6 ms·

Another way to put it would be that roads, sewers, and mortgages aren't heavily subsidized in other places.

by ch4s3 9y ago

taway_1212 9y ago
Also, it costs more to build and maintain a house (compared to a flat), and most of the other countries, even the developed ones, aren't as affluent as the US.
- ch4s3 9y ago
  That's true, but you still find higher rates of urban living in similarly rich countries with lower subsidies on sprawl.
- fuzzybeard 9y ago
  But after 15 years my house is paid off. With renting, you're paying for the rest of your life. After my mortgage I only pay taxes and upkeep which is a fraction as much.
  - gozur88 9y ago
    Sure, but you could buy something that isn't a detached, single family house. When I moved from my apartment I bought a house (no mortgage). When I add up extra utilities costs, taxes, insurance, and maintenance it comes up to about 75% of what I was paying for rent.
  - WalterBright 9y ago
    If your house was converted to cash, and that cash invested at, say, 7%, that is what the "paid off" house is costing you.
  - taway_1212 9y ago
    It's not a matter of renting vs buying. In many other countries, just paying off the mortgage for a flat will take 15-30 years.
deltawave 9y ago
StrongTowns has a great article on this, "The Growth Ponzi Scheme," describing the effect that debt-fuelled, suburban city growth can have on municipal finances: https://www.strongtowns.org/the-growth-ponzi-scheme/ https://www.strongtowns.org/the-growth-ponzi-scheme/
- ch4s3 9y ago
  I have in fact read that article :). It's quite a good overview.
- turc1656 9y ago
  I strongly disagree with the core claim that the reason is "unproductive growth". That's not the reason. The reason is municipal debt and gross mismanagement of the townships at every level. The municipalities are taking on debt by the truckload because they have failed to 1) manage their resources and personnel properly and 2) tax accordingly to what they need to actually maintain all services, which is why they take on the debt. If they instead were unable to take on the debt they would be forced to either raise taxes, cut services, or some combination thereof. The past ~40 years have seen an ever decreasing interest rate environment, which allows municipalities to borrow money by issuing bonds, pay only the interest, then when the principal comes due, they roll it into a new bond that borrows even more. That new bond pays the old one off and then they have some more borrowed money to work with. And because interest rates have gone down more in the years since the previous bond issuance, they can pay the same interest. Basically, they just keep rolling debt over so that the principal is never paid down. Example - in 2000, bond rates were around 6%. In 2010 they were around 4%. In 2000, if a municipality took out $100M to build schools or whatever, they need to pay $6M a year in interest. Ten years later it comes due. Uh oh, they now need $106M this year but only budgeted for 6 of it. Our bureaucrats spend every penny of tax revenue over the last decade and never made allotments of $10M a year to pay back this loan. So what do they do? Thankfully the rate is 4%, so they can borrow a whopping $150M and still pay the same interest! So that's exactly what they do. Now they get to pay the same $6M every year and also have an additional $50M to spend on "growth" and "sustainability". This has happened across the board in nearly every municipality (city, suburb, etc.) across the nation. This is why the Fed hasn't raised rates. It's the same reason why Japan is in the situation they are in...for 30+ years.
gozur88 9y ago
Roads, sewers, and mortgages aren't subsidized in my suburb. We pay for all of it.
- ocb 9y ago
  If you live in the US that can't be true. The Interstate Highway System, state highways, etc. are government funded infrastructure that isn't funded locally. The mortgage market is also distorted/subsidized nationwide by the federal government. I'm not sure about sewers.
  - gozur88 9y ago
    You can only count the highway system as a subsidy if you pretend a highway between, say, San Francisco and Los Angeles is there to benefit the people of the Central Valley. And it's not. Certainly the mortgage market is distorted by the federal government, but I have yet to see any evidence of subsidy for suburban borrowers.
    - ufo 9y ago
      The home mortgage interest deduction is effectively a subsidy for suburban borrowers.
      - gozur88 9y ago
        Why would you think that? Are people who buy million dollar shacks in SF forgoing their deduction? It's hard to imagine.
        ch4s3 9y ago
        It's a subsidy for all mortgages. More people would rent if not for this subsidy. Also any roady that connect your suburb to anywhere are heavily subsidized, to the tune of greater than 60%. If your suburb build its sewers with bonds, they too end up receiving various forms of subsidy. It would be truly unique in the whole of the US if your community's property taxes covered the full cost of local services and weren't partially covered from the state's general fund.

Another way to put it would be that roads, sewers, and mortgages aren't heavily subsidized in other places.

by ch4s3 9y ago

Another way to put it would be that roads, sewers, and mortgages aren't heavily subsidized in other places.

Also, it costs more to build and maintain a house (compared to a flat), and most of the other countries, even the developed ones, aren't as affluent as the US.

ch4s3 9y ago
That's true, but you still find higher rates of urban living in similarly rich countries with lower subsidies on sprawl.
fuzzybeard 9y ago
But after 15 years my house is paid off. With renting, you're paying for the rest of your life. After my mortgage I only pay taxes and upkeep which is a fraction as much.
- gozur88 9y ago
  Sure, but you could buy something that isn't a detached, single family house. When I moved from my apartment I bought a house (no mortgage). When I add up extra utilities costs, taxes, insurance, and maintenance it comes up to about 75% of what I was paying for rent.
- WalterBright 9y ago
  If your house was converted to cash, and that cash invested at, say, 7%, that is what the "paid off" house is costing you.
- taway_1212 9y ago
  It's not a matter of renting vs buying. In many other countries, just paying off the mortgage for a flat will take 15-30 years.

deltawave 9y ago

StrongTowns has a great article on this, "The Growth Ponzi Scheme," describing the effect that debt-fuelled, suburban city growth can have on municipal finances: https://www.strongtowns.org/the-growth-ponzi-scheme/ https://www.strongtowns.org/the-growth-ponzi-scheme/

ch4s3 9y ago
I have in fact read that article :). It's quite a good overview.
turc1656 9y ago
I strongly disagree with the core claim that the reason is "unproductive growth". That's not the reason. The reason is municipal debt and gross mismanagement of the townships at every level. The municipalities are taking on debt by the truckload because they have failed to 1) manage their resources and personnel properly and 2) tax accordingly to what they need to actually maintain all services, which is why they take on the debt. If they instead were unable to take on the debt they would be forced to either raise taxes, cut services, or some combination thereof. The past ~40 years have seen an ever decreasing interest rate environment, which allows municipalities to borrow money by issuing bonds, pay only the interest, then when the principal comes due, they roll it into a new bond that borrows even more. That new bond pays the old one off and then they have some more borrowed money to work with. And because interest rates have gone down more in the years since the previous bond issuance, they can pay the same interest. Basically, they just keep rolling debt over so that the principal is never paid down. Example - in 2000, bond rates were around 6%. In 2010 they were around 4%. In 2000, if a municipality took out $100M to build schools or whatever, they need to pay $6M a year in interest. Ten years later it comes due. Uh oh, they now need $106M this year but only budgeted for 6 of it. Our bureaucrats spend every penny of tax revenue over the last decade and never made allotments of $10M a year to pay back this loan. So what do they do? Thankfully the rate is 4%, so they can borrow a whopping $150M and still pay the same interest! So that's exactly what they do. Now they get to pay the same $6M every year and also have an additional $50M to spend on "growth" and "sustainability". This has happened across the board in nearly every municipality (city, suburb, etc.) across the nation. This is why the Fed hasn't raised rates. It's the same reason why Japan is in the situation they are in...for 30+ years.

gozur88 9y ago

Roads, sewers, and mortgages aren't subsidized in my suburb. We pay for all of it.

ocb 9y ago
If you live in the US that can't be true. The Interstate Highway System, state highways, etc. are government funded infrastructure that isn't funded locally. The mortgage market is also distorted/subsidized nationwide by the federal government. I'm not sure about sewers.
- gozur88 9y ago
  You can only count the highway system as a subsidy if you pretend a highway between, say, San Francisco and Los Angeles is there to benefit the people of the Central Valley. And it's not. Certainly the mortgage market is distorted by the federal government, but I have yet to see any evidence of subsidy for suburban borrowers.
  - ufo 9y ago
    The home mortgage interest deduction is effectively a subsidy for suburban borrowers.
    - gozur88 9y ago
      Why would you think that? Are people who buy million dollar shacks in SF forgoing their deduction? It's hard to imagine.
      - ch4s3 9y ago
        It's a subsidy for all mortgages. More people would rent if not for this subsidy. Also any roady that connect your suburb to anywhere are heavily subsidized, to the tune of greater than 60%. If your suburb build its sewers with bonds, they too end up receiving various forms of subsidy. It would be truly unique in the whole of the US if your community's property taxes covered the full cost of local services and weren't partially covered from the state's general fund.