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Comment by wyager | Hacker News Reader

> her landlord suddenly raised her rent by $500. That shouldn't be legal.

GP: "Government regulation is preventing the construction of more housing"

You: "So true. For example, we need more regulation that make housing a legally encumbered asset with uniquely constrained and inflexible financial properties"

What is your thought process here? Do you think this kind of thing will encourage the provision of more houses? Do you have a sense for how making housing an exceptionally financially risky asset will influence whether or not investors are interested in building more housing, and how they have to perform initial pricing to offset rent-fixing and regulatory risk?

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I think your argument is correct with the assumption that houses should be considered investment. I don't think they should, but realise that this statement is only articulated in principle rather than in practical and pragmatic terms. On the other hand, the practical and pragmatic treatment of houses as investment property has driven us to the precipice of one of the greatest potential societal crises at a broadly global scale. We have people literally slaving out to pay for a roof over their head. If the landlord's investment makes that ethically acceptable for them, I am afraid it's not for those who live this reality on the wrong side of the table. It always ends the same way, unavoidably. It will also impact the really productive parts of economy, when consumer base is shrinking because people just try to pay their rent, electricity and gas.

The amusingly sad thing is that they aren't even a great investment, all things considered, because over large enough areas and long enough times, they basically keep pace with inflation.

That has been obscured and hidden from the public consciousness, but it's there (and it basically has to be, as if it's not, eventually you get insanity where nobody can afford to live in anything - some say we're close to this but it cannot continue, just like population simply cannot literally increasing forever or eventually the entire mass of the Earth would be made of people.)

Too many landlords have been buying long and selling short, and losing money doing so but it's hidden by (sometimes) apparent appreciation - that train is rapidly decelerating and will be at the station soon, as the low interest rates have dried on up.

If building houses isn't profitable, then who would do it?

How profitable are roads?

People really do think there should be short-term bandaid solutions to these problems, and that somehow landlords will just absorb cost increases that they get hit with without passing them on somehow, or just exiting the market.

Ok, but without regulation, why should any investor be interested in building affordable housing, instead of just selling/renting for the exact same unaffordable prices we currently have?

More construction isn't the ebd goal, (except for developers and investors I guess), if anything, it's a means to an end. The end goal is affordable housing.

The logic here is that there are two different competing concerns—the use of housing as an investment (money in, money out) and the use of housing as a place to live. There’s a lot of legislation that shifts the balance one way or the other. Things like property tax caps and zoning regulations shift the balance towards house-as-investment, and things like rent increase caps shift it the other way.

If you don’t buy in to libertarian laissez-faire economics, which most people don’t, then this makes sense. (“Makes sense” is a much lower bar than “has the effect that we want it to have.”)

Exactly. I see houses primarily as a roof over your head, not as an investment. And I think the investment attitude has done a lot of harm to the housing market, leading to extortionate practices and artificial scarcity.

I wouldn't even complain if all houses halved in value, despite being a homeowner. That my home would be worth less is irrelevant, because I'm not selling it, and if I was, I'd have to buy a new house anyway. People who see houses as investment would hate it, of course.

Every physical good is a financial asset whether you like it or not. Ignoring this reality will not help achieve policy goals.

I agree that you are accurately describing the economically illiterate thought process, just not that it's correct.

Price controls are one of those interesting things where there's a phase transition from near-universal support to near-zero support at a certain knowledge level.

Treating everything as nothing more than a financial asset is way too reductive.

My point here is that housing is not only a financial asset, and should be treated as more than just a financial asset. Or if you want to take an economic approach here, you need to come up with a utility function that more accurately reflects what we care about—we think that two people who have housing is a better situation than one person who has two houses and one person who has none.

Thankfully we have a mechanism for working utility-theoretic optimization into economic calculations. The mechanism is called "prices". When you undermine this mechanism, you are not globally utility-maximising.

A lot of the problems would fix themselves if it was a lot harder for people to own a second home. Would make housing cheaper for one.

There's about 10 million "second homes" in the USA by some estimates, but that doesn't necessary say how they're actually used - some are vacation homes that are empty when not used (and are in locations that are effectively "worthless" except for vacationing) whereas others will be a technically owned second home but actually inhabited by a child or relative of the owner.

The mortgage interest lack-of-deduction for most (because of the increase in the standard deduction) also affects things. What we likely should be doing is making it easier to build second homes and "dump" them on the market even for a bit of a profit, so as to increase supply.

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