3 ms·

What is it that you don't understand about it? The two are not mutually exclusive. Economics works at the margin: it's not whether friction exists or whether it

What is it that you don't understand about it? The two are not mutually exclusive. Economics works at the margin: it's not whether friction exists or whether it does not, but the level of friction. Some frictions apply in both cases, but the one mentioned only applies to ownership. Thus, two people at the margin in identical positions except that one is a homeowner and one is a renter may make different decisions — the renter is more free to change jobs/locale.

claydavisss 8y ago
What about the "frictions" renters face based on a tax system that inherently rewards home ownership? How about the "friction" renters face by not turning their housing expenditures into a future retirement nest egg?
- rory096 8y ago
  >What about the "frictions" renters face based on a tax system that inherently rewards home ownership? I mentioned that. It's constant across the country though, so I don't think it creates a new cost to move from one place to another (the "friction"). Rather it's an ongoing subsidy on home ownership that incentivizes people on the edge to lean towards buying. More people buy because of the subsidy, who then have a higher one-time cost each time they move. >How about the "friction" renters face by not turning their housing expenditures into a future retirement nest egg? It's not clear to me that this is true, leaving aside places where rapid housing price appreciation due to supply restrictions dominate the cost of housing. Homeowners bear additional cost and risk - maintenance, insurance, interest on mortgage capital - that are part of the cost of rent. How much wealth accumulation results from acquiring home equity when you exclude tax and capital gains from demand shocks and include the transaction costs of buying and selling, potentially frequently?

3 ms·

What is it that you don't understand about it? The two are not mutually exclusive. Economics works at the margin: it's not whether friction exists or whether it

by rory096 8y ago

claydavisss 8y ago
What about the "frictions" renters face based on a tax system that inherently rewards home ownership? How about the "friction" renters face by not turning their housing expenditures into a future retirement nest egg?
- rory096 8y ago
  >What about the "frictions" renters face based on a tax system that inherently rewards home ownership? I mentioned that. It's constant across the country though, so I don't think it creates a new cost to move from one place to another (the "friction"). Rather it's an ongoing subsidy on home ownership that incentivizes people on the edge to lean towards buying. More people buy because of the subsidy, who then have a higher one-time cost each time they move. >How about the "friction" renters face by not turning their housing expenditures into a future retirement nest egg? It's not clear to me that this is true, leaving aside places where rapid housing price appreciation due to supply restrictions dominate the cost of housing. Homeowners bear additional cost and risk - maintenance, insurance, interest on mortgage capital - that are part of the cost of rent. How much wealth accumulation results from acquiring home equity when you exclude tax and capital gains from demand shocks and include the transaction costs of buying and selling, potentially frequently?