4 ms·

So to get philosophical for a minute. Is it better for society to get a better return from housing compared to other investments? My gut feeling is that equit

So to get philosophical for a minute. Is it better for society to get a better return from housing compared to other investments? My gut feeling is that equity should have the best return as it involves the most risk. Property should yield less as it's, well, safe as houses. I suppose you could divide property into 2 elements, capital appreciation (the safe, and as it turns out lowest yielding element) and rent (which seems to be the real money maker), but then stocks are made up of the same 2 elements... So all this appears to mean renters are paying 'too much'? As in landlords should be flooding the market with cheaper rentals, except they can't because of building regs and zoning, which then, for me begs the question, why should the land lords be capturing that excess return? Why not capture it for society's benefit?

sideshowb 8y ago
Not just landlords, any property owner ie owner occupiers as well. That's the idea behind land value tax. Alternatively get more permissive with zoning, in the right places, but careful not to grant a monopoly to any developer.
- benj111 8y ago
  A land value tax could just get passed straight along to the tenants though, right?
  - zzzzzzzza 8y ago
    https://www.reddit.com/r/AskEconomics/comments/4w6reh/can_a_land_value_tax_be_passed_on_to_tenants/ https://www.reddit.com/r/AskEconomics/comments/4w6reh/can_a_...
HillaryBriss 8y ago
> Is it better for society to get a better return from housing compared to other investments? IDK, but when Japan was "taking over the world" in the 70's and 80's they didn't have tax laws that subsidized housing mortgages the way the US has. Japan's incentives were centered around manufacturing companies and exports. Did it work out well for Japan? One can make the case. OTOH, Japan's debt to GDP is like 200% now. And manufacturing in China has overshadowed that in Japan. In the US we've added fifty million people and built a bunch of housing. Landlords did ok. But our trade deficit continues to rise. What's better?
- klipt 8y ago
  > And manufacturing in China has overshadowed that in Japan. Not surprising since China is many times bigger geographically and wrt population. It's like 8 Japans glued together.
- benj111 8y ago
  But OTOOH Japan doesn't really have a 2nd hand property market, they just start again with a new house, so you could argue that Japans economy is centred around manufacturing, new houses. https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...
rpz 8y ago
>My gut feeling is that equity should have the best return as it involves the most risk. 'Should' is an interesting word isn't it :). However the higher the risk, the higher the chances that you may not get the return you are looking for.
- benj111 8y ago
  Risk should be captured in the standard deviation though. My thinking for 'should' is that faced with 2 options 1 risk free the other with a 50% failure rate, you would rationally go for the risk free option if they both yielded the same income. Even if the yield on the risky option were double it still isn't rational to go for that investment, why spend the years fretting when you can go for the risk free option for the same outcome. So clearly a risk premium is required to entice people into those riskier investments.

sideshowb 8y ago

Not just landlords, any property owner ie owner occupiers as well. That's the idea behind land value tax. Alternatively get more permissive with zoning, in the right places, but careful not to grant a monopoly to any developer.

benj111 8y ago
A land value tax could just get passed straight along to the tenants though, right?
- zzzzzzzza 8y ago
  https://www.reddit.com/r/AskEconomics/comments/4w6reh/can_a_land_value_tax_be_passed_on_to_tenants/ https://www.reddit.com/r/AskEconomics/comments/4w6reh/can_a_...

HillaryBriss 8y ago

> Is it better for society to get a better return from housing compared to other investments? IDK, but when Japan was "taking over the world" in the 70's and 80's they didn't have tax laws that subsidized housing mortgages the way the US has. Japan's incentives were centered around manufacturing companies and exports. Did it work out well for Japan? One can make the case. OTOH, Japan's debt to GDP is like 200% now. And manufacturing in China has overshadowed that in Japan. In the US we've added fifty million people and built a bunch of housing. Landlords did ok. But our trade deficit continues to rise. What's better?

klipt 8y ago
> And manufacturing in China has overshadowed that in Japan. Not surprising since China is many times bigger geographically and wrt population. It's like 8 Japans glued together.
benj111 8y ago
But OTOOH Japan doesn't really have a 2nd hand property market, they just start again with a new house, so you could argue that Japans economy is centred around manufacturing, new houses. https://www.theguardian.com/cities/2017/nov/16/japan-reusable-housing-revolution https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...

rpz 8y ago

>My gut feeling is that equity should have the best return as it involves the most risk. 'Should' is an interesting word isn't it :). However the higher the risk, the higher the chances that you may not get the return you are looking for.

benj111 8y ago
Risk should be captured in the standard deviation though. My thinking for 'should' is that faced with 2 options 1 risk free the other with a 50% failure rate, you would rationally go for the risk free option if they both yielded the same income. Even if the yield on the risky option were double it still isn't rational to go for that investment, why spend the years fretting when you can go for the risk free option for the same outcome. So clearly a risk premium is required to entice people into those riskier investments.