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Home ownership is the West’s biggest economic-policy mistake
- Labo333 5y agoAny way for me to access the article from EU without subscription or account?
- deleted 5y ago[deleted]
- fergie 5y agohttps://outline.com/yWUcst https://outline.com/yWUcst
- SilverRed 5y agoWhy are paywall articles even allowed on HN? All they do is encourage people to comment without reading the article and talk based on headlines alone.
- dang 5y agoIf there's a workaround, it's ok. Users usually post workarounds in the thread. This is in the FAQ at https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html and there's more explanation here: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&sort=byDate&type=comment&query=paywalls%20by:dang https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so... https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989
- bserge 5y agoVPN, of course.
- eythian 5y agohttps://archive.is/iyTVR https://archive.is/iyTVR
- Animats 5y agoWhat's this obsession with increasing housing density? Population in the developing world is leveling off. Most of the developed world is already at "peak child".[1] Housing shortages come from migration to cities, not more people. [1] https://ourworldindata.org/peak-child https://ourworldindata.org/peak-child
- rocqua 5y agoThe rules against density have prevented a lot of demand from being met. It makes big cities where people want to live unattainable for many because of price. It also forces many people into long commutes. This makes them less happy, cause large amounts of pollution, and creates huge traffic jams. By increasing density, biking to work becomes easier. Similarly, public transport becomes a lot more effective. In general it leads to much more efficient cities.
- lentil_soup 5y agoAs a single data point, I live in one of the most dense european cities and home prices are insane. Probably a mix of speculation, tourism and other policies. While density might play a part it's not a silver bullet. As with everything, the solution is probably custom to each city and region
- exporectomy 5y agoPerhaps it's not dense enough compared to how economically valuable living there is. Otherwise, why would people live in an overpriced city instead of a cheaper one? Why do you live there? Surely for most residents, it's because of high-paying jobs.
- lentil_soup 5y agoMost people live here because they are from here, local jobs are definitely not high paying. Could they move to a cheaper city? Probably, but that has big life implications, people might take the economical hit to be able to stay close to home. What I mean to say is that in this particular case it's not just a density problem. There's problems with tourism, there's problems with speculation, there's problems with general inequality. So the solution is not just build more, it's way more nuanced.
- tgv 5y agoThe title is clickbait, I presume. I can't read the full article either, but in the introduction it already says that the problem is that not enough houses have been built. And in my opinion, that plus regulation failure are at the root of the problem. Who actually owns the houses is of lesser importance.
- differentView 5y agoDon't some homeowners object to increased supply because they believe it hinders appreciation of their homes?
- yodelshady 5y agoYes. But if a development that makes the local quality of life worse, then - surprise! - that will also deflate asset prices. How much value does the Economist put on me starting my tech job on three hour's sleep, because of the following, all of which I've had happen nearby (as in a literal stone's throw) between 1 am and 5 am in the last year: Redirection of arterial road traffic ! Fire alarms that nobody else shows an inclination to reset ! Dog fighting ring ! violent robbery ! I'd rank this as somewhere in the middle of flats I've rented. Words struggle to express how much I hate neoliberal suburbanites wanking on about the values of high-density housing. Yes, there is potential. But by f*k, try living it for a bit.
- tgv 5y agoI don't see much of a difference between individual home ownership and people or businesses that own many houses. The latter group is more powerful, and might have more influence on politics through lobbying.
- tpm 5y agoIt's not of lesser importance, because who owns the housing (whether houses or flats) has implications for the politics of building new housing. If the owners are individuals, they often go the way of NIMBY, which in turns slows the (social and economic) development of the area. We can also think of housing prices (or rents) as taxes, which if the pace of new buildings slows and the area is still in demand is rising. But if the owner is the city or state, they can plan and build accordingly. So in the city I live in after the fall of communism almost all of the state-owned flats were sold to tenants very cheaply which was great, but now it's very hard to build anything new. Even old flats are horribly expensive, which is great for sellers like me, but not great for people that want to come here to work and live. On the other hand, we have cities like Vienna where a siginificant part of the housing stock is owned by the city. They are able to build new neighbourhoods. As a result, while my city is much smaller and less economically interesting, the price of housing is now near Vienna's levels, if not even higher. That's not good for the economy of our city either.
- stepbeek 5y agoI agreee that speculation on property solely as an asset is an issue, but don't really agree with the premise early in the article around the growth of cities. The argument strikes me as something like this: * An increase in the size of urban areas would increase GDP by 4% * Anything which blocks this growth is bad * Home ownership blocks this increase * Therefore, home ownership is bad The implicit premise is that anything which increases GDP is good. Is it? An obvious counterexample is around environmental regulation. We could almost certainly bump GDP in the short-term by deregulating, but would suffer the consequences a few decades down the line. I really like the economist and they make their bias clear, but I am a little frustrated with the rhetoric that ever growing GDP is an ethical imperative.
- shuckles 5y agoIt’s easy to say this as someone wealthy enough to spend time commenting on online forums. What is the economic externality of urban infill development?
- ggm 5y agoLoss of greenspace mainly.
- stepbeek 5y ago> It’s easy to say this as someone wealthy enough to spend time commenting on online forums This feels a little ad-hominem. I criticised the argument laid out in the article. Do you agree with the point made in the article? If so, why?
- shuckles 5y agoYou’re making the point that GDP is not a perfect measure, without offering any that are better. It’s easy to wonder who economic growth helps when you are in the diminished marginal returns part of the curve.
- WalterBright 5y ago> I agreee that speculation on property solely as an asset is an issue Speculation helps create a liquid market and stabilize prices.
- perfunctory 5y ago> From Sydney to Sydenham, fiddly regulations protect an elite of existing homeowners and prevent developers from building the skyscrapers and flats that the modern economy demands. The resulting high rents and house prices make it hard for workers to move to where the most productive jobs are, and have slowed growth. Following this logic from the ancient Greek times, by now we would have thousand stories skyscrapers in Athens - because that's where all the jobs were - and an empty Europe around it.
- deleted 5y ago[deleted]
- shuckles 5y agoUnfortunately, Athens became economically irrelevant two millennia before we had the technology to try this experiment.
- trainsplanes 5y agoNo, because not everybody wants to live in the same city, country, climate, culture, whatever. But what we do have today are cities that economically dominate their region with people commuting an hour or more each way just to make ends meet. And even if those people were to quit and try starting a business 5 minutes from their home, there's a good chance that some zoning regulation, lack of infrastructure, or other issue would make it rather troublesome for a normal person to do a startup.
- pjc50 5y agoRome was the city where upwards growth was only limited by technical issues, and it did indeed expand to a population of 1-2 million (approx) out of a whole Roman Empire population of 60 million.
- neonate 5y agohttps://archive.is/Txnc4 https://archive.is/Txnc4
- RcouF1uZ4gsC 5y ago> At the root of that failure is a lack of building, especially near the thriving cities in which jobs are plentiful. I think the biggest economic policy failure of the West is the hyper-concentration of high-paying jobs and enormous wealth in a few cities. What percentage of wealth do New York, Seattle, San Francisco, Los Angeles, and London represent? The truth is as long as the wealth is hyperconcentrated in these cities, you can densify all you want, but you are still going to have massive inequality as to who can afford housing and, because of politics, massive advantages of people already there versus newcomers. In this age of jet aircraft, high speed rail, and high speed internet, it is a shame that we still cannot spread out the economic opportunities over larger areas.
- shuckles 5y agoJet aircraft, HSR, and high speed internet are all relatively modern - newer than all the cities in your list - and require infrastructure which concentrates population growth. Have you tried pricing out the cost of Comcast trenching cables to a disconnected homestead? Now do an airport or HSR line.
- imtringued 5y ago>In this age of jet aircraft, high speed rail, and high speed internet, it is a shame that we still cannot spread out the economic opportunities over larger areas. Actually, this only makes thing worse, because your boss gets to decide where you live. After all, you can easily reach all your customers from a single location thanks to these technologies.
- docflabby 5y agoOwner occupation of property vs rent seeking ownership are 2 very different paradigms. The former results in community, and investment and a large number of beneficial economic effects. The later is simply an economic parasite Only have to look to the past to see what happened with farming. Substance farming and feudaliam was inefficient and disincentified investment.(why improve land you don't own and someone else reaps the benefits of what you sow?)
- klodolph 5y agoSubsistence farming? That just means that most of what you farm is used to feed yourself and your family. It's not really that subsistence farming is inefficient, it's just that subsistence farmers (by definition) are not selling food on the market.
- tejtm 5y agotenant farmer. share cropping; where the "farmer" is guaranteed to be left with nothing above subsistence if that.
- klodolph 5y agoThat’s not subsistence farming. Subsistence farming is where you are only growing what you need, plus maybe a little extra. What you’re describing is something else entirely.
- brobdingnagians 5y agoReminds me of Three Acres and a Cow [1]. I do find it an interesting concept; but I think the general principle I would agree with is more of decentralizing production by making people more free so that they can buy their own land or means of production and use it; rather than coercive legislation against acquisition of property. [1] https://en.wikipedia.org/wiki/Three_acres_and_a_cow https://en.wikipedia.org/wiki/Three_acres_and_a_cow
- inglor_cz 5y agoI rented out my small apartment for 6 years when I had no use for it (living elsewhere), and I never felt like an economic parasite. It is a service that comes with plenty of duties and risks, at least if you want to have a reasonable reputation. It probably depends on local market. I can imagine that in Silicon Valley, bad landlords can get away with almost anything, because the demand is so strong. Outside such economic hubs, the market situation is much more balanced and getting a good tenant who won't smoke in the house and destroy furniture is not trivial. A friend of mine rented out a small apartment inherited from his grandma (nothing expensive, a rust-belt city in Eastern Europe that just keeps itself alive) and found out that the tenants turned it into a meth factory, when police came knocking on his door to ask unpleasant questions.
- fergie 5y ago> a generation of young people who cannot easily afford to rent or buy and think capitalism has let them down Thats not some irrational misconception- capitalism has indeed let these people down. Capitalism, a set of social policies that prioritises the needs of capital over the needs of people, is literally a system that is designed to concentrate ownership. Under capitalism the best way to make money is to own, or have access to, capital: therefore if you want a house, the best way to do that is to already have another house. I'm not going to pretend to have the answers to this problem (although they probably involve some combination of tax relief for owner-occupancy, and a relaxation of planning regulations), but it is important to recognise the housing crisis as a negative outcome of capitalism, just as technology should be recognised as a positive outcome. The more people have access to capital, the more popular and sensible capitalism becomes. Home ownership is the best way to promote capitalism, and government should do its best to encourage it.
- gonzo41 5y agoYou could regulate the market. 1 house per person perhaps? I can only sleep in one bed at a time. It makes sense to have only one.
- Traster 5y agoHere's a funny thing, in the UK the main tax associated with owning a house is council tax, you pay it to the local council for the services they provide (although we can have an argument about where the money actually goes since it's all fungible anyway and the central government repeatedly butts in and restricts councils). As you suggest we could disincentivize second home ownership by levying a higher tax on it. How does this manifest in real policy in the UK today - 2nd homes, and homes occupied by only one person more often than not receive lower taxes than normal.
- lucian1900 5y agoI expected your last two paragraphs to argue for abolishing capitalism, after such a robust critique of its fundamental contradiction. Why not publicly owned and democratically controlled housing, like socialist countries have? I grew up in a flat where my parents paid less for rent to the state than for utilities.
- dr_dshiv 5y agoWhat if renters could have a way to pay more to gain partial ownership of their property? E.g., could progressively own up to 10%. That woulf allow for more of the feeling of ownership and allow renters to participate in the appreciation. That would mitigate some of the negative impacts of gentrification. Has anyone given this sort of renter-ownership blend a thought?
- TheSpiceIsLife 5y agoThat sounds complicated, and I can't imagine landlords voting that policy in. If renters want to invest why can't they take that bit extra and invest it elsewhere?
- rlonn 5y agoI think that is called a mortgage :)
- skolsuper 5y agoThis exists in the UK already at least. Last time I checked (10+ years ago) you could choose to split 50/50 rent/mortgage or 25/75 either way.
- nly 5y agoMost hybrid schemes end up being scams. You end up with the disadvantages of renting with equity tied up as well.
- Ir0nMan 5y agoImagine a system where renters could put up a small fee, say 3-5% of the homes value, then just continue paying their monthly "rent" payment as usual. However, each time they pay that monthly rent a portion of that payment goes directly to them as equity. That way years later they could move and benefit from that equity position or after a certain period of time, say 30 years, own the entire home outright. Oh wait...
- cryptica 5y agoThis is very different because what the previous comment is suggesting is that it will be impossible to rent out a property without losing ownership of it after x years. This would make it very unappealing to rent out a property and it would cause property prices to crash. On the other hand, mortgages only cause property prices to go up because it allows people who could otherwise not afford a house to buy one outright (creating higher aggregate demand). At the same time, it makes it more appealing to own a house because you can collect rent on it and prices always go up because banks keep making loans to people to drive up your property's price.
- joshuahughes 5y agoSo am I reading this right, that the Economist is suggesting “mortgage bad, rental good”?? Seems I’ve seen something similar referenced quite a lot recently... https://www.weforum.org/agenda/2016/11/how-life-could-change-2030/ https://www.weforum.org/agenda/2016/11/how-life-could-change...
- DocTomoe 5y agoSeen from another angle, homeownership (once the mortgage has been paid) grants freedom, while a rent-dweller will remain a slave to his landlord forever, with Damocles's sword named "Eviction and homelessness" always dangling over their heads.
- est31 5y agorent dwellers on the other hand can move whenever they want while home owners are chained to their property. Each time they sell and buy a new property they run a risk of buying lower quality than advertised, selling under value, and they do lose money in fees. Also, home ownership doesn't make you immune from gentrification due to property taxes. Especially if you "only" own a flat in a multi storey building, then you have only little influence in your maintenance fees bills. That being said, personally, I still prefer home ownership over renting.
- brobdingnagians 5y agoBrings up a key point; there are pros and cons to each; and, like most things, there are risks to each. The great thing is being able to look at your own situation and preferences and choose which you think you want. I love economics because it is one big decentralized computation for a future that we don't know. The difficulty is when people start cramming one size fits all on everyone, everyone gets the same result, which is usually worse than people choosing according to their own situation and evaluating pros, cons, and risks. The issue I have with a lot of think tanks is they often have an agenda of forcing one size fits all on everybody because they think they are smarter than the collective decentralized decision making of people with skin in the game.
- mustafa_pasi 5y agoAnother public policy that would help tremendously would be providing financial incentives for big industries to relocate or expand in low cost of living areas. This would also have other benefits besides more affordable housing. Other than that I find the author's casual dismissal of other people's lifestyles as a bit off putting. Calling home ownership a cult and providing Tokyo as a model to follow, ..., I personally don't like this style of writing that does not acknowledge that people might have different preferences from the author. As a young millennial I of course don't like the high rents in big cities. I would also like to live in a house that I own, and I would also not like living in a very big city with a skyscraper skyline.
- Traster 5y agoI don't think this article makes a logical argument at all. It says house ownership is bad because it gives people a vested interest in constraining the supply of housing. That's true but that's not a problem. If people didn't own houses then someone would, and that someone is still incentivized to constrain the supply. I'm also not sure that reducing home ownership is a good idea - "let's make everyone poorer" doesn't sound like great policy to me, especially at a time where asset prices are inflating like mad. What's the actual alternative to people owning their own homes. Would we be better off all holding shares in housing companies? I also take issue with this idea that we should all be living in skyscrapers. If you go off and build skyscrapers. Maybe some people want to live in skyscrapers but if the result of this policy is that the middle class who used to be able to live in a nice semi/detatched house are now living in flats in a skyscraper that is a massive detriment to their quality of life. It's like the problem we have with Houses of Multiple Occupancy in the UK. It's a fine concept to break up a 4 bed house into 3 flats and sell each individually but you need to understand you're making it economically unviable for anyone to ever afford a 4 bed house anymore in that area. There are serious issues with housing, and the massive disincentive for people to downsize is definitely one of them, but a lot of these policy solutions are just trash.
- radicalbyte 5y agoIt would make so much more sense to just implement a progressive wealth tax combined with tax rules which make owning more than one home very expensive. I would also be interested to see what would happen if the rental and sales markets were forced to only supply houses which matched the current building codes - it would make building much more competitive.
- em-bee 5y agonow that would be interesting. if an old flat or house became unrentable or unsellable once the current occupant moves out because it doesn't match current requirements, then landlords would be begging renters to stay. on the other hand, individual home owners would be stuck unable to sell their property, because it would drop in value. (even if they could sell it, not everyone would want to buy it). i am not sure if that's good or bad. in any case everyone would be forced to keep their buildings up to standard.
- tlarkworthy 5y agoNext up, living in families shown to be inefficient, newborns should be matched in a skills based auction at birth. => There is more to life than supply and demand, and home ownership has a hidden effect on societal responsibility, wellbeing and a life milestone
- RcouF1uZ4gsC 5y agoActually who you are born to is probably the number 1 driver of inequality. If you really wanted something more equitable, you would probably require that no children be raised by their parents and be turned over to a state run children's home at birth.
- bovine3dom 5y agoIn practice, that's not so far from what schools do.
- sufehmi 5y agoYup, COVID-19 shows me something that I have suspected all along - a LOT of parents are not comfortable to be with their OWN children. Because schools are closed, parents have to be with their children all the time A lot of them are really, really stressed out because of this. Which begs the question - why the fuck did you bother to have kids then? Children are blessings from heaven. If they can not see it that way, then they should free themselves from that and chose not to have kids instead Mind blowing
- CalRobert 5y agoAre you a parent? I really don't think humans evolved to have a nuclear family with no external support from grandparents, uncles, aunts, neighbours, etc. We also have a scenario where children have been robbed of their independence (suburban design patterns, dangerous drivers, fearmongering on the news about child molesters, etc.) - so you can't just shove your 5 year old out the front door at 9 AM and tell them to come back for lunch. I would _much_ rather watch my kids and my nieces and nephews for half a day, then trade, than watch my kids all day long. It's utterly grueling.
- yrgulation 5y agoProperty ownership is bad. Rent for life, dont leave inheritance to your children so they can rent for life too. All you need in life is clothing, entertainment, a bit of travel to distract you from your tiny living space, maybe a gadget or two and of course onsite work. Oh and praise from you manager to add meaning to your daily grind. Or so “they” say while “they” amass thousands of properties and massive fortunes while we get tagged, farmed in office buildings, monitored and ignored in politics. /Sarcasm Sorry, I am bitter about this because I simply dont buy in to this concept. Owning your own home is, in my view, the first step towards financial freedom. Downvote away but i strongly believe this concept is horrible.
- kumarvvr 5y agoThis. I'm from India, and the most important goal for any salaried person in India, is to own a piece of land. Maybe 150 - 200 square yards (decently sized to build a 3 bedroom house). And that land is not seen as an expense, but as an investment. An investment to be handed over to children. And usually, families try to buy about 1 plot of land for each child typically. I think that, no matter where you are in the world, land is an important asset. A place to live, a house to cover your head, reduces a lot of stress in life. In India, there are three things considered first and foremost in life "Roti, Kapda Makaan". Roti - Food Kapda - Clothing Makaaan - House.
- blueblisters 5y agoA curious phenomenon I have noticed only in India is that rental yields tend to be much lower than any other country. Arguably, if renting is so cheap, it makes more sense to rent than own a house, unless property is expected to appreciate in value indefinitely.
- kumarvvr 5y agoOne reason for less rentals, is the cultural norm of home ownership, which is often seen as a very reliable and solid sign of income stability. Another reason is lack teeth in laws that implement rental agreements. In fact, most owners hardly take any rental agreements or leases.
- brobdingnagians 5y agoEven from the title, the implication is that "home ownership" is a "policy" from the government rather than just a natural state of people acquiring and improving the land. It implies the government can simply revoke home ownership by a new policy. Property ownership and improvement isn't a privilege "given" to us by a benevolent government with their immaculate "policies" from time immemorial. People are the source of government power. People build houses. The government doesn't own us. We own the government.
- verbify 5y agoIn the UK there are lots of government policies/incentives by the Conservative Party to encourage people to buy a home. These policies can be revoked.
- toyg 5y agoLet’s be honest, there is a substantial bipartisan agreement on this... possibly because most MPs of all colours are homeowners.
- verbify 5y agoNot only that, but 24% of the ruling Conservative Party members of parliament are also landlords, including the housing minister. Partly that, but also partly that in a constituency based system, there will be a bias towards those who are in the constituency longer. I have to register to vote every time I move constituencies (a fairly regular event for a renter), while those who buy only register once (and can be considered returning customers for the member of parliament). Wealth (which is correlated with property ownership) is also correlated with voting.
- eertami 5y agoThe "incentives" for home ownership in the UK are mostly just government (taxpayer) subsidies paid to land owners. H2B/LISA schemes artificially raise house prices above what the floor would otherwise be.
- 5y ago
- ZoomZoomZoom 5y ago>Those who own homes often become NIMBYs who resist development in an effort to protect their investments. I don't get it. Isn't this a good thing? People protect theirs and pay far less attention to commons and rented properties.
- fifticon 5y agoI agree. Obviously too much NIMBY is possible, but in general I appreciate that local people get a say in, how their own local environment should or shouldn't be transformed. The alternative, where some nebulous central agency or authority(which lives nowhere, and doesn't have to live with or in the result) decides which areas should be developed how, sounds horrible to me.. "Let's just plonk some more skyscrapers down on this lot, next to these other blocks of skyscrapers". That said, in my local city, possibility of financing and no concrete loud protests seems to be enough to 'plunk down hi-rises'. I hope some will like the results, because pretty it's definitely not. And it won't be cheap housing either.
- golemiprague 5y agoGive me one example where not owning homes turned out to be better for the simple man, in surfdom Europe? in Communist countries? in housing commissions/estates/projects around the world? They just want to put their paws on our land so we will have nothing tangible and those people will be able to control your life exactly like in the examples I have mentioned before. Also, what is it with skyscrappers? Did it solve the price problem in Manhatten? Each city has it's own character and dynamics, skyscrappers is not always the solution, only sometimes in some situations. Some countries are tiny and even skyscrappers don't solve anything.
- NiceWayToDoIT 5y agoHuge difference is that wealthy/landlords buy properties with debt and operate with cash-flow while for them liability creates wealth. For working people properties on mortgage are just expense. https://www.singsaver.com.sg/blog/robert-kiyosaki-advice-on-financial-statement https://www.singsaver.com.sg/blog/robert-kiyosaki-advice-on-...
- RobertoG 5y agoUntil you pay the mortgage. Then, your bigger expense, rent, disappear and you can start saving. Also, the thread of homelessness disappear from your life. That's something never will happen if you keep just renting.
- chii 5y ago> rent, disappear and you can start saving. that's not true. At any point in time, the cost of the capital is going to be comparable to rent. If you owned 100% if equity in the house, what you're "losing" is the potential rental income from the house, in exchange for the free rent you don't have to pay, plus the difference in the income from investing in the stock market (assume a maximally diversifed portfolio). AKA, imputed rental income. The only bit you save is the tax that you didn't have to pay, if you actually earned the imputed rental income from your own property. It's an illusion that living can be free. Renters pay in straight hard cash, so it's easy to count that cost. Owners pay in opportunity cost lost in the locked up capital in the house, or the interest payment (or some combination of interest and lost opportunity cost of capital).
- RobertoG 5y agoWell, I suppose that Warren Buffet and similar are all renting then. I think that part of the problem is thinking of your home only in terms of an financial investment. A home is a place for living, you are always going to need a place for living. Despite appearances, you don't need a maximally diversified portfolio for living.
- effie 5y ago
- pulse7 5y agoNo no no... if you own a home you have a pension/rent for the time before your death... this is your stored money for those, who will take care for you before you die... before pension plans and insurance companies and financial markets existed, your home ownership was your "pension plan"...
- tuyguntn 5y agoby this economic model, if I get unemployed for unknown period, immediately I should become homeless? So this model pushes me always to have a job and work endlessly, because if I retire and don't have enough money to pay monthly rent, I should move to shittier place and live there (or become homeless) feels like lobby article.
- BirdieNZ 5y agoHenry George and Progress and Poverty have a better solution. See a recent review on Scott Alexander's blog: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr...
- jl2718 5y agoThis makes sense, but if he sees rent as an immutable law of progress, then he is simply advocating for the creation of a new rentier monopoly in the political class. This is exactly what he decries as the violent theft of land by English nobles and colonial forces. I’m sure that the nobles would have told you that they were saving the commoners from all those evil landlords, and the colonization of India was actually freeing them from oppressive local warlords. The main thrust of economic discovery over the last 200 years is that self-sovereignty is the main driver of social prosperity, not authoritarianism, nor collectivism. There is a natural tax on land, which is the cost to defend it, or perhaps the cost of support to a community that will respect a right to ownership. Put that way, the situation is not that the government ‘allows’ landlords to collect rent, it is that the government reverses this by forcing the community to pay for the legal and physical defense of the land, which is given to them for free. If you removed any central authority, you would get exactly the situation that George is looking for, which is that the landlords would have to pay the community the full value of the rent so that there would be no benefit from recognizing a new owner, and thus all members of the community would be willing to enforce ownership rights. Of course this could also be chaos, so formalization of these agreements turned into government, which made some people very powerful, who found that they could make lots of money renting land if they collected income tax to pay their cost of ownership. So I’m wary that invocation of his ideas may lead to a violent revolution that will end up in exactly the same place place we came from, which is a powerful class of rentiers using the threat of violence to extract maximum value from productive people. But still I like the Georgian idea, and I think it can probably be expressed through an insurance bond that secures the physical defense of the property through payments to the community, and a collateral to compensate for any loss of ownership. There should also be room for externality compensation, or possibly even further, conservation fees (Pigou). We have remarkable possibilities for fully-voluntary governance with smart contracts.
- gigatexal 5y agoHome owner here. I feel lucky to have been able to (barely) qualify for a loan when I did and buy a home. We now live overseas and rent it. It’s been a huge help to us knowing that it’s there growing in value. I’m also for governments using my property taxes and other taxes to pay for Or subsidize more housing, even affordable housing, even if it might lower the price for my home if it helps the community out. Being able to have something that’s yours (yes, yes, I know it’s not truly yours until you pay off the bank note...) is a huge boost to my confidence. When we lived there we made improvements, were involved in the community, supported local business and such. I liked knowing the only thing that could raise my monthly mortgage payment was a rise in the assessed property value or a jump in my insurance premium. That peace-of-mind is a huge asset when budgeting. It’s also something one can borrow against to consolidate loans or start a business.
- KoftaBob 5y agoThis seems to target the wrong part of the problem. Rather than "homes appreciate in value --> homeowners have an incentive to constrain supply of new housing to further appreciate the value --> we should somehow tackle the concept of homes being an investment" we should instead focus on the aspects of our state/local governments that allow homeowners to have an influence on constraining new supply of housing to begin with. Namely, zoning rules for any particular parcel of land should be handled by the state, not the local government. If a development fits the zoning rules, it should automatically be approved, with no endless town hall meetings that add tons of delays and cost overruns. The way zoning and approval of housing construction currently works in much of the US is a prime example of what happens when you let too many opinions get in the way of progress. It's no coincidence that states like Texas, with their less stringent zoning laws and relatively small NIMBY (Not In My Backyard) presence, do the best at allowing new housing supply to better keep up with demand. As a result, despite Texas' population exploding over the past 20 years, its housing remains relatively affordable compared to states like CA.
- Ekaros 5y agoHomes logically really shouldn't be an appreciating asset. After build(including warranty fixes) they should be in best condition they ever will be(unless further invested). And then just wear down from there and require maintenance to even keep functioning. So after 10, 20 or 50 years it should cost less, not more. I wonder how will this look in let's say 100 or 200 years. That is after we have reached full urbanization. As outside changing demand in different regions the prices should stay same apart from inflation.
- satellite2 5y agoGenerally you buy the land under the house as well, and this is the part of the pack that is appreciating.
- Ekaros 5y agoTrue, but I imagine that at some point that won't be true any more. And in many cases that has already happened. In the end it just comes to betting on right location... See Detroit vs SF.
- bidirectional 5y agoMuch of that appreciation should be taxed away as the landowner unfairly benefits from public spending elsewhere. If a government decides to invest public money in building a good new school in an area, it is not right that the landowners benefit from free appreciation while the renters are forced to pay more.
- nemo44x 5y agoMuch of it is. Property taxes never end and in my experience only go up. Land owners are also bound to the area and assume all the risks associated with that. Renters can just get up and leave with no financial risk.
- cujo 5y agoThe landowners also pay more in the form of property taxes, at least where I'm from.
- coldtea 5y ago"Wages slaves are not dependant on their employers enough"
- gadders 5y agoIn the UK at least, the process to increase the housing supply is horribly broken. Given a choice between a) a brownfield site near to an existing town, or b) hundreds of acres of fields in a lovely piece of countryside, planners seem to choose option B every time. It's no wonder their plans get objected to all the time.
- airbreather 5y agoIn Australia we have "stamp duty" as part of the cost of sell-buy, when you add on agents commission etc it can easily cost over 10% in fees and charges to move next door. Or more to the point, closer to work or aging parents etc. With capital city houses easy running into 1-2 mill, that's a lot of money and is very retrograde and an impact to productivity due to longer commutes etc. This is one of the key limiting factors to mobility caused by ownership. Add in the family home is exempt capital gains taxes, the whole market is out of whack.
- donavanm 5y agoThe US has similar capital gains exclusions and roll overs on primary residences. The transfer (“stamp”) taxes of 1-4% of the sale aren’t directly comparable. However most US locations do have property value taxes of 1-3% per year. Closer to the proposed land value tax scheme that was recommended a few years back. The other huge difference is where property depreciation and losses (negative gearing) can offset other income streams indefinitely. That doesn’t work in the us (and most economists are against mortgage tax deductions in general).
- hexhex 5y agoThere is a solution to the housing problem besides home ownership and renting: Housing cooperatives. These are still relatively common in Germany, my parents live in a flat owned by a cooperative and are consistently paying less rent than I pay for my college dorms, despite living in the center of a major city. The cooperative was founded by workers in the 19th century and has a single purpose: To provide affordable housing, satisfying the needs of their members. It isn't subsidized by the state, its business model is simply to distribute the expenses for building and maintaining the flats to their members. Home ownership has the disadvantage of being too inelastic and imposing the risks of owning a house to individuals. Renting from a private company on the other hand means you constantly have to give up a significant portion of your income so someone else makes profit from basically doing nothing. Cooperatives strike me as the best solution to this dilemma. It's of course not surprising that the Economist doesn't mention this at all, the flaws of their argument have been sufficiently demonstrated by other commenters. The basic recognition that home ownership is flawed is an important point though IMO.
- JulianMorrison 5y agoOr renting from the government, with rents restrained to break-even. Honestly, private landlords should not be a thing. Holding a house hostage isn't a job.
- jcbrand 5y agoI know people who live in cooperatives and I've explored it for myself as well. You might pay less in a cooperative, but you're expected to be more involved in its internal politics and in keeping things running, so you're likely making up for the lower monetary price by paying with your time and energy. There are also many opportunities for interpersonal conflicts. > you constantly have to give up a significant portion of your income so someone else makes profit from basically doing nothing When something goes wrong in the house I rent (which has happened multiple times), it's up to my landlord to fix it. The landlord also has to spend time and money on upkeep and maintaining the property.
- hexhex 5y ago
- throwastrike 5y agoHome ownership isn’t bad. Securitization is what ruined it all. Wall Street ruins everything in this world.
- cryptica 5y agoThe system is so heavily manipulated. I don't trust statistics anymore. I remember reading a statistic that only 35% of wealth is inherited... The way I read this now is that 35% of wealth is inherited via a will after a parent's death and 64.9% is inherited via some kind of money laundering or power laundering financial scheme while the parents are alive... Leaving only 0.1% to real, self-made individuals.
- username90 5y agoMaking up imaginary facts to deal with data you don't like makes you a conspiracy theorist.
- cryptica 5y agoI don't have the statistics and I made it pretty clear that I'm guessing the numbers but I can see what kind of people are getting rich. They all have social connections to rich people, mostly family ties. This is so obvious. I don't need statistics to tell me that the sun rises every morning. Unfortunately, there is no incentive for anyone with money to fund studies to show how crony-capitalism doesn't work. On the other hand, many people with money are interested to fund studies which show how it does work. So you only see the good parts and even there, the choice of words often distorts the true meaning of the statistics. Statistics are worthless. My wife has a masters degree in marketing and was working in market research for over a decade before she quit (she worked for several acclaimed agencies and did a lot of work for big corporations and governments). She is the one who told me that statistics are worthless (which is why she ended up quitting). The job of the market research agency is to figure out what the client wants to hear and then they work backwards to make the numbers fit... Then they make creative use of wording, categories and correlations to mislead clients into drawing incorrect but financially beneficial conclusions.
- jariel 5y agoIt's not 'ownership' that is the problem, it's when combined with housing inflation etc..
- gtsop 5y agoMost of my relatives have moved from owning their property to renting. The rents go higher and higher, leading people to rent worse and worse houses so they can aford to live. Those who still manage to own their home have a significant advantage in life. West's biggest economic-policy mistake isn't home ownership, but capitalistic use of housing. Give me a 100% guarantee that I will get afordable, good quality housing for life and I will have the keys of my house delivered to you tomorrow, first class shipping, free of charge. Can you ever make this guarantee in a capitalist economy? No? Well, I'll pass then, I'll keep my own house. Bye
- dslkfjg 5y agoIt's not like the price of sleeping somewhere is going to go down if we assign home ownership to people whose goal is to raise the cost of housing for personal gain. California found out how little this is tolerated when they tried to turn everyone's house into the government's piggy bank by continually raising property taxes. Their voters, ina rare show of almost total unity, capped property taxes to 1%. It can only be, then, that not only will we not own housing, but its cost, supply, distribution and asignment to individuals will tightly controlled by the government. At this point in this exercise either you understand that this is an attempt to get you to accept the implementation of totalitarianism or you're under the age of 15.
- gtsop 5y agoFor some reason you extrapolated that I support government ownership of everyones houses. My comment was very clear, with the economy being what it is people are better of owning their houses than renting. When you own the house your only cost is maintenance and you don't fear of living in the street one day. And the question is also clear, by transfering the ownership to any agregator, can they guarantee you will not live on the street one day? They answer is no. Let's move on then. > At this point in this exercise either you understand that this is an attempt to get you to accept the implementation of totalitarianism or you're under the age of 15. I honestly don't even understand what your point is
- austincheney 5y agoContrary to the basic laws of supply/demand housing prices tend to increase as quantity of housing increases. To see this problem look at current and historical data only. Do not trend for the future. The reason why this can occur contrary to the most basic principle of economics is because land is a fixed resource regardless of the frequency of housing upon it. Peoples’ perceptions of fixed resources doesn’t change regardless of frequency variations upon them resulting in trends that defy both pricing and availability as suggested by supply/demand. The problem this causes is bad policy. There is always a perception of housing shortages. Sometimes there are housing shortages but far more often there are plenty of houses that new incumbents cannot afford. That is an availability problem but not a shortage. Building more housing to directly address that concern widens the gap between shortage and availability. The speed with which that housing is built is a direct correlation to the rate of value increase of existing homes. That increased value drives up property taxes. This change is immediately felt by property owners. For rental properties this change results in a short term loss of capital and a lagging price hike to the renters to make up the difference. That delayed variance of price increase increases demand of ownership without addressing availability. Here is my real world example: I live in one of the fastest growing areas of the US. In 1990 my city was less than 450,000 people. The city was considered large but not amongst the largest in the US by a long shot. In 2010 it was around 750,000 and the 2019 estimate put it at about 910,000 making it the 13th largest city in the US. I bought my house as a foreclosure after the crash in late 2009 (2800sqft) for 129k retail before fees and taxes. In the past few years they projected housing shortages so there is a shift from building hundreds of homes per year to apartments. As a result, last year alone, houses have increased in value 50%. More than month ago the price of lumber dramatically increased and rapid inflation become apparent. In the past month the value of my house has increased by more than 10%. More than hour away my mom’s house has increased by nearly 11% over just the past month and they aren’t even doing any construction there. EDIT I am curious to see any real world cases where housing prices went down as a result of building more housing.
- deleted 5y ago[deleted]
- EVa5I7bHFq9mnYK 5y agoSo why people flock to those high priced cities? Past year has shown you can work remotely alright. Is it just the restaurants?
- timbit42 5y agoMany employers weren't convinced of remote work. The pandemic has changed this so I expect to see an effect. Also, rural areas often don't have very good internet for remote work, so moving toward cities helps.
- bambax 5y ago> Young people’s view that housing is out of reach helps explain their drift towards “millennial socialism” And? Is socialism bad per se? Or is it just something that The Economist doesn't like? > In Britain areas with stagnant housing markets were more likely to vote for Brexit in 2016 Ah but which is it? This comes just one sentence after the previous quote, making it seem brexitism is a variant of socialism. Is it?
- dslkfjg 5y agoRTFA. (written by no-one, literally, no byline). TLDR: the elites want you to own nothing and like it. Anyone who doesn't see in this and COVID passports and only electronic money the clear beginning of an elite-driven fascism is beyond help at this point.
- nemo44x 5y agoThe Economist never uses bylines. Everything is written by “the Economist”.
- deleted 5y ago[deleted]
- hnnameblah365 5y agoI would pin the failure on how we view home ownership as an investment vehicle. There's little inherently appreciable to a building. In fact they depreciate over time and require constant investment to maintain. The location however can appreciate, which we all agree on. But we never say out loud the underlying mechanism. Locations appreciate in value specifically because more humans want to own it. Viewing homes as investments therefore, requires you to steadily make more and more people want your home who are unable to have it. This explains why NIMBYism is so effective at raising house value.
- nemo44x 5y agoStructures don’t necessarily depreciate in value over time if maintained. The costs of materials and labor increase allowing an existing structure to maintain value and appreciate. Have you seen how much a 2x4 costs today? $8! When my home was built that piece of wood cost 5 cents. So the value of the structure is what it would cost in terms of parts and labor today minus existing wear-and-tear and needed repairs. Of course maintaining the structure probably eats up any potential profit over time on the structure itself while the land appreciates indefinitely. However in many places the land is worth far more than the structure.
- hnnameblah365 5y agoThe other way I thought of that the building itself appreciates is if the craftsmanship style becomes antique or vintage down the line. Or the architect becomes notable, etc.
- ethagknight 5y agoThis is not correct, both land and structure have differing but related values. With persistently increasing construction complexity and building code, replacement cost generously outpaces existing building value. At least from a USA perspective, many neighborhoods are stuck with older, dated housing stock that would be aesthetically better off scraped and rebuilt in modern form, but the existing home is too valuable and ground-up new construction too expensive relative to market. In typical US middle-income neighborhood, a scraped lot isn't worth much because the cost to build a suitable replacement home is too high, above market rates per sf of living space. Its a risky investment, but someone may agree that the value is worth it and buy it down the road, or maybe not. The same home site with a decent (but boring) home in good marketable condition will be priced relative to median incomes and market values of surrounding neighbors. The home structure is the valuable, appreciated component in this scenario. Home ownership certainly is an investment vehicle- tradable and you can gain or lose lots of money on it! its also the largest single investment for most/many people. Many investments have operating and maintenance costs, nothing wrong with having to fight some depreciating elements in an investment. Land value is important. Structure value is important. Pin the failure on viewing homeownership as a "sure bet, can't lose" investment causing too many people to aim to high above market.
- ngcc_hk 5y agoIn some places the money you earn after owning even a small place exceed all the income you got in working. I guess it depends.
- biddit 5y agoHousing cannot be both affordable and a good investment at the same time.
- gpvos 5y ago(2020)
- macinjosh 5y agoIn the US you can get a USDA home loan. The minimum down payment is ZERO. The mortgage insurance is incredibly affordable as well. The catch is you have purchase a home in an approved rural area. I grew up in a house paid for by a USDA loan. We lived in a small town just 5 miles from a larger city that had all the opportunities we needed. We don't have an affordable housing issue. There are plenty of affordable places to build and buy a home outside of NY, SF, and <your-big-city>. We have problem where everyone wants to live somewhere that has cachet not a small rural town.
- tedk-42 5y agoThe rich are getting richer because they are able to acquire more and more property and prices keep going up. Simply limit the number of properties a person can own would solve a lot of price issues. Also limiting property as something you can pass down would drop prices fast as well. These things are impossible because the rich and their property ownership is protected and this is a dangerous idea for the masses
- known 5y agohttps://archive.ph/iyTVR https://archive.ph/iyTVR
- a0-prw 5y agoI don't know about the macroeconomics of this issue, but I am SO happy to be free of my house: Constant house maintenance (remember to price that into the cost), cutting the grass once a week in summer and shovelling snow off the sidewalk in winter, pruning trees, insurance, always worried in storm season that a big wind will take the roof off (as happened to many of my neighbours). Home ownership is a dream lots of young people have (as I had), but I think it's a pipe dream. You'll be a slave to your monthly payments wether it's a mortage or rent you're paying. I have far more freedom and less worries now.
- mcwalshq 5y agoHousing markets all over the world have significantly increased their value since the Boomer era. We should try to secure property even we resort to renting to own or similar to that, not just blindly renting throughout our whole life.
- mycentstoo 5y agoIn my opinion, at some point, there will be a lot more voters who don't have houses than there are that do. When that happens, there will be a strong incentive to level the playing field and increase property taxes, reduce tax benefits and in general, degrade some of the financial incentives to have a house.
- cannabis_sam 5y agoThis a million times is true, every politician responsible for this garbage type of policy has robbed coming generations for their future. It’s a deeply, deeply, deeply, vile and evil policy, perpetuated by completely incompetent politicians, high on their own power, 100% done for their own gain (how many politicians rent, just on average... ) Everyone who ever voted for this garbage is a literal thief... including every single property owner... (yes, my parents, your parents, everyone who owns a fucking house is responsible) Expropriation really is the perfect solution to dealing with these assholes, trying to appropriate the future to pad their own pension.. Fuck ‘em, long and hard
- cannabis_sam 5y agoPeople who profit of other people’s housing should be imprisoned for exploitation. It’s a deeply hateful system perpetuated by spoiled rich clueless assholes.
- snarfybarfy 5y agoI'd love to RTFA but I am paywalled! You guys all have subscriptions, or what?
- hewsnacker 5y ago> At the root of that failure is a lack of building, especially near the thriving cities in which jobs are plentiful. Well then get at the root of the root of the failure and stop artificially cramping jobs up in cities. Living closer and denser with people ends in misery for everyone and disconnects people even more from the world they actually depend on.