configuration. Used vehicle prices went insane during covid as the irrational market and places like Carvana paid more for your used car once it's off the lot.

I almost wonder if people overbought into the "new car must be more expensive" paradigm so they forgot new cars were competing against used cars, and the prices of used cars became irrationally high.

I thought it was that new cars had long lead times attached to them. Was that not the case?

I'm sure that's a big factor.

New cars did sort of have prices raised, because most of the incentive programs stopped. The 5-year zero interest financing, the thousands of dollars of rebates, the negotiating the dealer was willing to do, all ended. New cars sold at sticker price and there was no shortage of buyers.

Yes they did? There were upwards of $10k dealer mark-ups on new cars.

> They would do the same with housing, if they weren't already conditioned not to.

That's a pretty unrealistic comparison, housing doesn't hold its value (or go up) because people are conditioned, there are real reasons.

There is an effectively infinite supply of new cars, as factories can much more easily ramp up production if there's more demand. (Sure, recent supply chain issues have made that problematic, but in normal times.)

Second, cars do inherently depreciate faster. A ten year old house is basically brand new whereas a ten year old car is probably mechanically sound but cosmetically often looking its age and a lot of people like new and shiny.

So I think folks overlook just how wealthy certain investors are when they propose the fix is to just build new properties. Those will also get snapped up by investors. To fix the problem, investing in housing needs to be either banned or made very unattractive. You only need one house to live in.

I agree with you, that's a whole other problem. But housing like many goods is still subject to supply and demand. The investors buy the properties because they are actually good investments in situations where housing is in demand, and that's true in all the major cities where we're not building enough housing and appropriately sized housing. If we increase the supply, if we make smaller housing units so there are also affordable units for poorer renters. The investors will move on to more lucrative investments. They can only extract so much wealth from housing before people move for alternatives.

Everybody has a place to live. Housing isn't scarce. When housing is scarce, people are homeless or living in extremely tiny spaces. They are not. The problem is that people wouldn't be able to afford to own the places where they live.

Housing is only "scarce" in desirable places, and that's simply tautological. The sum of unfulfilled desires is the contrapositive of scarcity.

Housing is a market in which a very tiny percentage of goods are up for sale at any particular time, and the projected prices of those goods are heavily shared among a huge network of people who profit when the prices are high. The owners of those goods are often heavily leveraged, and can't afford to lower the price significantly, and the transaction and mortgage costs push them to raise the price to cover those costs at the next place they buy.

> They can only extract so much wealth from housing before people move for alternatives.

No such alternative, which is why the market is as lucrative to exploit as health care. Finding an "alternative" to health care is just to find another type of health care, and if you find an alternative to being housed, you've just found a new kind of house.

Ah yes, everyone without a home is simply a lazy poor who should just move to Mississipi where the land is cheap and the jobs are abundant.

I left California because I couldn't afford to own a home there.

Which is why California needs to fix the policies that led to its housing shortage. There is no inherent reason for California to be so expensive, it is a deliberate policy choice driven by local governments.

> Which is why California needs to fix the policies that led to its housing shortage. There is no inherent reason for California to be so expensive, it is a deliberate policy choice driven by local governments.

There's a lot of truth in that, but it's also an oversimplification.

There is plenty of cheap land in California, here, have a quarter acre lot for $15K:

https://www.redfin.com/CA/California-City/Princeton-Ave-9350...

Of course it's cheap since nobody wants to live there. If everyone wants to live in San Francisco, it's going to be much more expensive. Building more helps but in the end there's only so much that can realistically be built in 50 square miles. Some people will always be left out so there will always be some unmet demand, so it'll never be dirt-cheap.

So yes policy obstruction is a thing, but there are also inherent reasons why popular places will never be cheap.

Maintaining the character of a neighborhood as single family houses. Even as prices exceed $1,000,000.

> everyone without a home

I guarantee you're not talking about homeless people here, but people who live in a home that they are renting, reasonably near the place they work.

edit: also, somehow these so-called poors are always wealthy programmers trying to buy million-dollar houses.

By this logic oil & gas will never run out because rising prices will incentivize new extraction technology and formerly too expensive reserves will come online. Or supply will dwindle and the price rationing system will ensure it goes to the most productive use and energy consumers will switch to cheaper substitutes.

I actually think this is what will happen to oil and gas. It will become less and less of a feature of our lives over the long run. We will have to find alternatives (hopeful!) or cut back (painful!)

> You only need one house to live in.

Many people do not want to own a home, they would rather rent. Someone has to be the landlord for all those people, and to all those someones, the home is an investment. You can only get rid of homes as investments if you get rid of renting.

> Many people do not want to own a home

I hate to go all "citation needed" on you, but I'm not sure this is true.

Do I want to pay for upkeep of a property? Probably not. But since renting is basically equivalent to burning money in our economy, any responsible renter will eventually feel a pull towards ownership if only to stop the bleeding.

I think we need a society where renting isn't so expensive AND owning a property isn't so heavily subsidized by tax breaks. The entire housing market is a massive bubble because of investors and speculation. At some point, that bubble prices people out, leading to homelessness and missed opportunities because people aren't willing or able to move.

Much like freedom of car-free movement, housing ought to be a fundamental human right. Not a business or a place to hide your money.

> I hate to go all "citation needed" on you, but I'm not sure this is true.

Given the number of people that rent in large cities all over the world for their entire lives, I don't know why you would find my claim doubtful. Many people seem to want to live in large, densely populated areas, and for most people that is always going to mean renting.

> Much like freedom of car-free movement, housing ought to be a fundamental human right

I disagree with this as a blanket statement; neither car-free movement nor housing as a basic right will ever work in areas that are not densely populated. And many people (including me) want to live in areas that are not densely populated. We are quite willing to pay the costs of doing that and don't need handouts.

However, in densely populated areas, I think many people would agree with your statement--but I think they would also say that "housing as a human right", for them, means availability of affordable rentals, not home ownership.

> Many people seem to want to live in large, densely populated areas, and for most people that is always going to mean renting.

The "for most people that is always going to mean renting" is that part that we could change through large scale collective policy. That's what Singapore has done for example. No one doubts whether people want to live in cities. We are asking whether the model of private landlords is the best way to manage large quantities of housing in cites. Look at Singapore:

"Eighty-two percent of Singapore’s residents live in HDB-built (Housing Development Board) apartments, of which there are more than 900,000. In contrast to both New York and Vienna, HDB encourages public housing residents to purchase their apartments. Nine out of ten HDB residents own their homes. The 50,000 rental units are, according to the HDB website, 'for the truly needy who have no other viable housing options.'" [1]

So yes, people want to live in dense cities. It does NOT automatically follow that they will have to rent. This is a policy choice.

[1] https://charterforcompassion.org/shareable-community-ideas/p...

We do not need to hand over ownership to the government to build more houses. Just simplify zoning laws. Private landlords want to build. People want to maximize the value of their properties. They can't because of zoning laws that favor single family home hellscapes.

> single family home hellscapes

"Hellscapes" is uncalled for. Many people like living in single family homes. The goal of housing should not be to enforce a single cookie cutter configuration on everybody. It should be to enable a free market in housing so that all of the different preferences people have for housing can have a reasonable chance of being met. I agree zoning laws should not favor single family homes to the detriment of other types, but equally they should not disfavor single family homes.

I agree, people should be able to do with their property what they want. Many SFH owners actively try to block development of the properties they do not own, unfortunately.

> They can't because of zoning laws that favor single family home hellscapes.

This can easily go too far in the other direction though, carving up a single family sized living space into 5 tiny 400 sqft apartments. There have to be incentives for mixed sized living spaces.

There is, that is “the market is willing to buy mixed sized living spaces.” I live in Tokyo, my first apartment was shocked pikachu 230sqft! Oh, the horror!

And yet there are plenty of single family homes and 2500+ sqft apartments if you want that. Just in the USA, if you want to live small - the government forcibly tells you that you’re not welcome here.

The market is willing theoretically, but practically with high property values there's more incentive to build tons of smaller units since they'll sell for more in aggregate. This happened in my city, where there's a distinct lack of family-sized apartments in the downtown core. Only older buildings from the 80s prior to recent real estate booms built decent sized units suitable for families.

Well I guess that's the problem with having failed to produce housing supply for decades, until the balance of the market got so far out of whack that pressure for smaller units is that high. Tokyo built both housing and infrastructure to increase the viable land to live in striking distance to the commercial core, and so that's not an issue (although typical apartment sizes for family homes included are much smaller across the board because of the premium on space).

To me, it's a scenario of pick your poison - continue to be unaffordable because society is not willing to accept the consequences of its failures, or eat the consequences for a brighter future. In cities like SF, I don't see a world where it will ever get affordable if they insist that everyone needs to live in 1000+ sqft apartments, unless you plan to pack it to the gills with ultra-tall skyscrapers (never happening) or it becomes so undesirable to live there that people just stop moving there (unlikely, but given the rampant human rights violations it commits everyday to its denizens... well maybe that's the most likely scenario).

Aside, Americans don't know what small apartments even mean. The presence of super tiny Tokyo apartments is a great thing IMO, it means that people can still live centrally even if they aren't rich. I think a lot of people would happily accept a well-designed 200 sqft apartment over a 2-hour commute, if society gave them that option, since Tokyo residents do that en masse everyday.

Most of the people renting in a large city are doing so because buying is so expensive and unattainable. Not because they prefer renting.

I can buy a house here in Tokyo but it doesn’t make sense for me to. Partially because housing is a bad investment here and rents are very affordable (which is exactly the point of OP), and partially because I expect that my needs in my current situation will differ greatly from my future needs and don’t personally want to take on the burden of managing properties at this time to compensate for that.

And if it's attainable, does it make financial sense? I rent an apartment now, and to buy a similar would be roughly 1000 times the monthly rent. I would have to bet very heavily on appreciation before that made financial sense, even with the leverage of a mortgage.

> to buy a similar would be roughly 1000 times the monthly rent.

Have you somehow inherited into a rent-controlled apartment still paying the same $5 rent from 1800?

Talking about the total apartment price, not a monthly installment.

Yes most of the city is rent controlled, this is a ten year old rental contract. Rent is about 600€ and apartment I estimate would be 500-600k. Could also be more though, I'm not exactly up to date.

> Given the number of people that rent in large cities all over the world for their entire lives, I don't know why you would find my claim doubtful.

How many could afford to buy though?

Condo model ownership is very common in dense urban areas. You "own" your apartment, and pay an association to manage the repairs and upkeep of the common building and amenities.

That said, renting in the short term is still something people will want to do. Some people will even want to do it longer term, if they want no responsibilities at all for repair and upkeep or freedom to leave with no strings attached at the end of the lease.

How many college students want to bother with owning a home for <4 years before potentially moving somewhere else entirely once done with their studies?

The number of people that end up never owning or wanting to own a home is likely small. But there is a very real case for non-ownership depending on what stage of life people are in and how they want to live their lives.

Not uncommon for parents to buy a house for their kid to live in, rent it to a few roommates to cover the mortgage, then keep it as an investment or sell for a profit when the kid graduates.

But notice how that only works for a fraction (the larger part “paying” the mortgage)

The even easier argument is how many college students and new grads can afford to buy a house? Subdividing property that people can't afford is a valuable service.

If by "many" GP meant "a small but noticeable percentage of the population", I think the claim is reasonable. Buying a home is a process. In additional to the standard search and short personal inspection you'd do for a rental, there's an official inspection, securing a loan, etc. It consumes a significant amount of time for a month.

For someone moving every 6-12 months, spending a month or even two per year on buying properties and ensuring the previous owners aren't hiding issues isn't worth it. If a landlord hides something this type of tenant will only have to deal with it for a year at most, but if a seller hid something they would lose a lot of money on the move.

Moving every 6-12 months isn't the default, but it's relatively common for college students and recent graduates who haven't established roots yet. Next year it's a new city for a different job or a different school. For example, for many fields in the US going to the same university for grad and undergrad is highly discouraged.

(Not disagreeing with any of your other points.)

Good point. For those in niche situations where flexibility is king, renting will almost always make sense simply because of static purchase transaction fees. When I was in college and fresh out of college, I didn't have (tens of) thousands of dollars to float broker percentages, inspections, nor the time and know-how to navigate sales and inspection processes.

I think there's nothing wrong with renting, and for folks who just want shelter with a known cost up-front, it's a great solution. The problem is rental costs that creep up and up and up and housing policies that reward the haves (of housing) but indirectly penalize the have-nots (renters) because they miss out on massive tax writeoffs.

> I hate to go all "citation needed" on you, but I'm not sure this is true.

I don't have a paper to link to, but reading all the housing threads on HN for years there are always many people who sing the praises of renting for all kinds of reasons that make sense to them.

This line of reasoning is flawed. The government can build housing so that people have places to rent, in a way that isn’t “an investment” in the profit-seeking sense. That’s what they do in Vienna and it seems to work great.

https://www.huduser.gov/portal/pdredge/pdr_edge_featd_articl...

And then in Singapore they have very high home ownership rates, so we could also be dramatically reducing the number of people who actually need to rent, reducing the need for private investment:

https://charterforcompassion.org/shareable-community-ideas/p...

I rented (by choice) for many years. I never once thought, "I wish the government were my landlord." The arrangement actually works pretty great just how it is. I was very happy to write that rent check every month and always felt like I got a good deal for my money, even when I lived in a very expensive market (NYC). In every case, I desired something that was very important to me and for which there's a lot of demand. I was happy, therefore, to pay for it.

That the fact has not occurred to you personally does not mean such an arrangement in aggregate would not help solve the problem of housing as a profitable investment. Maybe you didn't think of this on your own accord, but I bet you WOULD have appreciated if the same unit was cheaper, and this would be the case if 50% of the housing in your market was public housing as is the case in Vienna, even if your unit was privately owned.

Plus your single example of being satisfied with your landlord is not evidence that we should accept landlords across the board. My own landlord sucks at repairing things that need repair, and I find it very frustrating.

There is public housing in NYC, and I can assure you that your landlord is better than NYCHA.

The article I shared in my first comment in this chain addresses problems in NYC and compares that to Vienna and Singapore, which are much better. So please take a look if you would like to learn about alternatives.

https://charterforcompassion.org/shareable-community-ideas/p...

I actually know already about Vienna and Singapore. I have zero confidence we can copy that model here. Every time we've tried to do public housing it's been a disaster. At some point it's just who we are. If I keep striking out, it's no use to tell me to look to Mike Trout for an example of what's possible. I'm not Mike Trout. I will never be Mike Trout. I will never achieve what Mike Trout has achieved. If we're talking about my batting average, then Mike Trout's success is irrelevant. I need an approach at the plate that accounts for my skills and limitations.

Private parties can build housing too, if you let them.

And why do people prefer renting to ownership? Because it's cheaper? Because the home buying process is too difficult?

Owning a home, even if its value is deprecating, is fundamentally still more attractive than renting. You get to recoup at least some of your investment, and you don't have property management invading your personal life.

Most people simply can't afford to buy homes in the first place.

I think many people enjoy the short term benefits of renting (spend money instead of saving for down payment) and undervalue the long term benefits of owning (lower housing cost when retired).

I'm sure many prefer it, but many also require it. Bundling the two groups is disingenuous.

Making ownership more accessible would attract a lot of prospective buyers, and getting rid of the landlord role and land investment would likely have that effect.

>Those will also get snapped up by investors.

Investors buy around 10-20% (depending on quarter) of all new properties (and likely because they paid to build most of that share).

That's a far cry from 100%.

If there's enough housing it doesn't matter who owns it. Unless units are being held vacant by landlords (they're not atm) housing prices will reach an equilibrium that represents the value they provide. Landlords can't just unilaterally raise prices without lowering supply levels.

Yes zero to low tax for primary residence. 10x tax for all secondary houses

Vacancy rates are low, investors don't just sit on the units.

They had to add a tax to empty homes in Vancouver to try and recover some of the units lost to investors just sitting on them.

[citation needed]

A tax was established, yes, but was it reasonable to do so (was it reasonable to expect that it will do much) and did it do anything? It seems the answers are no to both those questions.

I think it's a good signaling tax though. (I'm 50-50 on the extra tax for foreign buyers. Ethically there shouldn't be any difference based on where one's passport is from, but practically of course there is.)

Anyway, the real problem is constrained supply. Vancouver is still a fucking suburb compared to dense cities.

https://www.youtube.com/watch?v=evYOhpjMql0

https://www.statista.com/statistics/960174/vacancy-rates-res...

https://www.cbre.nl/-/media/cbre/countrycanada/images/insigh...

https://vancouversun.com/business/real-estate/three-years-in...

> Now everyone who owns a home is incentivized to ensure their investment is maximized and that results in a lot of NIMBYism.

This motivation is backwards. Getting zoning restrictions around your house removed multiplies the value of that house. NIMBYism comes from places where people live. YIMBYism maximizes property values, although there's an element of blockbusting because overbuilding and a change in neighborhood character can make a neighborhood so unpleasant to live in that holdouts will end up selling cheap.

It's probably very rare the holdouts sell truly cheap. More like slightly cheaper than they could, but still at a very large profit.

YIMBYism simultaneously raises prices (presumably for the greedy developers and sellouts) and lowers them (for the noble neighborhood defenders who are forced to sell). Got it.

I'm going to ignore your presumptions (your "greedy developers and sellouts) and things I did not say (like "YIMBYism lowers prices for noble neighborhood defenders who are forced to sell"), so basically every word and try to find the spirit of your comment.

It's pretty difficult to fit a massive apartment building on a house sized plot between two massive apartment buildings. The prices you will be offered are not what your neighbors were offered. There will also be pressure on you to sell because your neighborhood is now shit. Your house prices may still, all that being considered, have massively risen since you bought the house. The property taxes also rose proportionally, sucking away your equity.

Any reply to this other than vague sarcasm?

I think the contradictions are pretty clear: it raises prices, but holdouts sell cheap; it's a shit neighborhood that no one wants to live in because it's too crowded...

And the hypothetical boxed-in holdout scenario is simply not representative of what's happening in high demand areas in the US. We're preserving laundromats and parking lots in San Francisco and Manhattan. No one is trying to build towers in the middle of suburbia.

> home is incentivized to ensure their investment is maximized and that results in a lot of NIMBYism

I'm not sure a lot of NIMBYism comes from the notion of protecting home values.

If a home were to be upzoned for apartments the underlying land value would rise significantly, and this would be a significant financial windfall for the home owner. They should want to see their land be upzoned for apts but that's not what we see.

I think NIMBYism derives from the desire for exclusivity. When ones home and surrounding homes are ultra low density you are guaranteed to have few neighbours. This is what is eliminated when homes are rezoned for apartments.

Everyone benefits from their own property being upzoned, but loses when their neighbors build upzoned properties. Hence the NIMBYs block other people's development

This would only be in the case where their neighbour receives beneficial upzoning and they don't. This would be an unlikely edge case.

Generally when we see upzoning advocacy it's neighbourhood wide if not city wide.

When was housing not an investment? Throughout history, people have always wanted to drive up the value of their land and properties. There are still plenty of places in the US/Canada/UK where housing is cheap. The problem is that nobody wants to live in those areas.

> When was housing not an investment?

Housing was never an investment before recent decades, with an emphasis on the housing bubble. Housing tracked inflation for 400 years.

https://thegoldobserver.substack.com/p/amsterdam-real-housin...

edit: the history of US house prices is that they strictly tracked inflation, then with government subsidy right after WWII, housing prices jumped up, then stayed flat at that new level for the next 50 years, then the turn of the millennium happens and housing becomes an investment (after a stock market crash.)

“In terms of total returns, residential real estate and equities have shown very similar and high real total gains, on average about 7% per year. Housing outperformed equity before WW2. Since WW2, equities have outperformed housing on average, but only at the cost of much higher volatility and higher synchronicity with the business cycle. The observation that housing returns are similar to equity returns, yet considerably less volatile, is puzzling.”

https://www.frbsf.org/wp-content/uploads/sites/4/wp2017-25.p...

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?

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 trades in derivatives based on mortgages

The first two have been going on for centuries at some level. The third only really got going at the point house prices completely disconnected from inflation.

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.)

I genuinely don't understand why you're getting down-voted.

Not only has it been true historically - there's a real reason to allow it: it incentivizes owners to maintain and improve their properties. Further... maintenance of that property requires investment, both in time and labor. If you make it so that owners have no reward or incentive for improving their properties, they WON'T DO IT.

Why invest money into fixing your place if the price of the house is capped anyways? Trying to prevent this style of investment has almost always failed, and generally makes neighborhoods that are nice/attractive places to live much less nice and attractive - because people stop maintaining and improving them.

I think the real question right now that needs to be answered is: Why are we not able to create new urban areas in low cost areas? What has changed so that we no longer create towns?

Because frankly - right now the issue isn't housing, it's housing in areas where economic opportunities exist. Why are economic opportunities so exclusive to high population centers? What can we do to change that?

This positive effect goes far beyond just maintaining the house and land.

Governments love home owners. They are typically stable citizens in the work-force, law-abiding, reliable, etc. They have a high time preference and have every interest in maintaining the status quo, safety, anything that makes society pleasant.

It's true but the reason people are moving to cities are jobs. Rural locations do not have the job market to support the costs to live there. It's a lower cost, but a much, much lower income outlook as well.

If you have the money to outright buy a rural property and build a house there, it's not a bad place to live. But you don't want to have to depend on the limited job market with an expensive mortgage and limited buyer pool.

> If you have the money to outright buy a rural property and build a house there

That's if there are available builders. It took my mother the better part of a year to get her roof replaced, because there was no one available to do the job. I'd also argue that the place she lives in rural VA is pretty awful in most respects other than having space and she's not all that far from a town.

Remote work is commonplace now. Perhaps in the next few years we’ll test the theory that jobs and house prices are linked. It’s now possible (for tech workers at least) to work from almost anywhere for decent wages.

My hunch is that the housing crisis is simple supply and demand. People want to live in cities because of the better access to entertainment, amenities, and services. There aren’t enough houses to fill that demand. There’s no great city on earth that has a glut of housing. If there were, people would flock to that city to fill the housing. I think that’s the very nature of a city. In some sense, the more people that want to live in a city, the higher the quality of the city. That’s also directly correlated with housing cost, sadly.

Remote work is commonplace to a very few privileged folks. HN seems to forget that.

It's always been an investment, but the difference is the shift from being a stable asset that appreciated at or above inflation, to the sort of incredible hyper inflation that we now see.

So do you have a solution in mind?

Almost never. Housing has always been a basic necessity for survival.

Only when feudal societies developed you had landlords and serfs and that's hardly something to be proud about.

> feudal societies developed

Sooo... the last thousand some years, given that feudalism was widespread by the 11th century (and housing was absolutely an investment before that). Basically - half of recorded history (~400bc for Europe), and longer than the United States has existed.

I don't understand what you think this comment means...

Please refresh your memory around the topic https://en.wikipedia.org/wiki/Human#History

> and housing was absolutely an investment before that

..and don't make absurd generalizations. Humanity is way older that the middle ages, and hundreds of different cultures existed around the world even during the middle ages.

Very few had the concept of investment and the idea a house has a monetary value that grows significantly over time was simply unheard.

> longer than the United States has existed.

Imperial units are bad but measuring history in united-states is even worse. The US is not even 250 years old.

> I don't understand what you think this comment means...

I can see that.

Ok - well have a good one. You aren't helping yourself here, and I don't think we'll have a productive conversation.

Same here.

- The last thousand some years (in Europe)

- Widespread (in Europe)

- Half of recorded (European) history

An exclusively European phenomenon, the bulk of which came and went while it was a backwater region with limited effect on the rest of the world.

> An exclusively European phenomenon, the bulk of which came and went while it was a backwater region with limited effect on the rest of the world.

Weird that it had limited effect on the rest of the world, since basically history from now back to about the 15th century represents a European hegemony, now a US hegemony that extends European Western philosophy to the world.

Seems that "limited effect" is pretty big. So much so that we're /literally discussing it now in 2022/.

The bulk of feudalism took place between the 5th and 12th centuries, ~400 years before 1491.

Sure, and the legacy of feudalism is a core part of what informs Western philosophy and political structure since then.

Yes. Its post 1492* relevance through its legacy now established, we revolve back to the point:

- The last thousand some years (in Europe)

- Widespread (in Europe)

- Half of recorded (European) history

You may have misread my original comment, the “limited effect” was to describe Europe’s influence at that particular point in time, not feudalism/Europe’s influence since then.

I wonder if persistently low interest rates is the real culprit that led to housing as investment. I have been recently intrigued by FinTwit arguments that an excess of demand spurred by too low interest rates is the real reason for many shortages. As a saver, that argument naturally appeals to me.

> I wonder if persistently low interest rates is the real culprit that led to housing as investment.

Of course.

The profit from selling a leveraged investment is based on the delta between what you pay to borrow the money and how quickly the asset goes up. Doesn't matter it that's a house, a stock, bonds, whatever.

Housing is particularly attractive for these bets, because it's so easy to qualify for a big loan and because the rates have been so low.

Once mortgage rates exceed about six percent, the incentive to invest in real estate will be much lower.

> I have been recently intrigued by FinTwit arguments that an excess of demand spurred by too low interest rates is the real reason for many shortages

I don't believe this is the case as since 2008 the U.S. construction industry has not even built enough units to keep up with population growth. I believe this is a supply problem which is two-fold.

1) Restrictive zoning and permitting which really took off around the 70s

2) A boom and bust construction cycle which has convinced many to not risk it any longer and find other work (this which has been going on for decades but truly inflected after 2008).

> I don't believe this is the case as since 2008 the U.S. construction industry has not even built enough units to keep up with population growth. I believe this is a supply problem which is two-fold.

A counterargument to this is that population growth has not been very high in the past few decades: https://fred.stlouisfed.org/graph/?g=SUL3

You certainly have valid points, especially in San Francisco. Nevertheless, looking at the broader market, outside of California, the market appears to be working: builders find a way to build what will sell and maximize their profits. Last week, I drove around a planned community in a middle-America state. Developers started building houses around ~2010 and are still building out the area. These developers had no problem building thousands of homes that were selling well until very recently.

Population growth has been lower but construction levels have been lower still. This is not speculation. It is fact.

https://www.cnbc.com/2021/09/14/america-is-short-more-than-5...

The only parts which are speculative are why. There is consistently lower workforce participation in construction though, that is also a fact.

https://finance.yahoo.com/news/construction-industry-after-r...

I'm glad the builders in your area have been able to work consistently. I would guess that they are likely riding a trend of a decreasing number of builders who are increasingly professionalized and technologized their operations. Regardless, that is an anecdote and the statistics paint a pretty clear picture.

> States are going to have to step in and override cities that aren't being effective

surprise - this has already been signed in California; and amended, and further amended..

https://www.capradio.org/articles/2017/09/29/brown-brings-ho...

And SF has already tried bending over backwards to defang it. Luckily mayor Breed rejected the attempt, but it's far from over.

> 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.

I don't know how this came to be such an obviously true common wisdom answer here at Hacker news. It's an extremely incomplete account of what causes NIMBYism. I'm sure at least some of it is purely a desire to maintain land value appreciation, but as others have already pointed out, in plenty of cases, conversion from single-family to multi-family zoning increases land value and the land owners still don't want that.

The basic cause of NIMBYism is these are people's homes you're talking about. They live there. They may have lived there for decades, possibly even for generations. They chose the place for the character and culture it had at the time of choosing, and they don't want that to change. If they enjoy a relatively quiet life with space, they don't want to see their home changed into a traffic jam with nowhere to park. They don't want to be perpetually surrounded by nonstop construction.

I'm not trying to say anyone who feels this way is inherently right. At some point, change is inevitable. I'm sure the original inhabitants didn't like it when European colonists spread strange diseases across the land and then wiped out the stragglers with superior firepower. I'm sure the ranchers of the west didn't like seeing their ranches turned into suburbs. And the suburbanites don't want to see multi-family housing in their once-quiet and relatively secluded homesteads.

Without making value judgments either way, though, I think you have to acknowledge there are far more basic instincts at play here than simple financial incentives. It's fair to say we at some point have no choice, and if the result is we can solve housing unavailability and especially homelessness, and the cost is a few or even a large number of people are left with the neighborhoods they grew up in changed drastically into places they no longer want to live, that may be worth it. But you should understand the full range of motivations for people who want stability in their homes and communities and not act like it's purely about financial gain and greed. Remember also that a fair number of communities in which concerns about gentrification are the greatest and people really oppose redevelopment are neighborhoods that these people were historically forced to live in because they were ostracized if not killed when they tried to live anywhere else. That community in its specific current form is what they see themselves as being a part of, far more than the larger city, state, or country that never wanted them in the first place. This is far more complex than you're making it sound.

> The basic cause of NIMBYism is these are people's homes you're talking about. They live there.

You hit the nail on the head!

I'm often confused by how the vibe here is that thinking of housing as an investment is bad, and yet simultaneously consider that all housing-related decisions are strictly financially driven!

Reality from everyone I know is that housing is primarily about being a home. A nice place to live. A stable place for the kids to grow up. That's the primary motivation.

Investment? Sure, it's nice if it goes up over a lifetime, but that's not a driver in any decisions.

The government made me an explicate promise with zoning laws that my neighborhood was a safe investment, just as they make people comfortable that bank accounts are safe via banking laws, or that stocks are somewhat safe. Taking that away is breaking a MAJOR social contract made to the 65% of American's that own their home.

Yes, it's a social contract that must be destroyed. Otherwise we will experience economic ruin. Look at what happened in Japan in the 1980s, or is happening in New Zealand in Canada. The fact of the matter is that this social contract is pure rent-seeking, and never should have been allowed in the first place. It is theft from future generations by present day homeowners.

Also it certainly is not true for all homeowners btw, lots of municipalities have fairly minimal zoning laws.

This can probably be solved at the federal level using smart taxation and incentives for mixed zoning.

The hubris is astounding.

You know how we got into this problem? Decades ago we used taxation and law to try and incentivize the development we wanted and disincentivize or prohibit what we didn't. And today the efficacy of that endeavor is obvious to even the most casual observer.

There is no compelling reason doing the exact same thing will work better for different values of "development we want" and "development we don't". Have you seen what gets developed when you incentivize mixed development? It's lifeless crap compared to the places that were built up prior to the advent of widespread usage restrictions on land where development happened organically without the input or prior approval of local government (i.e. people were basically free to do whatever within the permissive limits of the time).

How about we just get the government out of the business of telling people what and where they can and can't build. Let people develop what they think there is demand for. A few inappropriate industrial sites is a small price to pay for allowing pent up demand for residential and commercial construction to be satiated.

I think I wasn't clear. When I say incentivize mixed zoning, I meant that the federal government would incentivize local governments choosing to zone land as mixed use. Then people can build whatever they want.

It's not possible to remove zoning completely. That's severe hubris, thinking that we introduced zoning to begin with for no legitimate reason. That's not true - it's necessary to plan city infrastructure and that requires zoning. Removing zoning altogether would be an unmitigated disaster.

There is no easy clean solution like "remove all the rules". You can't get government out of the business of city planning and basic infrastructure, and that's in more words what you mean.

There is a difference between good policy and bad policy. We need good policy. The only solution is that local governments somehow make better choices.

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