How I won the housing market without trying
theguardian.com
theguardian.com
The net result is an enormous redistribution from productive young people to (mainly) older owners and inefficient land use, a growth-killing policy.
The solution is simple. Abolish all personal income taxes (or at least reduce their levels) and replace them with land value taxes (not property), something like 30% of value annually. Unproductive use of land would disappear. Retiring people with homes close to jobs would move out fast somewhere else, as short commute times have no value to them. Uneconomical building limits would disappear (more efficient use of land - multilevel housing - would have much smaller land tax per living surface area) which would reduce transport costs and time wasted. It's easy to imagine many more positive effects.
Sadly that's never going to happen.
edit: After some thought, never is too strong. If aging gets cured, something like that will be a certainty, because the alternative is the world in which - more numerous - generations after the invention don't own almost anything, which won't work for long.
Where it gets shouted down is from old people that have lived in their homes for 50 years and seen their property prices rise to make them millionaires on paper but with no real income. They claim its unfair to force someone from their home.
Having studied Alzheimer's disease, it's easier on the mind to live in one place for the majority of your life. Being forced to move later in life can be traumatic.
Once you start taxing capitol you'll end up with no more overpriced valuations, conservative banking will be back in vogue.
> A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else.
For one, he took the opportunity risk of locking his liquid capital into a piece of land, which only accumulates property taxes, as opposed to owning a bond or a stock that pays dividend or interest. When you calculate the IRR, land doesn't necessarily come out ahead of S&P 500 over longer periods of time.
For two, he took on the appreciation risk - the land is not guaranteed to go up in value all the time.
These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually.
Even if they were land taxes, they would be way too small for a meaningful difference. Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most, and presumably invest the gain in whatever productive thing they're doing.
>For one, he took the opportunity risk of locking his liquid capital into a piece of land
>For two, he took on the appreciation risk
There's nothing valuable in risk. Your argument works even better for buying a piece of a rock for a million dollars and expecting profits, as the opportunity risk and appreciation risk are way higher than buying a piece of land.
I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both.
> Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most
How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose?
> There's nothing valuable in risk.
He provided liquidity to the market when somebody was willing to sell that piece of land. If you're taxing someone for providing liquidity, the price of the underlying good will plummet, as that removes incentives for current buyers, and then you're back to square one - low tax revenues collected from land owners.
> Your argument works even better for buying a piece of a rock for a million dollars and expecting profits
People do invest in gold and silver.
Land tax is a tax on a value of unimproved land only [0]
>How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose?
Why would it change anything? The land prices would just fall so that the net result would be neutral for average farmer.
>He provided liquidity to the market when somebody was willing to sell that piece of land
Land tax increases liquidity drastically by making it much more expensive to hoard it.
>and then you're back to square one - low tax revenues collected from land owners.
It's not back to square one - it's a situation in which people with more productive use of land can get it much more cheaply. Think of a situation in which a prime residential city land costs one average annual wage.
>People do invest in gold and silver.
People do many weird things. https://images.angelpub.com/2014/17/24245/returns-on-stocks-...
If we don't alter this course we, I fear will end up at early 1900s distribution of ownership with a crippling economy because actual growth driven by labour will significantly decrease.
Henry George is credited with land rents taxation as a theory. He built on Ricardo's work to posit a complete theory of taxation based purely on land rents.
You have to ask yourself what changed in the UK mortgage market to create this increase in housing value. It comes down to a bank regulation change the government put in place in 1996. Banks were able to offer buy-to-let mortgages.
This has fundamentally distorted the housing market in the UK.
In London you also have another issue. Apparently 40% of new build apartments are bought and never lived in. They are used as an investment to hold money 'safely' primarily by foreign buyers.
[EDIT] Citation for "buy to leave" http://www.theguardian.com/business/2014/dec/04/property-inv... http://www.theguardian.com/commentisfree/2014/dec/08/islingt...
So you have a situation where the Banks leant like crazy inflating the housing market, the crash happened, the banks hardened their mortgage lending criteria, which forced most people into renting, enabling landlords to maximise returns and invest further in rental properties using buy to let mortgages that use rental income as part of the payment calculation.
It's one hell of a vicious circle.
From my point of view I have benefited, but I honestly cannot see my 11 year old daughter ever owning her own property.
I'm guessing it very much depends on the development with some stating sales being 85% to foreign investors.
http://www.londoncouncils.gov.uk/londonfacts/default.htm?cat...
It's buying a house before you've sold yours that's a problem, not this way around (think cashflow), especially if you don't mind putting your furniture in storage and renting for a few weeks in between.
I suspect that this is really a form of xenophobia, used, among other things, to sensationalise newspaper articles.
It's called "buy-to-leave" and no it's not xenophobia, it's a symptom of a housing bubble very much centred on London.
- The central London population is very transient. Many stay only for a few weeks, months or at most a year or two. Why bother registering?
- Many central Londoners, especially the young and newly arrived, move about quite a lot before they settle in one place for longer. They would not bother with registration.
- Many, probably the majority of central Londoners are foreign and don't bother with the electoral register because they can't vote in the general elections anyway, and may not know that the can vote for the major (or may not care).
- There's a lot of legally questionable subletting going on (think AirBnB), where the subletter and / or sublettee might not necessarily want to be on an official register.
- Some owners may simply fail to find a tenant, for example because they pitch rent too high.
As a piece of anecdotal evidence, I offer myself: I only got on the electoral register about 10 years after I moved to London.
Would they be? What's a realistic amount of rent to charge on a GBP 5,000,000 flat? How many people can afford that and are looking to rent?
(Also I think many appreciate having their London flat available for the few days a year they're in town)
If you want to park your money in property, the worst thing you could do is hand control of that money to a group of people with legal right to keep if for certain periods.
Property prices and rental income in London are extremely high. I cannot see how anyone but the extremely wealthy could afford letting London property stay empty as an investment. And there are not enough extremely wealthy around to account for the large number of empty properties that London is allegedly seeing.
There was an article posted on HN a few months back (which I can't locate right now) which explained this problem.
Having tenants requires work, adds cost, and might just not be worth your time.
You might just want a house for a weekend, and not want plebs messing your shit up.
And it probably has some degree of truth, You can stand outside 'new' buildings for a week and never see lights on in some windows.
I'd guess the price of these is around £350k - £1.5m (for a reasonable 1 - 3 bed flat in a new build), which is well within the reach of well off foreign middle class investors.
Incidentally, I just had lunch with an architect and a guy who runs a building company, both London-based. I asked them about this. They both agreed that no sane investor would leave flats bought as investments empty. Investment means basically having tenants. The agreed that there is a media-driven moral panic about this. The architect said he had one client who had a 12 bed-room house in central London that was empty for most of the year ... that customer was a member of Kuwait royal family.
I'm not saying such speculative investment doesn't exist, I just doubt it is as ubiquitous a phenomenon as claimed.
I think that's a bit harsh - my wife's parents bought their house under the Thatcher Right to Buy scheme and they were both hard working and financially prudent - they could have purchased a house but it wasn't what skilled working class people did in Glasgow so they didn't do it for cultural, not financial, reasons.
People used to joke that you could tell council houses where the owners had purchased because they had a new front door - and that is true - people look after property a lot more when it's there and whole neighborhoods have been improved that way.
What I do think was wrong with the Right to Buy Scheme was that it didn't spend the money raised on building new social housing.
Offering cut-price sales of social property to council tenants is an amazingly powerful tool for giving people ownership over their communities.
It gives people ownership of their houses, not their communities. It's a micro version of the general privatisation problem of selling public assets at a discount for the benefit of private interests; it's just a variant that everyone's allowed a crack at, like the royal mail shares.
I guess I'm just having trouble really feeling sorry for anyone who decides that living within a select few square miles is worth paying an obscene percentage of their income towards that pursuit. It's a housing market and prices will rise to meet demand until buyers finally split off to other nearby locales.
As to your last line; There's a reason that most people don't want to admit that 2008 was the housing bubble popping and instead insist that homes are "finally returning to their true value".
Investment in older buildings in tense areas, combined with wealthy buyers who neither live in nor rent their property, are pushing prices way beyond acceptable ranges. I don't know about London, but in Paris for instance, 20 to 30% of the flats in the center districts are empty.
When young professionals and less fortunate people are struggling to find housing and putting more than 40% of their income into the rent, I believe those 30% of empty flats are unacceptable and the owners should be taxed out of them.
There are plenty of legitimate vehicles for investment, but already-built real estate is definitely not one of them. Such investment is not productive for the economy as a whole and is not much more than generational ransoming.
It may have burst in the US, but certainly nowhere else
With the money needed to buy a crappy flat, you can buy a luxury house in a lot of places around the world. Prices are crazy.
In a city like Melbourne, where I live, there's a lot of development which could still be done to reach a reasonable medium-density of 3-4 story apartment buildings in the suburbs immediately circling the CBD. It is being done, but not to such an extent that housing prices will stop rising. I really wonder what this city will look like in another 20 years, as people are pushed further and further out but the work is still centralised.
Of course I may just be a dreamer and we'll continue to see housing prices skyrocket as we try to cram 10's of millions of people into small geographical areas- I'm certainly not dismissing that possibility.
National legislation sometimes slows this development, e.g. by insisting on having a paper with a signature and possibly even a stamp.
As usual, we tend to overestimate how quickly the changed happens in short-term (hence "the broken promise"), but we also underestimate the social impact this change has (we don't just replace paper with electronic forms, we change the way we work and it changes businesses profoundly.)
There have been studies showing a negative correlation between long commute times and happiness.
I don't have a family, so I am happy to pay for a relatively small apartment in the city centre. If I lived in the suburbs I would get a lot more house for my money, but then I would have to spend and extra couple of hours every day commuting.
So if you have a big income with a corresponding big tax burden, you can reduce you extra income to purchase a property and by using the expenses of that investment, reduce you net income and hence reduce you net tax burden.
So rather than paying the tax man, you end up paying the bank, which for you the rich investor, is not bad since the value there is a chance that second, third, forth property that you are now gearing will appreciate in value.
So while the tax receipts of the country go down, your paper wealth goes up, that is until the next GFC.
So the end result is the rich continue to reduce their tax burden, reducing the tax income of the country, hence passing the tax burden onto the middle and lower classes and in the process the rising house prices encourage those same rich to invest in yet another property as their paper wealth continues to climb.
Any one can see that is not good for the country, not good for the community and also not sustainable.
It's easy to create a bubble but at some time the buble has to burst.
The parent's response is (presumably): "remove negative gearing".
The original parent said "housing has become an investment commodity" and that it very true here in Oz.
Thanks to a climate of very low interest rates and "negative gearing" it means only those with high taxable income and a high tax burden can afford to invest in housing and in the process pushing housing prices ever higher.
But this is a bubble and it is unsustainable. If the world economy ever gets over the problems of the 2007 GFC and we finally see any form of real growth, interest rates will have to increase from their near zero position.
When that happens it will cause yet another crisis when that housing bubble is pricked.
By removing that unhealthy gearing tax, the Oz government could at least take some of the heat out of what is an already overheated property market.
Edit: Before someone points out Oz interest rates are actually not zero but rather high, unlike the majority of the developing world. Last Tuesday the overnight cash rate came down to it's lowest level since the 1950's.
And since the Oz economy is not running as well as it should, all predictions are we'll be seeing several more rate cuts in the future.
And with the current tax settings, that means we're in for a booming of house prices. We only have to go back to 2007 to see how over inflated house prices can destroy a world economy.
But this is a bubble and it is unsustainable.
So many people say this, presumably because "it must be true".
I just don't see why that is necessarily so - at least in the medium (20-30 years) term. Australian demand is propped up by Chinese flight-to-safety money, and housing demand (especially in Sydney and Melbourne) remains very high.
In the short term, yeah, it would be good to see lower growth in housing prices, or even a drop. I'm quite sympathetic to the idea of negative gearing reform.
A 5% drop in real terms is possible, or even likely at some point, and markets like Perth and Darwin will always be more volatile.
But that's very different to the 30-50% drops that "bubble bursting" implies.
Consider this link:
http://www.smh.com.au/business/property/median-asking-price-...
* Across Australian state and territory capitals, the median asking price for detached homes jumped $6,400 over the week to $755,100, the figures show.*
At a rate of 6% the interested alone on that loan is $45,000.00 a year. Move that rate to 7% and that jumps to close to $53,000.00 a year.
How can any family earning average or better than average wages every have enough income to cover those interest re-payments?
> Australian demand is propped up by Chinese flight-to-safety money, and housing demand (especially in Sydney and Melbourne) remains very high.
I don't disagree with this and I have no doubt the prices are being over inflated by a large numbers of oversees investors.
Hover, part of that problem is the Australian government is not enforcing it's own rules regarding home ownership. If a foreign money buys a home in Australia the owner needs to be a student or a permanent resident.
Currently there is massive level of overseas investment in Australian driving up the prices in the housing sector but most of that investment is actually illegal:
http://news.domain.com.au/domain/real-estate-news/parliament...
Australia also suffers from demography issues in that there are so few cities where you can live.
Unlike the US where there are numerous big cities options, in Australia there are less than a dozen such big city locations to choose from.
That factor alone is also putting upward pressure on housing in those areas.
The question is will interest rate every go up. That is not certain since the world is still suffering with the issues of the last GFC.
But in Australia if those interest rates do ever start to move upward, which would be an indication the country is finally showing something in the form of economic growth, those rising interest rates are going to cause problems with those massive $1 Million+ home owner debts.
Foreign Investment Review Board (who should be in charge of making sure foreign investors only buy new properties)
which is apparently a rule that's not being enforced. Lots of the western world is seeing housing bid upwards by capital flight from China.
Negative gearing, and the flight to safety by overseas investor do have significant impact though.
I suspect many people who think that governments should act to try to cut prices miss the fact how hugely unpopular this would be with the majority of the population.
Many (most?) people have the majority of their savings tied up in a family house and rely on rising prices as retirement savings. That's worked well for the past 60 years or so, and there is no real structural reason why it needs to stop (in Australia anyway).
My parents house has quadruple in price over the last 20 years, (while wages have gone up maybe 50%). Where does that money come from? The younger generation that have to buy it from them when they sell up of course.
What is? Banking deregulation? Or the features of the tax system like negative gearing?
They are very different things, and talking about them both as they are the same thing or have the same effect is just plain wrong.
I think the question is more about where does that demand come from, as it clearly increases faster than supply.
Where does that demand come from? Population growth, particularly immigration, as well as migration of people within nations.
Every time they do this, they just exacerbate the problem long term, which is quite simply, that the market needs a correction, and the longer they put it off, the more painful the correction is going to be (like it was early 1990's in the UK but worse).
I for one say let it burn.
Edit: I suspect "let it burn" reflects a certain frustration, you have my sympathy if you or your family/friends are finding the situation a barrier. Facts and figures can mask the very personal cost of being unable to achieve fundamental goals in life such putting down roots for one's family.
It seems like your example of Bristol is only becoming cheaper relative to London, not cheaper in any absolute sense.
[1] https://www.gov.uk/government/uploads/system/uploads/attachm...
Dev salaries are not high in Britain as a whole, outside of London.
If only it weren't so necessary to be physically present for the work.
50k is a mediocre salary, mind.
£50k is what a senior software developer outside London gets.
Personally, I think there's little point in living in the UK outside of London. There's far nicer places to live if you're willing to take a hit in salary. (And no, I'm not British.)
My argument was a PPP and quality-of-life one, really. Moving to Edinburgh has worked out quite nicely in that regard.
I spend most of my money on travel, motorcycles, food and fine wine (in particular, aged fortified wines in the 3-digit price range). Food is the only one particularly affected by PPP. A typical meal out for two costs £60 to £200, depending quality and wine bought. I'll spend more on a special occasion. But living outside London, I'd have a harder time finding great places to eat. My experience from touring the UK is that there are more hearty, good value options especially as you go north, but fine dining gets scarcer.
Travel is really important to me, touring by motorcycle specifically. But the south of England is very flat, and the fastest way to the continent is a train to France. Once you land in France, you have to cross it to get to wherever you're going. Alternately, one can take a ferry and suffer excruciating boredom only marginally worse than a motorway.
Almost anywhere in central Europe would be better for biking - southeast France, northern Italy, southern Germany, Austria - or northern Spain, if I didn't want to leave the country for some of the best roads in the world. More snow in winter, mind, but I could live with that. Certainly, the roads in the UK are among the worst in western Europe, outside of Belgium and possibly Ireland - though Ireland has had a lot of investment, they've built some very odd roads.
I grew up on the west coast of Ireland. My willingness to tolerate rainy days is no longer very high.
Sure London is more expensive, but if you don't mind commuting you can live further out of the city for not much more than the UK average - I'd imagine rents between Bristol and Reading are pretty similar, but Reading is easily commutable to London (Bristol isn't bad either, but I wouldn't like to do it every day).
There is also the question of technologies too, if you aren't happy working with legacy Java or .NET systems then you'll have a much harder time getting a job outside of London.
Also where exactly is Central Scotland (I'm a southerner)?
It's a good way south of the centre of a map of Scotland, but it's the area where people are concentrated.
There is a body, IIRC, promoting Scotland and awareness of its growing activity in tech as a place to come and live and work. Perhaps not "Mission Accomplished" quite yet :-)
> London prices are forcing people away from living in London. Businesses are moving away.
Wouldn't this force prices higher across the country?
As someone living in Bristol, I have to say that there's been a (noticeable) influx of people from London, and that this is what I believe has forced local prices up to the point where many can no longer afford to stay.
Friends of mine, who are local (I am an Essex import), have scattered as far as Darwen and Bournemouth.
Exactly. Moreover, the housing value is tied into things such as total wealth (which is why after the 2008 crash the wealth of middle-income and low-income Americans crashed, too much of it was tied up into housing equity), which then ties into economic outlook and consumer spending, which then ties into lending and all things finances.
Presidents and parliament members do get voted out when there's a severe contraction in consumer spending and generally depressive feelings about economic outlook.
The market needs correction, but it needs to be well-managed. That basically means long-term house price stagnation and investment in social housing to remove the incentives for buy-to-let landlords and multiple property owners.
No it is not. Properties - houses - can be built. When prices go up, the incentive to build more increases.
It could be argued that land ownership is a zero sum game, because you cannot manufacture land. But even that is not quite true, as can be seen in areas where more land is claimed from sea [0], effectively manufactured. Elsewhere, new land may emerge due to land rising after the recent Ice Age [1].
More importantly, land use - zoning - is something that can be changed, and it’s where economic incentives have an impact. For instance, in UK there's a lot of discussion about building on the green belt around London. And there are other factors here than just money, of course. It could be that money cannot buy a plot to build, but a racial or cultural identity can justify constructing what eventually become new properties. This does not always happen without conflict [2].
[0] https://news.ycombinator.com/item?id=8940235
That's not to say there shouldn't be more pressure put on property price appreciation, not to mention confiscatory levels of capital gains tax on property speculators that aren't tax-resident in the UK. But inducing a property price crash (as opposed to slowing property price inflation) would be a bad move for the economy as a whole, as well as electoral suicide in a country where the majority of the population have a mortgage or own their house outright.
For me this has to be looked at from the point of who it affects the most. A person that already has a house is much better suited to "take the hit" of property prices than someone that doesn't have one (in general terms). Obviously you have to manage it, but in the end you should strive to protect those that are more vulnerable.
People least likely to be positively affected by a house price crash include people that don't have houses, the majority of whom face considerably more difficulty and up-front expense in obtaining a mortgage in an environment of falling or unstable property prices.
Sure, there are some beneficiaries from a house price crash, just like some people make money shorting a failing company. That doesn't mean there isn't a deadweight loss, and if your conception of people who are "most vulnerable" to property prices prioritizes the welfare of those with no significant exposure to property but plenty of liquid funds and a long term investment horizon, it's a very strange conception.
Much of the world is still suffering from the after-effects of a major house price crash in the US several years later; I'm genuinely quite saddened that some people are so adamant the effects of that must have been "zero sum" they feel obliged to reach for the downvote button when HN commenters have the temerity to suggest otherwise.
Also, I would imagine people in this second group struggle more than the ones that already have a house or are using it as an investment. I would expect a government to enact policies that benefit them the most.
Secondly, I don't know about the UK, but here in Australia, home loans in the 80s had interest rates of almost 20%, as opposed to 5-6% today. It had calmed a little in the 90s though. The cost in dollar terms was much cheaper, sure, but it was still difficult to service at the time. Buying a house was still monumentally stressful. I know a few boomers who were unable to maintain their mortgages in that time.
Just because the sticker price was significantly smaller doesn't mean that it was all that much easier.
Edit: it's also worth mentioning that the median wage in the UK has increased about 50% from 1990 to 2010 (~16k to ~24k) and the average wage more than that. Housing is still depressingly expensive, but the numbers aren't quite so wildly different as shown.
That's a pretty big exaggeration. Rates peaked at 17% in 1989, but were below 15% for most of the 80's[1].
Here's another reference: http://www.abc.net.au/news/2007-08-08/the-reality-of-interes...
17% was as high as they got for mortgages.
It doesn't change the fact that mortgages, regardless of the percentage rate, were still not 'easy' back then. The smaller mortgages were not being paid off with today's rates and today's pay packets. They also had fewer flexibility features (things like redraw or offset accounts).
It's true that back then, the average monthly mortgage payment might have been similar, if not slightly more (adjusted for inflation). However, a lifetime fixed rate is unusual and they would have moved to lower rates when they came available.
Also back then, more people had a 'job for life', defined benefit pensions, and inflation-matching or beating pay rises without the risk of moving to a new company. One could be reasonably confident that if a mortgage was affordable now, it would continue to be so in the future. Nowadays, with stagnant wages, interest rates that can only go up, and the need to invest more into personal pension funds in order to mitigate the risk of retiring at a market low point.
For context. Assuming a 3-year course and no gap year, that would make her 31 when she bought.
Were she in the same position today, she'd need to have saved up at least £60K for a deposit (90% LTV) and have a salary of £135K (4x is a common salary multiplier). Given that that's more than a top decile _couple_ in London currently earns, that's not likely. The average salary today for her job at the time, is less than £24K, less than a fifth of what she would need.
Given the high cost of private rent, and the fact that social housing is only available for existing tenants and people who _really_ need it, saving up that much in only 9 years is difficult.
Meanwhile, house prices continue to rise faster than incomes, the longer you wait, hoping for a crash, the less likely it looks that you'll be able to afford a place even after the crash happens.
Even as a direct response to your point, moving out of London makes your money go much further. With that money, you could get a pretty nice house even as close to London as Reading, Maidenhead or even the outer London Boroughs. Not to mention what you could do with the money if you moved away from the south east entirely. At an estimated 61 years old, she's in a position to think about retiring soon, and considering she's not from London, she might well be considering moving away when she no longer needs to be here for work.
http://www.zoopla.co.uk/for-sale/property/london/dulwich-roa...
http://www.theguardian.com/money/2014/mar/25/uk-incomes-how-...
http://www.payscale.com/research/UK/Job=Communications_Offic...
My friend did this, sold his old place and bought a bigger nicer house, keeping his monthly mortgage payment roughly the same, which now is well below market rent.
£32,000 flat in 1995 -> £660,000 flat in 2015 is an increase of 2062%, or £628,000.
£100,000 house in 1995 increasing at the same rate of 2062% now costs £2,062,000, up by £1,962,000.
To move from the flat to the house you now need to find that additional £1,962,000.
Obviously not all properties increase at the same rate, and presumably the author of the article got a quite lucky with her 2062% increase. But even if the house only increased at half the rate of her flat it still costs £1,000,000 now, so she's £300,000 short.
Price increases only benefit you if the lower end moves up faster than the higher end (which is very rare) or if you're cashing out.
The gist is that instead of investing in stocks and shares, you put your money into property and a shared structure gives you some % of the property in question. The startup actually owns the property, and there is some legal allocation of your portion, and they offer the means to exit your share of a property without the property itself needing to be sold... your share just gets sold to the next investor.
As a startup I can see this working, as an investor I could see this working, as a resident in London I'm frankly appalled.
How's liquidity provided when there's no "next investor"?
I'd particularly be worried as a young person in the States now, a hefty mortgage on top of some of the student loans I've seen look like it'd spell an entire lifetime of loan repayments.
Of course they did. When they took out their mortgage, none of that 'money' existed. They had to participate in the creation of wealth in order to pay back mortgage + interest.
I've finally paid-off my mortgage. If someone has a more 'productive' use for my land and building, they are welcome to make me a financial offer.