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Also taxes. The housing bubble is a choice that voters make because voting demographics skew towards property owners.

1031 exchange

Mortgage interest deduction

Opportunity zones

Taxpayer backing of Fannie and Freddie (allows insane leverage and eliminates interest rate risk for borrowers)

Lack of any federal property/land tax

Historical precedent that the government will bail out property owners in times of financial uncertainty

Countless local tax cuts (Prop 13 etc)

I note these are mostly US-specific reasons, but the property bubble has been a thing all over the world both now and pre-2008. It's a phenomenon of popular cities everywhere.

Those specific reasons might be US-specific, but other countries have other policies to favor home ownership for the same reason (ie. "voting demographics skew towards property owners"). For instance, it's pretty common in other countries to have capital gains exemption on houses.

Ah capital gains exemptions. I knew I was forgetting something!

> other countries have other policies to favor home ownership

You make it sound like a bad thing? Policies should favor the people. There are policies that favor renting flats too.

I believe the problem is not "making it a good deal to own your home". That should be the default anyway.

Whichever nation you live in likely has similar crap.

In China for example there's no property taxes and you can't send your kids to public schools unless you own property.

China is a weird case where there is no property ownership per se, and all the property owners were sent to the fields, yet a generation later everyone is acting as if their 70 year lease is literally the same thing as property and entails the same rights of inheritance and so forth.

I mean, the government kind of mandates property investment over there.

every single post that has anything to do with housing turns into this

- prices dropping is a good thing

- nimby are the real evil

- we should promote the idea of housing as utility not a store of wealth

- but govt encourages housing as wealth via subsidies, tax breaks, bailouts ect.

- poc should be allowed to build inter-generational wealth via housing. This shouldn't be suddenly cancelled.

- we should be building more public housing like germany and france.

- some random side convo about gentrification

- another side convo about suburban housing = bad. we should all live in tightly packed cities with no cars.

Rinse and repeat.

I think this topic is might be second only to 'tech interviews and hiring' in terms of predictability

This should be a bot.

How dare people get concerned over something so trivial as "having someplace to live"

well..lets hear your genius idea then. Idea that isn't people voting to bring down their own property values.

Implement a land value tax by exempting buildings and improvements from paying a property tax, shift state income and sales taxes onto land value, and ease zoning regulations.

that's still going to have the effect of lowering property values though.

it's a catch-22. "lowering the cost of housing" and "lowering property values" are the exact same thing. there's no actual political appetite to lower the cost of housing, because all the people in charge of making those decisions are property owners who don't want to see their investment lose value.

It may lower property values some, but in the long run even homeowners will be better-off as other, more burdensome taxes decrease. Sure, increasing land taxes may not be that popular, but pair it with abolishing income taxes? That's a different political proposition.

It's also why my first step is not to sell it as the implementation of a new tax; rather, it is an exemption to buildings. People don't like new taxes, but everyone loves exemptions!

Political problems are often difficult to solve but that by no means makes them impossible.

>poc should be allowed to build inter-generational wealth via housing

IMO, this is slightly at odds with the OPs point that creating housing investments is a bad thing. One of the problems in my eyes is that a disproportionate amount of Americans wealth is tied up in their homes. This creates incentives to protect those "investments" through things like NIMBY policies, tax incentives, etc. An alternative would be to create a system that fosters more diversified inter-generational wealth.

> - nimby are the real evil

> - another side convo about suburban housing = bad. we should all live in tightly packed cities with no cars.

Are they wrong though ?

Removing zoning restrictions (and fake environmental/historical significance reports) will immediately restore supply-n-demand stability to housing. Want more housing ? Build it. Simple as that.

> second only to 'tech interviews and hiring' in terms of predictability

The main difference is that no one has a good alternative to tech interviews. On the other hand, every single NIMBY problem has been analyzed to death, with location relevant solutions proposals and verified proofs of them working.

Many of those perspectives have gained ground in recent years/decades and were not common or popular perspectives in years past, when housing prices weren't in crisis. You make it sound like repetitive nonsense when in fact these are salient points, relevant to the times and worthy of being spread and discussed.

> Being a landlord has become a more attractive investment

This is changing as we speak due to the interest rate. These investments are less attractive if you can get a safe 4% or higher return without having to deal with tenants and maintenance.

Is 4% an average rate of return for landlords? 4% of what: the capital you used to buy the house?

So if I buy a house for $100,000, I get $4000 in rent per year? Or I get $4000 in my pocket after I use the rent money to pay the mortgage and property tax?

Typical RE return targets are 10-20%. Anything less than that and you might as well be in public securities.

There are different ways to calculate returns: IRR, cash on cash, but it’s immaterial for this discussion. TLDR you want returns higher than you can get elsewhere easier.

(you must not just develop housing, you must lock it up from investors if you want to ensure long term affordability; capital is callous, uncaring, and voracious for returns)

> Financialization of homes as a personal investment is a BAD thing. It’s essentially a Ponzi scheme operating over decades where home buyers depend on people wealthier than themselves to buy their home at a higher price decades later. This is clearly unsustainable. Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods.

What do you mean by 'bad'? Morally bad? Macro-economically negative? A money-losing investment for the investor?

The investment has been a good one for generations. One reason is we have continued to grow wealthier for generations.

Owning your property, with the rights and independence that come with it, is fundamental to personal liberty and security. Your home is your castle; the landlord's home is not. Not everyone has to do it, but you are handing over a lot of power to someone else when you rent.

I believe they are generalizing past owning your own home, to owning _other_ homes as a pure investment. I.e. becoming a landlord. Owning your own home wouldn't require someone wealthier than you purchasing it -- even if it did not go up in price. When home prices don't rise, purchasing investment properties becomes less lucrative and more risky (where as purchasing your own home remains low risk).

No I am not ‘generalizing past owning your own home’. I am saying the official government policies that preferentially promote personal, primary residences as investment vehicles are bad public policy. As stated, these policies have manifested in practice as a decades long Ponzi scheme that is built on ever increasing home prices. It’s not sustainable. Younger generations will not be able to afford housing, as we are now witnessing.

Hmm in that case I think your argument doesn't make sense. "Good investment" regarding purchasing your own home is in comparison to renting. The price of the home doesn't need to go up for it to be a good place to put money, nor does it require any sort of "Ponzi scheme". It only requires the total price of maintenance not exceed the price of forever paying rent.

That’s because twice now you’ve not bothered to read what was actually written. I’m not going to explain the argument a third time to someone who isn’t putting in the effort.

Of course i could be wrong but you seem to contradict yourself in your first reply (You claimed new landlord policies were paramount, then that you were talking about primary residence ownership where landlordship wouldnt apply?).

You then said primary home ownership is a ponzi scheme which I gave an example as to why that seems untrue. I might be wrong here but providing a counter argument supporting why renting should be preferential to home ownership financially would be helpful as that seems superficially untrue.

The argument here is not that owning a home is bad. Owning a home is good. Considering the ownership of your personal home as in investment is bad.

Homes are a great long term investment. However They are a bad source of income. Cash out refinancing is a bad thing, as you are using your house as income now instead of an inflation protected savings.

The pay off from investing in a house is when you retire you live there rent free, thus needing less in other retirement investments. Most home owners fail at this, instead living beyond their means and have nothing saved for retirement.

Homes are seen as an investment: they are being bought with the expectation that they can be sold at a later point in time at a higher price. However, this leads to some serious issues down the line.

I think it is fairly safe to say that the general expectation of an investor is that the value of a home will grow faster than inflation - why else bother investing? This means that the average inhabitant's costs for living in that home (rent, mortgage payments) must also grow faster than inflation. However, the average inhabitant's income will only grows with the inflation rate.

This means that for homes to be used as investment, the cost of living in them must be an ever-growing percentage of the inhabitant's income. And this is what we are currently seeing in practice: since 1965, home prices have increased 7.6x faster than income.[0]

This is obviously unsustainable - we can't end up with everyone spending 100% of their income on housing. The big question is, who will be holding the bag when the bubble bursts?

[0]: https://www.realestatewitch.com/house-price-to-income-ratio-...

In part, because it incentivizes a lack of diversification in wealth, which leads people to support policies that protect the one egg in their basket.

Secondly, unless you own multiple properties, it's a market you can't exit. You always need a place to live so if you sell your "investment" at a market high, you have to buy your next "investment" at a market high.

Combining the two, you get a lot of policies that protect paper wealth not generating much value. I think it was Putin who said something along the lines of "I don't understand the American economy. It seems like they're just buying and selling homes to each other."

"Investment" doesn't just mean dollars, it means value to the person making it.

Owning a home provides tremendous value to the owner beyond the financial aspect.

Failure to understand imputed rents is a huge problem whenever housing discourse comes up.

The OP seemed pretty clear to me that they were referring to a financial investment. I don't think "investment" is particularly useful for describing other value, and think that more aligns with "utility" rather than an "investment".

Along with food, water, and clothing, shelter is a basic thing that everybody needs. Few of us see rising food costs as a good thing yet many people cheer on rising housing costs because they got theirs already.

We also need to eliminate the massive government incentives for owning a home, or adding similar incentives for renting.

I dont think we need to eliminate them, just have them only apply to a primary residence.

Yeah the person finally getting enough to own a house is not enemy here

They positively must be eliminated on the primary residence if want to halt the financialization of personal homes. Why should the related well-off be given a tax break anyway? It’s regressive. The US is one of the very few countries that allow mortgage interest to be deducted:

https://www.progressivemaryland.org/home_mortgage_interest_d...

I don't think someone buying a home for their family should be considered "well-off". That should be our base standard of living.

The US is also one of the only countries where mortgages are so expensive. We wouldn't need the tax breaks if housing prices were low, I suppose.

To the extent that they probably put upward pressure on housing prices, we should eliminate them.

I would file that under A. There is a massive market now that would see any devaluation as bad (they bought into the investment scheme)

The mortgage tax deduction and the Homes Sales Tax exclusion should be eliminated. They are regressive pieces of legislation that serve to widen inequality.

The mortgage interest deduction serves to put prospective owner-occupants on an equal footing with prospective landlords (for which business loan interest is deductible against profits).

The capital gains exclusion I have less strong feelings about, but it amounts in large part to excluding being taxed on the effect of inflation.

The MDI defines "owner occupant" over "landlord" in such a way as to effectively subsidize the single family detached suburban home lifestyle preference. It encourages the middle class to tie up a big chunk of their net worth in sprawling developments with questionable claims of being an appreciating asset.

I’m trying to gain understanding of your first sentence, but have been unable.

Landlords can deduct mortgage interest just like any profit-seeking business can deduct interest on loans taken on in furtherance of their business. That’s true for single-family homes or duplexes in a suburb same as a rowhouse, 4-plex or 50-unit building in a city.

The owner-occupant deduction applies to their unit, whether that’s all of an SFR, half a duplex, one level of a triple-decker, or 1 unit in a 4-plex.

The mortgage interest tax deduction is effectively eliminated for 90% of Americans because the standard deductions are high enough that 90% of people do not itemize to be able to claim the mortgage interest tax deduction.

Great let's simplify the tax code and clear it out completely. It's never been good policy.

And can we please make home ownership (or renting) cost part of the inflation level?

It already is. Tenant Rent and Owners’ Equivalent Rent (OER) is included. That’s capturing the cost of occupying the property, which is the “cost of living [there]” as separated from the cost of buying it.

https://www.brookings.edu/blog/up-front/2022/05/18/how-does-...

> Financialization of homes as a personal investment is a BAD thing

there's two parts to home ownership

Physical asset, which deprecates (or needs a lot of maintenance to keep its value)

Land, which appreciates, as they aren't making any more

The former is fine. If you take a wreck and improve/renovate it and sell it for more than you paid, that's great, should be encouraged. The problem is the land value. Ironically the US tends to tax the physical asset far more than the land.

I'm not even sure homes are depreciating assets any more.

The increase in labor costs may now exceed the rate of home degradation.

"Has become?" Seems that being a landlord has always been one of the more profitable things you could do.

And it has always been an odd split of who you want as tenants. Commonly, you either wanted very poor, or commercial tenants. Middle class was not desired.

For the middle class, you wanted to be their bank.

Homes are durable goods, hence an investment. Homes that are cared for can last a hundred years or more.

Contrary to your statements, it benefits everyone if these are seen as a personal investment - but not a liquid asset like stock or something.

Financiers shouldn't make broad stroking national moves on this, and it's basically up to state governments to beat back their capital by regulating things like quality, tax levels, and even build rates to prevent gluts, stem out-of-state "investment", maintainable infrastructure. If the banks try to dive into "house" be assured that they mindlessly leave it up to government to assure upkeep of every other dependency.

Banks can't even upkeep the property they plan to buy, they are so dumb and myopic that they'll buy a place, turn off the sump pumps in the basement to "save money" and literally destroy 2% of the available housing in an area -- which is fine for them since they can write it off pricing everything else up a bit, not as fine for the people who already couldn't afford a home, and are more deeply priced-out.

Governments could make them liable for this, akin to how you are contractually obligated not to destroy a leased car, but most homeless folks make poor lobbyists.

>Homes are durable goods, hence an investment. Homes that are cared for can last a hundred years or more.

This is largely context dependent. For example, Japan's homes aren't built to last as long as many American ones. Additionally, even heavily depreciating assets like cars can last virtually indefinitely with proper maintenance. (E.g., Model T's aren't really worth much because there still are many around and they are relatively easily maintained)

Right, but there remains a need to have responsible parties between financiers that are exposed to toxic assets, like leverage, expiring options, margins, dark pools, EV ponzi schemes, and derivatives markets large enough to collapse housing loans up into the fed every 4 years. If the banks turn off the sump pump, the fed lights candles to get rid of the stink.

Sure, but durable goods aren't necessarily investment goods. Homes do depreciate in value- their quality declines and they become increasingly expensive to maintain, and they simply don't have the same amenities as newly-built homes without increasingly expensive remodeling.

What makes "homes" appreciate in value is almost never the building itself, it is the land.

If a small number of bored NIMBYs can stymie development, what can a giant firm like JP Morgan do?

A giant like JP Morgan does it either way. JP Morgan originates mortgages (via Chase Home Finance). It likes to do that in places where the price of homes does not go down. Put it differently, it likes to do that in places with strong NIMBYs. I suspect Citi and Bank of America and Wells Fargo have the same preferences. I'm not sure how these preferences manifest themselves, and I'm also sure they are not doing anything illegal. But they create some market pressure to hinder development.

> It’s essentially a Ponzi scheme

It isn't, at all. The increase in prices is tied to increase in GDP, interest rates and disposable income. Unless you think investing is a Ponzi scheme.

The problem is that this isn't true. Since 1965, home prices have increased 7.6x faster than income.[0] This obviously cannot continue indefinitely (that'd lead to everyone spending >100% of their income on housing), so at some point the price increase will have to stop.

[0]: https://www.realestatewitch.com/house-price-to-income-ratio-...

You’re not even wrong.

> Developers are the good guys here.

Doubt.

Property developers are one of the most despised groups in Ireland, despite our extreme housing shortage, and there are many very fucking good reasons for that.

Like what?

I don't know about Ireland, but in UK they are known for buying huge amount of land getting all the grants and permits for building say, 10k houses, then they build ~500 houses a year, because if they built more it would crash the price. So now there is no land to buy and build on by yourself, and developers build fewer houses than they theoretically could to keep the prices high. Not to mention absolutely abysmal quality of newbuilds at every price level, and the smallest(by area) size of newbuilds anywhere in Europe - the average new house in the UK is smaller than an average flat in most of EU. And of course there are only really 3 big companies which have completely strong armed the market so you either buy from them, or pay 4x the price from a "boutique" developer just so your walls aren't made out of cardboard.

Yeah this is the landbanking problem. The solution is something like a land value tax which penalizes this kind of speculation and development-throttling. In fact there was a great article about that I just posted: https://progressandpoverty.substack.com/p/land-and-the-liber...

20% of all Conservative donations 2010-2020 came from housebuilders and property developers

https://www.opendemocracy.net/en/dark-money-investigations/2...

All of this in Ireland - and much more beside.

Successive Ministers for Housing have dramatically under-built social housing, every year, for decades. This, while a "housing emergency" has been recognised for near as long.

These failures are used to justify things like the HAP scheme, which subsidize landlords directly. If this seems stupid - you're right. Many have pointed this out, but the politicians and landlords and developers responsible don't see any issue.

We sometimes subsidize developers to the tune of tens or hundreds of millions, just so we can rent the future property off of them, at above market rate, for decades. And we give it back afterward!

We allow developers to lobby the Government on policies that will make housing less affordable for young people.

Sometimes we just straight up give them €150,000 taxpayer cash per unit, to build "unprofitable" €450,000 units.

All this, while we have all time high homelessness rates, with hundreds of thousands more Irish adults living on friends couches.... While State homelessness organizations accuse charities who question this of "virtue signalling".

Even our constructions materials companies are staggeringly corrupt, eg, CRH (https://villagemagazine.ie/a-history-of-scandal/). They're widely known among Irish people to be criminal, and have been for a long time. See the mica blocks scandal for another example. Yet somehow they all keep getting lucrative contracts. No one is ever punished. And every time there's a big documentary planned about their various mafia type scams, it gets pulled. "Orders from up top".

>Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods.

I'm a little skeptical that homes being disposable is a good idea.

Who said anything about disposable? In fact, they could make attractive rental investments maintained and held over decades if not a century. See Vienna’s social or privately owned housing that is rented out.

Housing simply should not be seen as the primary personal investment vehicle for the average person.

By their own nature, they will never be disposable in the original sense of that word.

"Consumption" doesn't mean disposable, it means homes should be used to be used to fulfill needs and desires, and not used to increase wealth (as an investment good).

Easiest way to do that is a land value tax; the home itself is not what is appreciating in value anyways, the land is what is appreciating.

So instead of private megalandlords you want government gigalandlords.

Please, taxing something doesn't mean the government owns it. Does the government own someone's home because they have to pay property taxes to the city for paving the streets and running the garbage service?

They are collecting rent as taxes and if you don't pay the rent they kick you out. I'd say they own it.

The homeowner just owns the liabilities.

Do you think the government owns you too, since they take a portion of the proceeds of your work and will put you in jail if you don't pay it?

Nope

Good point. At the end of the day, men with guns will come and put you in a cage if you disobey. Drafts are pretty nightmarish too, if you think about it.

Developers purchase land where they get the best ROI, and as I’ve witnessed it, that means first and foremost very central apartment blocks aimed at yuppies and financially secure people over 40.

In order to get the attractive spots, they’ll throw you a very lucrative bid, which also raises the surrounding property values considerably (well, until the blocks have been finished, that is. Could take years in cities with strong NIMBYism).

To be honest, many of the newer and “cheaper” apartments in such blocks (still costs you $350k minimum) kind of suck. Small, narrow, etc.