7 ms·

The problem has been popularly summarized as "housing cannot be both affordable and a good investment." Of course that might be an oversimplification. Housing

by api 9y ago

The problem has been popularly summarized as "housing cannot be both affordable and a good investment." Of course that might be an oversimplification. Housing has been an investment class as long as it's existed and yet there hasn't been an affordability crisis like this since at least before WWII. What's different now?

JBReefer 9y ago
Dramatic increases in lifespan have produced a home owning class that would normally have died years ago, locking up a large chunk of the housing stock. Also NIMBYs.
- s0rce 9y ago
  It surprised me when I moved to the US from Canada how many elderly planned to stay in their homes. In Canada it felt like many people downsized to smaller condos, at least in the city.
  - rpazyaquian 9y ago
    To be fair, moving is a pain, you'd be giving up an investment you've held for decades, and you may have settled down into an area and not want to move around. Plus, maybe there just aren't many other options where you live. I'm not elderly, but that's a few reasons why they wouldn't downsize.
  - JBReefer 9y ago
    That's started to happen again in the US, but you have to remember that many US cities were fairly dangerous and neglected until about 20 years ago.
    - surveilmebro 9y ago
      Another factor that is present in some places (at least here in Seattle) is that certain regulations discourage condo construction relative to building rental units. Essentially, there is a stricter inspection process for any units that are to be sold. The law was well-intentioned, but has led to crazy things like 10-20k luxury apartment units being built per year with none of them available for purchase.
  - klipt 9y ago
    In California prop 13 freezes property tax assessments at time of purchase, so many elderly people are paying less property tax on their house than they would on a newly bought condo.
    - jandrese 9y ago
      Prop 13 will go down as one of the biggest blunders in legislative history IMHO. I get the complaint that people were being taxed out of their homes and that's not good, but in the end it just shifts the tax burden from the old to the young.
      - pascalxus 9y ago
        And it's extremely Regressive. Out of 2 people who bought the same house, the guy who bought it 30 years ago, made 2 million dollars, but is taxed 10 times less!
        lostapathy 9y ago
        I've always wondered why this can't be subject to a constitutional challenge under equal protection. If the main reason somebody pays less taxes is that they bought the house before you were born, that feels like age discrimination.
        wbl 9y ago
        They tried. It didn't work.
      - lostapathy 9y ago
        Total agreement here. Prop 13 is outright generational theft from younger people by older generations.
        dragonwriter 9y ago
        > Prop 13 is outright generational theft from younger people by older generations. It's actually theft by corporate (or family chain) long-term property owners from everybody else; it doesn't favor individuals of particular ages (especially since the parent-child residence exception was adopted.)
deleted 9y ago
[deleted]
jdavis703 9y ago
NIMBYs are part of the problem, but there are also well-meaning (if poorly executed) safety and zoning regulations that drive up the cost. Rules like parking minimums, disability accommodations (i.e elevators) and minimum square footage requirements all contribute to increasing pricing. We have to decide as a society whether housing should be considered a luxury, and those who can't afford things like elevators and parking spots should be forced to live in a tent on the street or not.
- oconnore 9y ago
  I'm pretty sure that parking minimums, zoning, and minimum ft^2 are just thinly veiled NIMBY tactics, not a separate thing.
  - jandrese 9y ago
    Most of those are well intentioned laws to fix actual problems, but the lawmakers didn't take into consideration that not all developments would have those problems. The parking thing is a good example. It basically just says you need to have a space for most people in the building to park so they don't fill up the street parking for the entire block all of the time. A very valuable rule for suburban development where most units will have at least one vehicle. Not so necessary for downtown units where most of the apartments won't own a vehicle. Or there are just cases where the developer is complaining about having to build parking, but if they had built the building as they wanted the parking would have been a total nightmare, not only for residents but also for everybody else in the neighborhood. In other words they're being forced to consider the actual cost of their actions instead of pushing them off on the community and pocketing the profits like in the good old days.
    - sbov 9y ago
      If you could designate a building "car free", and have all local street parking be permit parking, AND don't hand out permits to people living in "car free" buildings, it seems like it would fix the problem. But I don't know how practical it is to do this.
frgtpsswrdlame 9y ago
Maybe its a soft-cap on commute times? People were fine driving 20 minutes instead of 10, 30 instead of 20 and so on if it meant they got to live in nice suburbs. But now staring down the barrel of an hour commute or more people aren't willing to continue moving further and further out. Purely speculation of course.
- jandrese 9y ago
  Doesn't that just further inflate the prices of homes in reasonable commute distance?
tcbawo 9y ago
We have external money moving into US property. I wonder how much the Pacific Northwest's recent surge is due to Chinese investment moving on from Vancouver.
sokoloff 9y ago
Housing that you live in (aka "consume") has not been a particularly good investment, IMO. What confuses many people into thinking that it is is that you often end up holding it for a long period of time, paying down the mortgage and when you go to sell, you have a large gain, where you started with a very small downpayment. For most people, that gain is also tax-free, so it seems like a magic windfall. The problem is that over that long a period of time, inflation may have halved the purchasing power, meaning your gain is a paper one, you spent a lot of years fixing and maintaining the house, paying taxes and insurance, working on the yard, maybe did some remodeling, etc. If you'd instead invested in the stock market any surplus over renting, you often would have come out ahead. Most people would find a way for that surplus to turn into lattes, vacations, new cars, and large TVs rather than into shares of VTSAX, so for them, homeownership is a good idea, not because it's a better investment than equities, but because it's a better savings vehicle than nothing. I'm a homeowner and very happy about that fact for our family (for lifestyle reasons), but even in a steeply rising market (Cambridge, MA), my other investments have performed much, much better (even including the 2007/2008 crisis).
- rpazyaquian 9y ago
  What's your investment strategy? I recently started a Roth IRA and started maxing it out each year, but I don't know what else to do with my savings (that are extra over my ~6mo salary buffer + emergency fund, I mean). Dumping it all into something like VTSAX is something I've thought about for a while, but I'm not sure how well it works for long-term investment/"making my money work for me".
  - sokoloff 9y ago
    This is my go-to post on advice for US taxpayers: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 https://forum.mrmoneymustache.com/investor-alley/investment-... (I didn't write it, but I generally agree with it and I like that it's very concise, fairly approachable, and you can readily act on the advice.)
  - avn2109 9y ago
    Read https://www.amazon.com/dp/B002QX44IS https://www.amazon.com/dp/B002QX44IS The sibling comment's Mr. MM recommendation is better than nothing but not as good as a real book IMHO.
coliveira 9y ago
The difference now is that we have seen a big uptick on inequality in American. People that are well off not only drive up housing prices, they also use their political clout to avoid the construction of affordable housing in order to maintain the value of their homes. It is a double effect that makes a big difference. Also, Americans got used to the idea that their personal home is wealth, which is a misleading and dangerous idea.
deleted 9y ago
[deleted]
maxxxxx 9y ago
Historically hosuing has not been an investment where people could expect a BIG payout after ten years. It was a good, conservative investment but not a money maker as it is now.
bradleyjg 9y ago
> What's different now? Cash compensation for most percentiles has stagnated since the 80s. There's a lot of mooted reasons for that -- increasing fringe benefit costs, demographic changes, Cowen's technological plateau, decline of labor unions, etc., etc., etc. -- but the upshot is that we have a ratio where the numerator has continued its growth pattern but the denominator has not. Growth covers a multitude of sins.
deleted 9y ago
[deleted]

by api 9y ago

JBReefer 9y ago

Dramatic increases in lifespan have produced a home owning class that would normally have died years ago, locking up a large chunk of the housing stock. Also NIMBYs.

s0rce 9y ago
It surprised me when I moved to the US from Canada how many elderly planned to stay in their homes. In Canada it felt like many people downsized to smaller condos, at least in the city.
- rpazyaquian 9y ago
  To be fair, moving is a pain, you'd be giving up an investment you've held for decades, and you may have settled down into an area and not want to move around. Plus, maybe there just aren't many other options where you live. I'm not elderly, but that's a few reasons why they wouldn't downsize.
- JBReefer 9y ago
  That's started to happen again in the US, but you have to remember that many US cities were fairly dangerous and neglected until about 20 years ago.
  - surveilmebro 9y ago
    Another factor that is present in some places (at least here in Seattle) is that certain regulations discourage condo construction relative to building rental units. Essentially, there is a stricter inspection process for any units that are to be sold. The law was well-intentioned, but has led to crazy things like 10-20k luxury apartment units being built per year with none of them available for purchase.
- klipt 9y ago
  In California prop 13 freezes property tax assessments at time of purchase, so many elderly people are paying less property tax on their house than they would on a newly bought condo.
  - jandrese 9y ago
    Prop 13 will go down as one of the biggest blunders in legislative history IMHO. I get the complaint that people were being taxed out of their homes and that's not good, but in the end it just shifts the tax burden from the old to the young.
    - pascalxus 9y ago
      And it's extremely Regressive. Out of 2 people who bought the same house, the guy who bought it 30 years ago, made 2 million dollars, but is taxed 10 times less!
      - lostapathy 9y ago
        I've always wondered why this can't be subject to a constitutional challenge under equal protection. If the main reason somebody pays less taxes is that they bought the house before you were born, that feels like age discrimination.
        wbl 9y ago
        They tried. It didn't work.
    - lostapathy 9y ago
      Total agreement here. Prop 13 is outright generational theft from younger people by older generations.
      - dragonwriter 9y ago
        > Prop 13 is outright generational theft from younger people by older generations. It's actually theft by corporate (or family chain) long-term property owners from everybody else; it doesn't favor individuals of particular ages (especially since the parent-child residence exception was adopted.)

deleted 9y ago

[deleted]

jdavis703 9y ago

NIMBYs are part of the problem, but there are also well-meaning (if poorly executed) safety and zoning regulations that drive up the cost. Rules like parking minimums, disability accommodations (i.e elevators) and minimum square footage requirements all contribute to increasing pricing. We have to decide as a society whether housing should be considered a luxury, and those who can't afford things like elevators and parking spots should be forced to live in a tent on the street or not.

oconnore 9y ago
I'm pretty sure that parking minimums, zoning, and minimum ft^2 are just thinly veiled NIMBY tactics, not a separate thing.
- jandrese 9y ago
  Most of those are well intentioned laws to fix actual problems, but the lawmakers didn't take into consideration that not all developments would have those problems. The parking thing is a good example. It basically just says you need to have a space for most people in the building to park so they don't fill up the street parking for the entire block all of the time. A very valuable rule for suburban development where most units will have at least one vehicle. Not so necessary for downtown units where most of the apartments won't own a vehicle. Or there are just cases where the developer is complaining about having to build parking, but if they had built the building as they wanted the parking would have been a total nightmare, not only for residents but also for everybody else in the neighborhood. In other words they're being forced to consider the actual cost of their actions instead of pushing them off on the community and pocketing the profits like in the good old days.
  - sbov 9y ago
    If you could designate a building "car free", and have all local street parking be permit parking, AND don't hand out permits to people living in "car free" buildings, it seems like it would fix the problem. But I don't know how practical it is to do this.

frgtpsswrdlame 9y ago

Maybe its a soft-cap on commute times? People were fine driving 20 minutes instead of 10, 30 instead of 20 and so on if it meant they got to live in nice suburbs. But now staring down the barrel of an hour commute or more people aren't willing to continue moving further and further out. Purely speculation of course.

jandrese 9y ago
Doesn't that just further inflate the prices of homes in reasonable commute distance?

tcbawo 9y ago

We have external money moving into US property. I wonder how much the Pacific Northwest's recent surge is due to Chinese investment moving on from Vancouver.

sokoloff 9y ago

Housing that you live in (aka "consume") has not been a particularly good investment, IMO. What confuses many people into thinking that it is is that you often end up holding it for a long period of time, paying down the mortgage and when you go to sell, you have a large gain, where you started with a very small downpayment. For most people, that gain is also tax-free, so it seems like a magic windfall. The problem is that over that long a period of time, inflation may have halved the purchasing power, meaning your gain is a paper one, you spent a lot of years fixing and maintaining the house, paying taxes and insurance, working on the yard, maybe did some remodeling, etc. If you'd instead invested in the stock market any surplus over renting, you often would have come out ahead. Most people would find a way for that surplus to turn into lattes, vacations, new cars, and large TVs rather than into shares of VTSAX, so for them, homeownership is a good idea, not because it's a better investment than equities, but because it's a better savings vehicle than nothing. I'm a homeowner and very happy about that fact for our family (for lifestyle reasons), but even in a steeply rising market (Cambridge, MA), my other investments have performed much, much better (even including the 2007/2008 crisis).

rpazyaquian 9y ago
What's your investment strategy? I recently started a Roth IRA and started maxing it out each year, but I don't know what else to do with my savings (that are extra over my ~6mo salary buffer + emergency fund, I mean). Dumping it all into something like VTSAX is something I've thought about for a while, but I'm not sure how well it works for long-term investment/"making my money work for me".
- sokoloff 9y ago
  This is my go-to post on advice for US taxpayers: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153 https://forum.mrmoneymustache.com/investor-alley/investment-... (I didn't write it, but I generally agree with it and I like that it's very concise, fairly approachable, and you can readily act on the advice.)
- avn2109 9y ago
  Read https://www.amazon.com/dp/B002QX44IS https://www.amazon.com/dp/B002QX44IS The sibling comment's Mr. MM recommendation is better than nothing but not as good as a real book IMHO.

coliveira 9y ago

The difference now is that we have seen a big uptick on inequality in American. People that are well off not only drive up housing prices, they also use their political clout to avoid the construction of affordable housing in order to maintain the value of their homes. It is a double effect that makes a big difference. Also, Americans got used to the idea that their personal home is wealth, which is a misleading and dangerous idea.

deleted 9y ago

[deleted]

maxxxxx 9y ago

Historically hosuing has not been an investment where people could expect a BIG payout after ten years. It was a good, conservative investment but not a money maker as it is now.

bradleyjg 9y ago

> What's different now? Cash compensation for most percentiles has stagnated since the 80s. There's a lot of mooted reasons for that -- increasing fringe benefit costs, demographic changes, Cowen's technological plateau, decline of labor unions, etc., etc., etc. -- but the upshot is that we have a ratio where the numerator has continued its growth pattern but the denominator has not. Growth covers a multitude of sins.

deleted 9y ago

[deleted]