9 ms·

"The problem is not this or that or some other thing!! The problem is there is not enough housing!" This is what people/companies say who are deeply invested

"The problem is not this or that or some other thing!! The problem is there is not enough housing!" This is what people/companies say who are deeply invested in making scads of money from sky high housing prices. It's a ruse, a distraction, a canned answer designed to ensure the finger is not put on the real problem. The real problem is that housing cannot be both affordable and a financial instrument.

cle 7y ago
> The real problem is that housing cannot be both affordable and a financial instrument. Can you elaborate on this? I don't know much about financial instruments and would like to know why these two are mutually exclusive.
- sokoloff 7y ago
  I'd say housing can't be both affordable and a good investment. By that, I mean that good investments (by definition) go up in value by more (often a multiple of) than inflation. If houses start out affordable and consistently outpace inflation, they will eventually, often quite quickly, cease to be affordable.
- creato 7y ago
  I'm no economist but it seems blindingly obvious. To be an interesting financial investment, a house must appreciate faster than other means of savings. If that happens, houses will inevitably be unaffordable, because they rise in value faster than people can save to buy them.
  - Macross8299 7y ago
    That assumes an "interesting" financial investment has to appreciate faster than all other investments that exist and that nobody would ever trade returns for less risk. People buy bonds, so I don't think that maximizing ROI is always necessarily the criteria for a desirable investment.
    - creato 7y ago
      So you think people that want to buy a house just need to take on more riskier investments before buying a house? Get lucky, buy a house, get unlucky, ...?
  - cle 7y ago
    Thanks! Meta-observation: to me, nothing in economics or finance is "blindingly obvious". Many economic phenomena seem obvious but in reality are way more complex than could be represented by any model that I could understand. Your explanation makes sense at some level, but I don't have much confidence in it, because all I can do is wonder what other mechanisms interact with the mechanism you've described, and what the net impact is.
  - viraptor 7y ago
    I'm not sure why you're looking only at the house price change. To be a good investment, the (price change + rent - mortgage repayment - maintenance) value has to be higher than other means of saving. Thus may be true even if the house itself losses some value.
  - sigstoat 7y ago
    and yet, reasonable people who know what they're doing buy bonds with negative interest rates. the financial world is more complicated than you realize.
  - benchaney 7y ago
    You have your causality hopelessly backwards. Housing did not become a interesting investment because people chose to invest in it. People chose to invest in it because it was an interesting investment.
  - sisu2019 7y ago
    A stronger case would be "it must be more profitable than the alternatives with the same risk" but you skipped a step and went right to "appreciate faster" which is not the only way it could be profitable. In fact "flipping houses" to make a living at this scale is an artifact of your current time and place which is the US in a massive inflationary bubble [1] We libertarians have been beating the inflation drum for decades now and been largely ignored and / or laughed at. Maybe it's time to revisit how adding trillions and trillions to the economy every year could maybe possibly lead to higher prices in "inflation hedge" type goods.[2] [1] https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FNetworthGDPIndex.jpg https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs... [2] https://mises.org/library/housing-too-good-be-true https://mises.org/library/housing-too-good-be-true
- delecti 7y ago
  A good financial instrument is a good investment, and likely to have the price rise faster than inflation with time. Affordable housing would be likely to have the price rise no faster than inflation, or it will eventually be out of the price range of people whose incomes are only rising with inflation.
- akgoel 7y ago
  In Houston, the property tax rate is 3%, and inflation is roughly 2%,so for property to be a net gain, it has to increase in value at over 5%, which is faster than the overall economy, and hence gets less affordable over time
  - sokoloff 7y ago
    You would be paying (indirectly) the property tax even to live in a rental, so I don't think that you should count that as a home ownership cost (any more than you'd count cable, gas, or electric bills as ownership costs) if you are going to live in the property.
  - im3w1l 7y ago
    Another solution to that equation is that houses increase in value at 2% a year (keep pace with inflation), and yield 3+x % in rent per year, where x is enough to cover administration and provide a modest return.
- whamlastxmas 7y ago
  I assume the premise is that if we approach a home as something that has an investment value than it means we have an economy of people rent seeking and speculatively buying and investing in property to make money. I guess the alternative would be to make it illegal to own housing you don't live in, which would definitely drive down prices but also possibly have other unforseen effects. In a world full of homelessness and ridiculous housing prices, I consider it worth exploring.
  - sokoloff 7y ago
    > the alternative would be to make it illegal to own housing you don't live in In such a world, how would anyone find a rental to live in? There are benefits to being able to rent in many different life situations.
  - sigstoat 7y ago
    > possibly have other unforseen effects possibly? besides, as the sibling comment notes, making it impossible for anyone to rent? a few more seconds of thought notes that it would also cause troubles for anyone inheriting a home. want to keep grandma's house until you can retire and move into it? nope, can only own one house, got to sell it off. want to move from one city to another, but you're having troubles selling your current house? nope, just got to auction it off and take whatever you get before you're allowed to leave.
    - sokoloff 7y ago
      Want to borrow money for a mortgage? Banks aren't allowed to foreclose anymore, so mortgage lending is now unsecured, meaning higher down payments and interest rates...
- iamtheworstdev 7y ago
  I believe the argument is supply and demand. Housing as an investment works if demand out paces supply or supply lowers. If you don't have some reasonable assurance of housing prices increasing over time then why buy?
  - snowwindwaves 7y ago
    I bought so I could be certain I could live in this pile of sticks until I die with no landlord to deal with.
- SilasX 7y ago
  I think parent is referring (with accidental substitution) to the widely cited "Housing Can’t Be Both Affordable and a Good Investment": https://news.ycombinator.com/item?id=19802482 https://news.ycombinator.com/item?id=19802482 Taken literally, there's no contradiction between housing being affordable and being a financial instrument. But I think s/he meant the theme of that article, that housing can't be both a reliable investment we think of it as, and affordable. If you make it reliably affordable, like food, then you can still invest in its related instruments, but it's not a good idea, since e.g. corn futures are not expected to reliably appreciate in value.
all2 7y ago
> The real problem is that housing cannot be both affordable and a financial instrument. Could you expand on this?
elliotpage 7y ago
I am with you. Housing must be forcefully de-commodified and it must no longer be considered an investment. I am currently trying to buy my first house and every single place I look at has "Ideal for a first time buyer or as an investment opportunity" in the description so I am in direct competition with these parasites. Frustrating to say the least.
- snowwindwaves 7y ago
  The buying experience sucks so I feel for you, but there are lots of cheap houses in less desirable areas - flyover states, I think I heard something about Detroit or chicago? Consider living in a less desireable or popular location that doesn't command such a premium. Remote work can make it possible to live in a town without your industry being present there.
  - elliotpage 7y ago
    I appreciate you are trying to provide a helpful suggestion buy this is not a solution. 1) I live in the UK. I'm sure Chicago is lovely though! 2) Housing price rises effect entire areas and transport networks, so anything in reasonable commute range (especially if you rely on public transport) also has prices inflated and driven out of reach.
- tanzbaer 7y ago
  What exactly are you proposing to "forcefully de-commodify" housing for it to be "no longer considered an investment"? I can think of the following options: 1. Prohibit sale of real estate -Obviously if you prohibit it forever, anyone who buys it will be stuck with it forever. Nobody wants to be stuck with a piece of property forever. So I'm assuming the next best thing would be to prohibit sale within an arbitrary time period (1 year? 5 years? 10 years?). Whatever that period is, if it's meant to have any effect, it will be long enough to disincentivize people from buying property who do not intend to own it for shorter periods of time. - That means no more fixer-uppers: People won't buy shitty places to make them nice and resell at profit. That will leave us with more shitty places. That will leave us with less non-shitty places on the market, thus driving up prices even more in that area. Seems like the opposite of what people generally want. - It will probably make certain areas of the city way more attractive than they already are. If you're going to be locked in somewhere, it better be good. So rich people have an incentive to spend more money than they usually would. Also, less than rich people will have the same incentive. Some people will make riskier decisions on how much money they should spend on housing and may very well bankrupt themselves in the process. It's difficult to predict what kinds of problems this could create, but it will create problems. This approach seems to me to just magnify the problems we already have. 2. Tax profits from sale of real estate close to 100%. This will introduce the same issues above with fixer-uppers. The incentive to make unlivable places livable will be gone. Houses that are ruined and that the owners can't afford to fix will not be taken care of, thus reducing the already limited supply. Additionally, anyone buying a house and living in it for an extended period of time will lose his equity to inflation. It becomes an automatic liability to buy a house. People who rent out houses do so, because the renters pay their mortgage while the house appreciates in value. If the appreciation component goes away, less people will be incentivized to buy to rent. Thus, lower income people will have less options to live. Again, lower-income people take the hit in this scenario. 3. Go full-commie. - Make all real-estate public property, managed by the city. - The city can either do that by just taking property away or if there's any semblance of the rule of law left, they will have to pay the current owners. - This will be a gigantic expense, increasing the tax burden on everyone in the future. - Next, the city will decide who gets what house at what price. There will be waiting lists, income disclosures to decide on who will get what place to live in. Now you'll have bureaucrats processing living arrangements, so everything will take longer. - Waiting lists for some areas will naturally be much longer than for others. - New housing will only be built by an already bankrupt city, which means it will likely not be built at all. - The destruction of the market, the confiscation of property, the waiting lists, processing times and rising taxes will scare away the people that this city has been attracting for so long. - There will be an exodus of tech into more market-oriented areas and San Francisco loses its appeal. - This will lead to shorter waiting lists and more people finding affordable housing, but it will also reduce the tax-base of the city. - So then the city needs to erect a wall around itself to make sure that nobody can leave and stays inside to be skinned to pay for escalating expenses. If people try to escape, there need to be heavy punishments to make sure they really don't leave....Hm...sounds vaguely familiar... I don't see how this fixes anything. Would you care to elaborate how you would make this work?
supercanuck 7y ago
tents are housing.
robert_foss 7y ago
I couldn't agree more. In Berlin, where I live, there are re-occurring public protests around this very topic. In order to curb housing as an investment in Berlin, there is a two-tier tax system for money gained from selling an apartment for example. - The profits from the sale of apartment that you've lived in less than 2(?) years will be taxed at 50% - The profits from the sale of apartment that you've owned for less than 10 years (but haven't lived in) will be taxed at 50%. That being said, housing is still a problem, especially since it is relatively cheap in comparison to other EU capitals. Which means lots of people move here, and sometimes displace locals.
youeseh 7y ago
Stocks, bonds, commodities, and other income generating assets are financial instruments. The price of stocks, bonds, commodities and other income generating assets can fluctuate for many reasons, one of which is an increase in supply. Housing is a financial instrument. And like any financial instrument, there is a risk of over supply. If the risk goes up, the new price would reflect the risk. When legislation tries to fix pricing, black markets pop up. No legislation that does not increase supply will reduce the cost of housing in real terms.
- andrewstuart 7y ago
  Nice - this is exactly how vested interests would put it - in very convincing economic terms that are hard for anyone to argue with. That's my point exactly.
  - opportune 7y ago
    That's because it's true? I am also in favor of a complete decommodification of housing but in a well-functioning market based system what they described would occur.
  - youeseh 7y ago
    No. Your point was "The real problem is that housing cannot be both affordable and a financial instrument." I argued against your point. Instead of making a counterargument, you decided to vilify mine by associating it with "vested interests".
    - sisu2019 7y ago
      Conservatives think liberals are wrong. Liberals think conservatives are evil. Jonathan Haidt is illuminating: ___ [...]liberals answered the Care and Fairness questions while pretending to be conservatives. When faced with questions such as “One of the worst things a person could do is hurt a defenseless animal” or ”Justice is the most important requirement for a society,” liberals assumed that conservatives would disagree. ___ From: https://theindependentwhig.com/haidt-passages/haidt/conservatives-understand-liberals-better-than-liberals-understand-conservatives/ https://theindependentwhig.com/haidt-passages/haidt/conserva...
anigbrowl 7y ago
Yes, that's a problem with capitalism. What is your proposed solution, and how is it faster/easier than construction, and how many people will it get off the street?

cle 7y ago

> The real problem is that housing cannot be both affordable and a financial instrument. Can you elaborate on this? I don't know much about financial instruments and would like to know why these two are mutually exclusive.

sokoloff 7y ago
I'd say housing can't be both affordable and a good investment. By that, I mean that good investments (by definition) go up in value by more (often a multiple of) than inflation. If houses start out affordable and consistently outpace inflation, they will eventually, often quite quickly, cease to be affordable.
creato 7y ago
I'm no economist but it seems blindingly obvious. To be an interesting financial investment, a house must appreciate faster than other means of savings. If that happens, houses will inevitably be unaffordable, because they rise in value faster than people can save to buy them.
- Macross8299 7y ago
  That assumes an "interesting" financial investment has to appreciate faster than all other investments that exist and that nobody would ever trade returns for less risk. People buy bonds, so I don't think that maximizing ROI is always necessarily the criteria for a desirable investment.
  - creato 7y ago
    So you think people that want to buy a house just need to take on more riskier investments before buying a house? Get lucky, buy a house, get unlucky, ...?
- cle 7y ago
  Thanks! Meta-observation: to me, nothing in economics or finance is "blindingly obvious". Many economic phenomena seem obvious but in reality are way more complex than could be represented by any model that I could understand. Your explanation makes sense at some level, but I don't have much confidence in it, because all I can do is wonder what other mechanisms interact with the mechanism you've described, and what the net impact is.
- viraptor 7y ago
  I'm not sure why you're looking only at the house price change. To be a good investment, the (price change + rent - mortgage repayment - maintenance) value has to be higher than other means of saving. Thus may be true even if the house itself losses some value.
- sigstoat 7y ago
  and yet, reasonable people who know what they're doing buy bonds with negative interest rates. the financial world is more complicated than you realize.
- benchaney 7y ago
  You have your causality hopelessly backwards. Housing did not become a interesting investment because people chose to invest in it. People chose to invest in it because it was an interesting investment.
- sisu2019 7y ago
  A stronger case would be "it must be more profitable than the alternatives with the same risk" but you skipped a step and went right to "appreciate faster" which is not the only way it could be profitable. In fact "flipping houses" to make a living at this scale is an artifact of your current time and place which is the US in a massive inflationary bubble [1] We libertarians have been beating the inflation drum for decades now and been largely ignored and / or laughed at. Maybe it's time to revisit how adding trillions and trillions to the economy every year could maybe possibly lead to higher prices in "inflation hedge" type goods.[2] [1] https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FNetworthGDPIndex.jpg https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs... [2] https://mises.org/library/housing-too-good-be-true https://mises.org/library/housing-too-good-be-true
delecti 7y ago
A good financial instrument is a good investment, and likely to have the price rise faster than inflation with time. Affordable housing would be likely to have the price rise no faster than inflation, or it will eventually be out of the price range of people whose incomes are only rising with inflation.
akgoel 7y ago
In Houston, the property tax rate is 3%, and inflation is roughly 2%,so for property to be a net gain, it has to increase in value at over 5%, which is faster than the overall economy, and hence gets less affordable over time
- sokoloff 7y ago
  You would be paying (indirectly) the property tax even to live in a rental, so I don't think that you should count that as a home ownership cost (any more than you'd count cable, gas, or electric bills as ownership costs) if you are going to live in the property.
- im3w1l 7y ago
  Another solution to that equation is that houses increase in value at 2% a year (keep pace with inflation), and yield 3+x % in rent per year, where x is enough to cover administration and provide a modest return.
whamlastxmas 7y ago
I assume the premise is that if we approach a home as something that has an investment value than it means we have an economy of people rent seeking and speculatively buying and investing in property to make money. I guess the alternative would be to make it illegal to own housing you don't live in, which would definitely drive down prices but also possibly have other unforseen effects. In a world full of homelessness and ridiculous housing prices, I consider it worth exploring.
- sokoloff 7y ago
  > the alternative would be to make it illegal to own housing you don't live in In such a world, how would anyone find a rental to live in? There are benefits to being able to rent in many different life situations.
- sigstoat 7y ago
  > possibly have other unforseen effects possibly? besides, as the sibling comment notes, making it impossible for anyone to rent? a few more seconds of thought notes that it would also cause troubles for anyone inheriting a home. want to keep grandma's house until you can retire and move into it? nope, can only own one house, got to sell it off. want to move from one city to another, but you're having troubles selling your current house? nope, just got to auction it off and take whatever you get before you're allowed to leave.
  - sokoloff 7y ago
    Want to borrow money for a mortgage? Banks aren't allowed to foreclose anymore, so mortgage lending is now unsecured, meaning higher down payments and interest rates...
iamtheworstdev 7y ago
I believe the argument is supply and demand. Housing as an investment works if demand out paces supply or supply lowers. If you don't have some reasonable assurance of housing prices increasing over time then why buy?
- snowwindwaves 7y ago
  I bought so I could be certain I could live in this pile of sticks until I die with no landlord to deal with.
SilasX 7y ago
I think parent is referring (with accidental substitution) to the widely cited "Housing Can’t Be Both Affordable and a Good Investment": https://news.ycombinator.com/item?id=19802482 https://news.ycombinator.com/item?id=19802482 Taken literally, there's no contradiction between housing being affordable and being a financial instrument. But I think s/he meant the theme of that article, that housing can't be both a reliable investment we think of it as, and affordable. If you make it reliably affordable, like food, then you can still invest in its related instruments, but it's not a good idea, since e.g. corn futures are not expected to reliably appreciate in value.

all2 7y ago

> The real problem is that housing cannot be both affordable and a financial instrument. Could you expand on this?

elliotpage 7y ago

I am with you. Housing must be forcefully de-commodified and it must no longer be considered an investment. I am currently trying to buy my first house and every single place I look at has "Ideal for a first time buyer or as an investment opportunity" in the description so I am in direct competition with these parasites. Frustrating to say the least.

snowwindwaves 7y ago
The buying experience sucks so I feel for you, but there are lots of cheap houses in less desirable areas - flyover states, I think I heard something about Detroit or chicago? Consider living in a less desireable or popular location that doesn't command such a premium. Remote work can make it possible to live in a town without your industry being present there.
- elliotpage 7y ago
  I appreciate you are trying to provide a helpful suggestion buy this is not a solution. 1) I live in the UK. I'm sure Chicago is lovely though! 2) Housing price rises effect entire areas and transport networks, so anything in reasonable commute range (especially if you rely on public transport) also has prices inflated and driven out of reach.
tanzbaer 7y ago
What exactly are you proposing to "forcefully de-commodify" housing for it to be "no longer considered an investment"? I can think of the following options: 1. Prohibit sale of real estate -Obviously if you prohibit it forever, anyone who buys it will be stuck with it forever. Nobody wants to be stuck with a piece of property forever. So I'm assuming the next best thing would be to prohibit sale within an arbitrary time period (1 year? 5 years? 10 years?). Whatever that period is, if it's meant to have any effect, it will be long enough to disincentivize people from buying property who do not intend to own it for shorter periods of time. - That means no more fixer-uppers: People won't buy shitty places to make them nice and resell at profit. That will leave us with more shitty places. That will leave us with less non-shitty places on the market, thus driving up prices even more in that area. Seems like the opposite of what people generally want. - It will probably make certain areas of the city way more attractive than they already are. If you're going to be locked in somewhere, it better be good. So rich people have an incentive to spend more money than they usually would. Also, less than rich people will have the same incentive. Some people will make riskier decisions on how much money they should spend on housing and may very well bankrupt themselves in the process. It's difficult to predict what kinds of problems this could create, but it will create problems. This approach seems to me to just magnify the problems we already have. 2. Tax profits from sale of real estate close to 100%. This will introduce the same issues above with fixer-uppers. The incentive to make unlivable places livable will be gone. Houses that are ruined and that the owners can't afford to fix will not be taken care of, thus reducing the already limited supply. Additionally, anyone buying a house and living in it for an extended period of time will lose his equity to inflation. It becomes an automatic liability to buy a house. People who rent out houses do so, because the renters pay their mortgage while the house appreciates in value. If the appreciation component goes away, less people will be incentivized to buy to rent. Thus, lower income people will have less options to live. Again, lower-income people take the hit in this scenario. 3. Go full-commie. - Make all real-estate public property, managed by the city. - The city can either do that by just taking property away or if there's any semblance of the rule of law left, they will have to pay the current owners. - This will be a gigantic expense, increasing the tax burden on everyone in the future. - Next, the city will decide who gets what house at what price. There will be waiting lists, income disclosures to decide on who will get what place to live in. Now you'll have bureaucrats processing living arrangements, so everything will take longer. - Waiting lists for some areas will naturally be much longer than for others. - New housing will only be built by an already bankrupt city, which means it will likely not be built at all. - The destruction of the market, the confiscation of property, the waiting lists, processing times and rising taxes will scare away the people that this city has been attracting for so long. - There will be an exodus of tech into more market-oriented areas and San Francisco loses its appeal. - This will lead to shorter waiting lists and more people finding affordable housing, but it will also reduce the tax-base of the city. - So then the city needs to erect a wall around itself to make sure that nobody can leave and stays inside to be skinned to pay for escalating expenses. If people try to escape, there need to be heavy punishments to make sure they really don't leave....Hm...sounds vaguely familiar... I don't see how this fixes anything. Would you care to elaborate how you would make this work?

supercanuck 7y ago

tents are housing.

robert_foss 7y ago

I couldn't agree more. In Berlin, where I live, there are re-occurring public protests around this very topic. In order to curb housing as an investment in Berlin, there is a two-tier tax system for money gained from selling an apartment for example. - The profits from the sale of apartment that you've lived in less than 2(?) years will be taxed at 50% - The profits from the sale of apartment that you've owned for less than 10 years (but haven't lived in) will be taxed at 50%. That being said, housing is still a problem, especially since it is relatively cheap in comparison to other EU capitals. Which means lots of people move here, and sometimes displace locals.

youeseh 7y ago

Stocks, bonds, commodities, and other income generating assets are financial instruments. The price of stocks, bonds, commodities and other income generating assets can fluctuate for many reasons, one of which is an increase in supply. Housing is a financial instrument. And like any financial instrument, there is a risk of over supply. If the risk goes up, the new price would reflect the risk. When legislation tries to fix pricing, black markets pop up. No legislation that does not increase supply will reduce the cost of housing in real terms.

andrewstuart 7y ago
Nice - this is exactly how vested interests would put it - in very convincing economic terms that are hard for anyone to argue with. That's my point exactly.
- opportune 7y ago
  That's because it's true? I am also in favor of a complete decommodification of housing but in a well-functioning market based system what they described would occur.
- youeseh 7y ago
  No. Your point was "The real problem is that housing cannot be both affordable and a financial instrument." I argued against your point. Instead of making a counterargument, you decided to vilify mine by associating it with "vested interests".
  - sisu2019 7y ago
    Conservatives think liberals are wrong. Liberals think conservatives are evil. Jonathan Haidt is illuminating: ___ [...]liberals answered the Care and Fairness questions while pretending to be conservatives. When faced with questions such as “One of the worst things a person could do is hurt a defenseless animal” or ”Justice is the most important requirement for a society,” liberals assumed that conservatives would disagree. ___ From: https://theindependentwhig.com/haidt-passages/haidt/conservatives-understand-liberals-better-than-liberals-understand-conservatives/ https://theindependentwhig.com/haidt-passages/haidt/conserva...

anigbrowl 7y ago

Yes, that's a problem with capitalism. What is your proposed solution, and how is it faster/easier than construction, and how many people will it get off the street?