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> What's this obsession with increasing housing density? Wealth inequality is compounded when urban real estate appreciates faster. The Economist blithely ign

by wahern 6y ago

> What's this obsession with increasing housing density? Wealth inequality is compounded when urban real estate appreciates faster. The Economist blithely ignores why governments are obsessed with homeownership, though--because homeownership tends to negatively correlate with wealth inequality. That is, the greater rate of homeownership, the less wealth inequality. So rents may be stable in Germany, but so is its moderately high wealth inequality.[1] However, mortgage burden positively correlates with wealth inequality. Using easy financing to make ownership more common tends to cancel out the former effect. So, really, what correlates with lower income equality isn't nominal ownership, but actual equity. [1] See https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/WKP(2019)58&docLanguage=En https://www.oecd.org/officialdocuments/publicdisplaydocument... and https://www.jstor.org/stable/pdf/10.15609/annaeconstat2009.136.0027.pdf https://www.jstor.org/stable/pdf/10.15609/annaeconstat2009.1...

eptcyka 6y ago
Easy financing only drives up prices.
presentation 6y ago
I personally think the issue isn’t really homeownership per se, but homeownership as an investment. The biggest long term difference I see between my life here in Japan and in San Francisco is that people here view their homes as a place to live in, and that there’s no shortage of options of places to buy - but don’t expect a profit on it unless you’re within 5 minutes from the most coveted stations. Otherwise, you buy because it’s better value than renting, and so I see that my Japanese friends can be young, middle class, and still benefit from the economies of scale of living in the largest city on Earth. Meanwhile countless people are excluded from San Francisco’s business nexus because it’s just too expensive to justify. Meanwhile my landlord had already bought over 10 properties to rent and had accumulated otherworldly wealth from the fact that he was born 30 years before me. Many of my friends have virtually 0 prospects of ever reaching home ownership in a major American city, and so long as everyone’s home values rises indefinitely, it’s only going to become more unattainable. COVID has changed the calculation, but I still think cities will remain economically dominant into the future.
bildung 6y ago
I'm not sure the links support the thesis that "the greater rate of homeownership, the less wealth inequality." The first source explicitly says that this only occurs "in countries where homeownership is widespread" (p. 67), and it makes the poor half of the owners vulnerable to price changes. More importantly, the second document has an arbitrary selection of countries that supports its cause and ignores others. The relationship completely breaks for e.g. Denmark with ownership rate 61% and a Gini coefficient of 0.25 or Sweden (63%, 0.3). One of the reasons is that ownership ratio alone doesn't explain how the non-privately owned housing is structured. For example Eastern Germany has much lower individual ownership rate (and lower inequality) than Western Germany. The rental units though are mostly owned by either by municipal enterprises or cooperatives (both due to the socialist history of this part of the country, the formerly public enterprises were transformed to their western analogues) - neither of which usually try to drive rents up.

by wahern 6y ago

eptcyka 6y ago

Easy financing only drives up prices.

presentation 6y ago

I personally think the issue isn’t really homeownership per se, but homeownership as an investment. The biggest long term difference I see between my life here in Japan and in San Francisco is that people here view their homes as a place to live in, and that there’s no shortage of options of places to buy - but don’t expect a profit on it unless you’re within 5 minutes from the most coveted stations. Otherwise, you buy because it’s better value than renting, and so I see that my Japanese friends can be young, middle class, and still benefit from the economies of scale of living in the largest city on Earth. Meanwhile countless people are excluded from San Francisco’s business nexus because it’s just too expensive to justify. Meanwhile my landlord had already bought over 10 properties to rent and had accumulated otherworldly wealth from the fact that he was born 30 years before me. Many of my friends have virtually 0 prospects of ever reaching home ownership in a major American city, and so long as everyone’s home values rises indefinitely, it’s only going to become more unattainable. COVID has changed the calculation, but I still think cities will remain economically dominant into the future.

bildung 6y ago

I'm not sure the links support the thesis that "the greater rate of homeownership, the less wealth inequality." The first source explicitly says that this only occurs "in countries where homeownership is widespread" (p. 67), and it makes the poor half of the owners vulnerable to price changes. More importantly, the second document has an arbitrary selection of countries that supports its cause and ignores others. The relationship completely breaks for e.g. Denmark with ownership rate 61% and a Gini coefficient of 0.25 or Sweden (63%, 0.3). One of the reasons is that ownership ratio alone doesn't explain how the non-privately owned housing is structured. For example Eastern Germany has much lower individual ownership rate (and lower inequality) than Western Germany. The rental units though are mostly owned by either by municipal enterprises or cooperatives (both due to the socialist history of this part of the country, the formerly public enterprises were transformed to their western analogues) - neither of which usually try to drive rents up.