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Housing can either be affordable, or profitable, not both. Affordable means that the price of a house remains stable relative to inflation or wages. Profitable

Housing can either be affordable, or profitable, not both. Affordable means that the price of a house remains stable relative to inflation or wages. Profitable means it has to grow faster than inflation or wages. Everyone needs somewhere to live, therefore housing should not be profitable. You shouldn’t be able to make a tonne of money by just buying a house and sitting on it. Investing in housing should mean improving existing housing or building new housing. Here in Australia the government is talking about letting young people access our equivalent of their 401k to afford a deposit on a house. Without changing the supply of housing how is this anything other than another attempt from boomers to steal more wealth from their children so they can line their coffins with more gold.

xwdv 5y ago
Profitable means we get more and more houses being built.
- reportingsjr 5y ago
  Except due to insane zoning rules and an ever greater push for exurban housing, which is insanely expensive due to the infrastructure required, we are not getting nearly enough housing.
- nicoburns 5y ago
  The way to make them affordable rather than profitable would be to build many more than are currently being built. As long as the quality is decent, you then drive the prices down through a simple increase in supply. You probably still need some tweaks to disincentivise use of property as a financial vehicle, but you're 70% there just by building more.
  - darepublic 5y ago
    Unless something still manipulates the price, as in the diamond market.
- BreakfastB0b 5y ago
  You would think so. But once again, how can housing continue to be profitable i.e. grow faster than wages, and people still afford to buy houses? Doesn’t it collapse at some point? Isn’t that the joke about only economists think that exponential growth can continue forever? Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. It seems like the market is currently a game of chicken of who’s willing to sign away more of their life. An interest only loan is literally admitting you can’t afford this house and the only hope you ever have of paying it off is if it increases in value without you doing anything.
  - xxpor 5y ago
    Profitable by owning and sitting on an asset != Profitable for a builder to buy land and build a house. You can have one without the other.
    - BreakfastB0b 5y ago
      Totally agree. The government should have a policy goal of keeping house prices stable relative to inflation. But when multiple generations have locked up most of their wealth into housing, it’s unclear how to untangle the whole mess without collapsing the economy.
      - nickcox 5y ago
        Also without losing votes from the people with property equity (i.e. the majority of the electorate).
  - maccard 5y ago
    > Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. These interest only are the reason my parents lived in a house 2x what they could afford - they took out an interest only mortgage in 2002, paid less on the mortgage than I was paying in rent for a room in an apartment last year, and sold at a 2.5x gain (to someone in my generation who is now mortgaged to the hilt), and bought a smaller home in cash from the proceeds after retirement. It's insanely unfair that the solution to irresponsible lending to my parents generation is to protect their investments and make sure I can pay back what they won't be able to repay.
- cshokie 5y ago
  If homes are a profit-seeking investment then supply and demand would incentivize lower supply. If new houses cannot be built, but the demand is the same or increasing, then prices must rise. The profit motive directly leads some people to fight against new housing.
  - jvfujnvxvcd 5y ago
    Quite frankly I don't think any of you in this thread have any idea what you're talking about
    - BreakfastB0b 5y ago
      That’s true! I’m not an economist or a policy expert. I don’t claim to have any answers. I’m just pointing out that profitability and affordability are mutually exclusive goals for housing prices. I leave it to people much smarter than myself to figure out if anything can or should be done.
- mixmastamyk 5y ago
  Nimbys don’t allow it.
- tfehring 5y ago
  Profitable to build != profitable to hold.
- duped 5y ago
  housing is most profitable when there is the least new construction.
- kelnos 5y ago
  I assume you are saying this to claim that if housing is "merely" affordable, no one will be incentivized to build houses. That's not really how it works. Developers can make a profit when building new housing on vacant land, or on improving existing housing. That does not preclude the resulting housing from being affordable, though. This is an unfortunate overloading of terms, but "profitable" in this sense doesn't mean just the usual "get more money out than you put in". It refers to the practice of land/housing speculation, and buying housing with the intent to hold and then sell at a profit without doing anything meaningful with it.
koolba 5y ago
> Here in Australia the government is talking about letting young people access our equivalent of their 401k to afford a deposit on a house. Which will have the effect of pushing housing prices even further. It’s like the government providing ever increasing student loans, if you don’t change the supply curve it just increases demand which pushes prices higher.
andrepd 5y ago
The answer to this particular problem is Georgism and a Land Value Tax. It strongly disincenctivises speculation and incenctivises productive use. It ensures that a person claiming ownership of land makes more productive use of it than the cost of depriving society of use of that land. As a cherry on top, the income from LVT can be used to reduce taxes on labour, or simply to be given back as a citizen's dividend.
- worldsayshi 5y ago
  I wonder if there's a good way to sell such a concept onto a political landscape. Anyone who already owns anything would want to keep things as they are. Feels like a very central political problem. Those that have accumulated wealth and power it would be in their interest to increase rather than decrease the scheme-ines of the political system. This concept has to have a name?
  - timy2shoes 5y ago
    I think regulatory capture applies here (https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture)
  - andrepd 5y ago
    > Anyone who already owns anything would want to keep things as they are. Feels like a very central political problem. Indeed, jt is perhaps the most central political problem: how does a class that doesn't have power wrestle it from those who already have power? As for the name, how about "human history"? :)
  - asdff 5y ago
    What you are describing is status quo bias I believe. This political structure is also oligarchy.
- bcrosby95 5y ago
  It would only do this if LVT were significantly higher than property taxes. Because property taxes already includes the value of the land. E.g. my "house" is valued at 700k. But the appraisal puts that at $280k structure and $420k land. 1% of 700k is 7k, but 1% of 420k is 4.2k.
vertere 5y ago
> Profitable means it has to grow faster than inflation or wages. That is not what profitable means. Returns on investment in housing consist of: 1. rental yields, and 2. capital gains (i.e. change in price). You cannot say whether housing is profitable or not (or affordable, for that matter) only by considering number 2.
- BreakfastB0b 5y ago
  That’s true, I didn’t figure in rental yields at all. Consider it a first order approximation. Would anyone rent if it was more affordable to buy?
  - sokoloff 5y ago
    I’d still have rented while in college. I’d still have rented for my first two or three places after college. After that, I bought a place, lived in it for a while, then moved and rented in the city in two places (including one with a girlfriend which seems like a bad idea to jump right into home ownership), then bought the house I live in now. There’s plenty of beneficial flexibility afforded by renting, even if you can afford to do either one. Plus, if housing doesn’t go up in value like an investment, why would you want to tie up a downpayment and tie yourself down, losing money all the while? You’d have more incentive to rent and invest your down payment money.
    - 8note 5y ago
      Rentals should always be more expensive than buying then, no? You're gaining a service overtop of the place to live. Not to mention, you should be able to leave atyhe drop of a hat, rather than be required to have a 1 year lease
      - sokoloff 5y ago
        Renting hotel rooms is more expensive than a month-to-month lease is more expensive than a year-long lease, so that all checks out to agree with your premise. Whether renting or buying is more expensive depends on your market’s outlook for property prices. But in an environment where they don’t go up, I’d definitely expect renting to cost more.
smnrchrds 5y ago
> Here in Australia the government is talking about letting young people access our equivalent of their 401k to afford a deposit on a house. We do that in Canada. I don't think it has helped with the affordability issue at all. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html https://www.canada.ca/en/revenue-agency/services/tax/individ...
- kelnos 5y ago
  Of course not; it encourages home prices to keep going up, because people have access to another source to fund home purchases. The problem is, of course, that tapping your 401k-equiavalent is a long-term bad move unless you have a way to quickly put that money back without skimping on other things.
  - dharmab 5y ago
    It worked out pretty well for many of my friends' parents, who bought houses in the American West, raised their kids, and then sold their now incredibly valuable homes to retire to small towns. Doesn't work so well when houses are expensive.
- trts 5y ago
  Why would the expectation be that it helps affordability? On an individual basis, having access to more money means you may be able to afford a home that would not have been within your means. In aggregate, everyone having more access to more money means inflation. Access to more money for a specific good or service means inflation concentrated in that category. See: college tuition and home prices in the U.S.
  - nicoburns 5y ago
    > Access to more money for a specific good or service means inflation concentrated in that category. See: college tuition and home prices in the U.S. 100x this. Financial policy giving everyone access to cheap mortgages has got to be one of the stupidest things governments have done in the last 30 years.
ProjectArcturis 5y ago
The problem in Australia in particular is that you're running out of land. The four major cities are surrounded by water and nature preserves. As population increases, demand runs up against a very inelastic supply. The only policy solution would be to strongly emphasize dense high-rise development.
- blackth0rn 5y ago
  I'm not sure Australia has a land problem in general, population density is quite low (I understand that a lot of the land doesn't support high density living). They have an issue in that their major cities have some constraints on perpetual outwards growth. Maybe this will help encourage remote work and relocation of offices to places that aren't the core downtown area of Melbourne and Sydney?
  - foxpurple 5y ago
    There is very limited land in places where you want to be. There is endless land in the middle of nowhere but that isn’t very useful for most people.
    - bussierem 5y ago
      This comes up often in these discussions but, barring any indigenous lands, there's nothing especially inhospitable about central aus. Las Vegas is in the middle of a damn desert, and Arizona/New Mexico are both extreme climates compared to much of the US but they are still livable and many people actually prefer it. I can't see why this would be any different in Australia...
      - foxpurple 5y ago
        It’s not about how possible it is to live, it’s about places people actually want to live. There is virtually unlimited land with good climate. But people don’t want to live there because it’s far from everything. Most people have picked paying more to live closer to events, jobs, stores and friends. Australia doesn’t have the population to start a new major city in the center. There are still multiple cities like Adelaide which could grow instead.
shalmanese 5y ago
Housing can be both affordable and profitable with a organized system of infill development. eg: You buy a single family home in an inner ring suburb in 1990 for $150K. You sell it in 2021 to a developer for $2.1M (9% RoR), the developer tears it down and spends $1.5M to build 12 apartments on the same footprint of land that sell for $350K each (~400K profit net transaction costs). People in 2021 are paying the same amount for housing as you did in 1990 but you also made a good return on your investment.
- handmodel 5y ago
  That sounds like it is affordable and profitable if you are in the top half of incomes. In that situation - a renter who made ~40k a year (in today's dollars - probably 30k in 1990 dollars) in 1990 could not afford a single family home and had to deal with expensive rents (because the city didn't allowed apartments buildings where there was demand).
- ryankupyn 5y ago
  The critical thing is that this also requires a growing population - which is not guaranteed in all places/timeframes!
- nicoburns 5y ago
  So what you're saying is housing was affordable in the 1990, but not you're paying twice as much for a much smaller space.
  - handmodel 5y ago
    It is also worth noting that in the example above (assuming we accept the 150k as normal and that growth as typical) that 150k was a solid amount of money. In 1990 the median income for someone with a a high school diploma was 26k. For someone with a masters degree it was still 50k. An educational attainment was lower across the board. So if you didn't have 150k then I guess you're screwed since they weren't going to let apartments to be built for so long? The only situation where you'd get that ROI is if the supply of houses had been constrained strictly for so long - which almost by definition means that rents grew at that rate too.
paxys 5y ago
The reason this doesn't work is that people want to live in very specific places. If you aggregate at the national level, the cost of land or housing hasn't gone up all that much in America over the last century. For every San Francisco there is a Detroit to balance things out.
- AnimalMuppet 5y ago
  Having looked around a bit lately, it seems to me that if you don't buy in a major metro area, and you buy a house that was built in the 1950s, you pay something that, inflation-adjusted, would look reasonable to someone in the 1950s. But lots of people don't want to live in houses that small. Well, if you want more, you pay more. And maybe the comparison isn't fair. In the 1950s, those houses weren't 70 years old, but they are now...
pedalpete 5y ago
As a Canadian who now lives in Australia, I'm astounded by the levers the Australian gov't will pull in order to keep the housing market "booming". In my 10 years here I've seen them split them make it difficult for foreigners to buy existing houses, but easy to buy off-plan https://treasury.gov.au/sites/default/files/2019-03/Stronger-rules-for-foreign-investors-owning-Australian-housing.pdf https://treasury.gov.au/sites/default/files/2019-03/Stronger... I've seen them restrict the amount of money retirement plans can use to invest in equities, promoting the use of more funds going to real estate (this was my understanding of the changes) - https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia And now including your housing as part of your superannuation, which I wasn't aware of. Every time I think they've run out of levers to pull, they find another one. When I arrived here in 2011, I thought real estate was cheap compared to rents, that equation has completely flipped.
- nl 5y ago
  > I've seen them restrict the amount of money retirement plans can use to invest in equities, promoting the use of more funds going to real estate (this was my understanding of the changes) I don't believe this is the case and haven't seen any coverage indicating a change like this. > And now including your housing as part of your superannuation, which I wasn't aware of. No, it's the opposite. You can withdraw part of any voluntary contributions to buy your first house. See https://www.abc.net.au/news/2021-05-13/budget-superannuation-changes-benefit-workers-women-retirees/100135376 https://www.abc.net.au/news/2021-05-13/budget-superannuation...
- nickcox 5y ago
  > When I arrived here in 2011, I thought real estate was cheap compared to rents, that equation has completely flipped. As long as it's possible to negatively gear unrelated income while building up a property portfolio it makes sense that people will be happy to lose money on rents in order to take advantage of capital gains discounts down the track.
Gatsky 5y ago
Not sure this generational divide argument holds water much. The children of boomers, who grew up in relatively nice houses with backyards, similarly want nice houses. Increasing supply in an urban planning context involves increasing high density dwellings in the inner city. This is a hard pill to swallow for adults who remember playing cricket in the backyard with their Dad or whatever idyllic notion they are left with from their wonderful childhoods (not a joke, Australian kids have great childhoods by any metric). The boomer parents also want the same thing for their adult children, and help fund the acquisition. As boomers die off and the wealth passes to their kids, they will invariably spend it on houses (or second houses) as well. I also think different cities in Austrlia have differnet issues. Adelaide has a very old demographic and little migration, and has the problem that their health care costs are going to greatly exceed their revenue. Melbourne has had too much migration, which tends to just make the economy look fine but causes a lot of strain on infrastructure. Melbourne and Sydney also suffer from being gravity wells for migration, so that people don't leave for better paying work elsewhere or cheaper housing. They choose to suffer underemployment in very competitive and saturated labour markets with unaffordable housing. I include myself here. Housing affordability is not going to improve. There is no way prices are going to correct by the 30% - 40% in desirable places to live to get into the realm of affordability. Increasing urban density is neither attractive to people nor likely to happen. It's done and dusted. The only thing to hope for is that the rate of change will slow down, and wages will improve so that at some point in 30 years time affordability will be better. That means there will be a generation of people who don't own their homes, and the comparison to the previous generation will be highly unfavourable. Being an elderly renter is a greatly inferior experience, and the government outlay for housing the elderly will simply increase more and more. The 'solution' to my mind is to strongly encourage people to move to places with more affordable housing and good living conditions.
- siquick 5y ago
  > Melbourne and Sydney also suffer from being gravity wells for migration, so that people don't leave for better paying work elsewhere or cheaper housing. This is exactly it, I'd love to leave Sydney to live somewhere else but until remote working is ingrained in our culture, it's just too risky for my partner and I to move away to a smaller city/town incase our current employment changes. I've been amazed to hear of so many people who, as soon as they started working from home because of the pandemic, bought a house 2.5 hours away from their office. You're one bosses decision away from having a very miserable daily life.
xf1cf 5y ago
> Without changing the supply of housing how is this anything other than another attempt from boomers to steal more wealth from their children so they can line their coffins with more gold. I don't think you can reduce this so easily. Houses can be profitable without be exorbitantly expensive. For example, a 6% increase per year would beat inflation and provide a small gain as an investment. Housing is, even under your proposed system, the largest purchase most people will ever make. People want to know the largest purchase they will ever make will be net profitable. Even marginally so. You have to be careful because disincentivizing ownership of houses (by making them net neutral or negative) will simply push more money into the rental market. The exact opposite of your intention of "striking back at the rich boomers". Moreover, there are several concerns regarding government interventionism. Some of housing prices can be described by the law of unintended consequences. I'm speaking as an American: (1) Land Use Rights: governments in many states won't let you bulldoze public land to build houses. This dwindles supply. (2) Disability requirements. Houses need to be built to support disabled people. ADA requirements can often significantly increase not only material costs (compliant walkways and such are not cheap) as well as legal costs (in case you get sued). (3) Foreign investment. In America foreign citizens can own property. This means prosperous nationals (for example from China and Saudi Arabia) can buy large swaths of houses to rent. So with (1) we lose supply because of land use. (2) we lose supply because of legal requirements. (3) we lose supply because foreign investment, ostensibly good for the country, is terrible for housing. Now you turn to finance and realize that with money easier to get through FHA loans, military-specific loans, and other hand out programs the amount of capital available in the market is much higher than 40 years ago. The solution isn't as simple as blaming boomers. There are many reasons housing is absurdly expensive and I don't think it's a conspiracy recently created to screw over millennials. This has been in the works for many, many decades and in my eyes the majority of it can be explained by unintended consequences.
xienze 5y ago
> You shouldn’t be able to make a tonne of money by just buying a house and sitting on it. Maybe you should instead think of it as sitting on a piece of _land_, not a house. Twenty years ago you bought a house in the middle of nowhere, now because of people moving to the area it’s desirable and thus worth a lot more. Whose fault is that?
- mikem170 5y ago
  One could argue that if the community expanding over a couple of decades is what made a house more valuable then it would be appropriate for the community to receive the profit, and not the home owner who just sat there.
Sophistifunk 5y ago
It's very clear that our (Strayan) government will sacrifice anything on the altar of the housing bubble, because that's what the boomers demand, and they're still in charge for some reason. The rest of us get the shaft.
- foobar33333 5y ago
  It's because half the population has their retirement based on housing values so if you crush that, you have a generation of boomers with no retirement money.
  - 8note 5y ago
    Keeping the housing price expensive seems less efficient than just paying the boomers retirement money. All kinds of people get to profit off of the high housing prices that could otherwise be part of the retirement money
  - Sophistifunk 5y ago
    ...so instead we have gen x and younger with mostly no retirement money and mostly no houses either. Great plan.
atweiden 5y ago
> You shouldn’t be able to make a tonne of money by just buying a house and sitting on it. But humans occupy physical space. Almost everyone would prefer more privacy and space to less. Hence if the human population keeps growing, the price of having physical privacy and space will also keep growing. It’s just the bitter reality of it. In addition, often times the architecture or established land use patterns of certain neighborhoods act as an upper limit on population density. It really grinds my gears when people advocate for essentially paving over these crucial neighborhood characteristics. This effectively destroys local culture in the name of “inclusivity”. Granted, there are definitely more neighborhoods without any unique character than not, and it’s hard to feel any sympathy for paving them over. But there are certainly quite a few neighborhoods globally that are quite special, and in these places inclusivity tends to be a tragedy of the commons scenario.
- mertd 5y ago
  How do you define a neighborhood characteristic? Usually it's nothing but an arbitrary snapshot in time that some folks decided is ideal and should be frozen. Curiously it tends to correlate with the date they moved in to the said neighborhood.
  - atweiden 5y ago
    > How do you define a neighborhood characteristic? Usually it's nothing but an arbitrary snapshot in time that some folks decided is ideal and should be frozen. Usually so, but sometimes not. What are the characteristics of Gion Kyoto, for example?
- 8note 5y ago
  I think that is to say that land needs to be taxed quite heavily. If you're taking up a lot of space, you're keeping important resources tied up in nothinh
  - Tagbert 5y ago
    Sounds like you want to significantly increase the price of housing to do…?
nickcox 5y ago
There is definitely a serious intergenerational fairness issue here. One of the best expositions of the problem I've seen is this talk by Tory peer (and boomer!) Lord David Willetts. https://www.youtube.com/watch?v=ZuXzvjBYW8A https://www.youtube.com/watch?v=ZuXzvjBYW8A

xwdv 5y ago

Profitable means we get more and more houses being built.

reportingsjr 5y ago
Except due to insane zoning rules and an ever greater push for exurban housing, which is insanely expensive due to the infrastructure required, we are not getting nearly enough housing.
nicoburns 5y ago
The way to make them affordable rather than profitable would be to build many more than are currently being built. As long as the quality is decent, you then drive the prices down through a simple increase in supply. You probably still need some tweaks to disincentivise use of property as a financial vehicle, but you're 70% there just by building more.
- darepublic 5y ago
  Unless something still manipulates the price, as in the diamond market.
BreakfastB0b 5y ago
You would think so. But once again, how can housing continue to be profitable i.e. grow faster than wages, and people still afford to buy houses? Doesn’t it collapse at some point? Isn’t that the joke about only economists think that exponential growth can continue forever? Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. It seems like the market is currently a game of chicken of who’s willing to sign away more of their life. An interest only loan is literally admitting you can’t afford this house and the only hope you ever have of paying it off is if it increases in value without you doing anything.
- xxpor 5y ago
  Profitable by owning and sitting on an asset != Profitable for a builder to buy land and build a house. You can have one without the other.
  - BreakfastB0b 5y ago
    Totally agree. The government should have a policy goal of keeping house prices stable relative to inflation. But when multiple generations have locked up most of their wealth into housing, it’s unclear how to untangle the whole mess without collapsing the economy.
    - nickcox 5y ago
      Also without losing votes from the people with property equity (i.e. the majority of the electorate).
- maccard 5y ago
  > Most of my peers are either completely priced out of the market, or taking on 40yr or interest only loans. These interest only are the reason my parents lived in a house 2x what they could afford - they took out an interest only mortgage in 2002, paid less on the mortgage than I was paying in rent for a room in an apartment last year, and sold at a 2.5x gain (to someone in my generation who is now mortgaged to the hilt), and bought a smaller home in cash from the proceeds after retirement. It's insanely unfair that the solution to irresponsible lending to my parents generation is to protect their investments and make sure I can pay back what they won't be able to repay.
cshokie 5y ago
If homes are a profit-seeking investment then supply and demand would incentivize lower supply. If new houses cannot be built, but the demand is the same or increasing, then prices must rise. The profit motive directly leads some people to fight against new housing.
- jvfujnvxvcd 5y ago
  Quite frankly I don't think any of you in this thread have any idea what you're talking about
  - BreakfastB0b 5y ago
    That’s true! I’m not an economist or a policy expert. I don’t claim to have any answers. I’m just pointing out that profitability and affordability are mutually exclusive goals for housing prices. I leave it to people much smarter than myself to figure out if anything can or should be done.
mixmastamyk 5y ago
Nimbys don’t allow it.
tfehring 5y ago
Profitable to build != profitable to hold.
duped 5y ago
housing is most profitable when there is the least new construction.
kelnos 5y ago
I assume you are saying this to claim that if housing is "merely" affordable, no one will be incentivized to build houses. That's not really how it works. Developers can make a profit when building new housing on vacant land, or on improving existing housing. That does not preclude the resulting housing from being affordable, though. This is an unfortunate overloading of terms, but "profitable" in this sense doesn't mean just the usual "get more money out than you put in". It refers to the practice of land/housing speculation, and buying housing with the intent to hold and then sell at a profit without doing anything meaningful with it.

koolba 5y ago

> Here in Australia the government is talking about letting young people access our equivalent of their 401k to afford a deposit on a house. Which will have the effect of pushing housing prices even further. It’s like the government providing ever increasing student loans, if you don’t change the supply curve it just increases demand which pushes prices higher.

andrepd 5y ago

The answer to this particular problem is Georgism and a Land Value Tax. It strongly disincenctivises speculation and incenctivises productive use. It ensures that a person claiming ownership of land makes more productive use of it than the cost of depriving society of use of that land. As a cherry on top, the income from LVT can be used to reduce taxes on labour, or simply to be given back as a citizen's dividend.

worldsayshi 5y ago
I wonder if there's a good way to sell such a concept onto a political landscape. Anyone who already owns anything would want to keep things as they are. Feels like a very central political problem. Those that have accumulated wealth and power it would be in their interest to increase rather than decrease the scheme-ines of the political system. This concept has to have a name?
- timy2shoes 5y ago
  I think regulatory capture applies here (https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture)
- andrepd 5y ago
  > Anyone who already owns anything would want to keep things as they are. Feels like a very central political problem. Indeed, jt is perhaps the most central political problem: how does a class that doesn't have power wrestle it from those who already have power? As for the name, how about "human history"? :)
- asdff 5y ago
  What you are describing is status quo bias I believe. This political structure is also oligarchy.
bcrosby95 5y ago
It would only do this if LVT were significantly higher than property taxes. Because property taxes already includes the value of the land. E.g. my "house" is valued at 700k. But the appraisal puts that at $280k structure and $420k land. 1% of 700k is 7k, but 1% of 420k is 4.2k.

vertere 5y ago

> Profitable means it has to grow faster than inflation or wages. That is not what profitable means. Returns on investment in housing consist of: 1. rental yields, and 2. capital gains (i.e. change in price). You cannot say whether housing is profitable or not (or affordable, for that matter) only by considering number 2.

BreakfastB0b 5y ago
That’s true, I didn’t figure in rental yields at all. Consider it a first order approximation. Would anyone rent if it was more affordable to buy?
- sokoloff 5y ago
  I’d still have rented while in college. I’d still have rented for my first two or three places after college. After that, I bought a place, lived in it for a while, then moved and rented in the city in two places (including one with a girlfriend which seems like a bad idea to jump right into home ownership), then bought the house I live in now. There’s plenty of beneficial flexibility afforded by renting, even if you can afford to do either one. Plus, if housing doesn’t go up in value like an investment, why would you want to tie up a downpayment and tie yourself down, losing money all the while? You’d have more incentive to rent and invest your down payment money.
  - 8note 5y ago
    Rentals should always be more expensive than buying then, no? You're gaining a service overtop of the place to live. Not to mention, you should be able to leave atyhe drop of a hat, rather than be required to have a 1 year lease
    - sokoloff 5y ago
      Renting hotel rooms is more expensive than a month-to-month lease is more expensive than a year-long lease, so that all checks out to agree with your premise. Whether renting or buying is more expensive depends on your market’s outlook for property prices. But in an environment where they don’t go up, I’d definitely expect renting to cost more.

smnrchrds 5y ago

> Here in Australia the government is talking about letting young people access our equivalent of their 401k to afford a deposit on a house. We do that in Canada. I don't think it has helped with the affordability issue at all. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html https://www.canada.ca/en/revenue-agency/services/tax/individ...

kelnos 5y ago
Of course not; it encourages home prices to keep going up, because people have access to another source to fund home purchases. The problem is, of course, that tapping your 401k-equiavalent is a long-term bad move unless you have a way to quickly put that money back without skimping on other things.
- dharmab 5y ago
  It worked out pretty well for many of my friends' parents, who bought houses in the American West, raised their kids, and then sold their now incredibly valuable homes to retire to small towns. Doesn't work so well when houses are expensive.
trts 5y ago
Why would the expectation be that it helps affordability? On an individual basis, having access to more money means you may be able to afford a home that would not have been within your means. In aggregate, everyone having more access to more money means inflation. Access to more money for a specific good or service means inflation concentrated in that category. See: college tuition and home prices in the U.S.
- nicoburns 5y ago
  > Access to more money for a specific good or service means inflation concentrated in that category. See: college tuition and home prices in the U.S. 100x this. Financial policy giving everyone access to cheap mortgages has got to be one of the stupidest things governments have done in the last 30 years.

ProjectArcturis 5y ago

The problem in Australia in particular is that you're running out of land. The four major cities are surrounded by water and nature preserves. As population increases, demand runs up against a very inelastic supply. The only policy solution would be to strongly emphasize dense high-rise development.

blackth0rn 5y ago
I'm not sure Australia has a land problem in general, population density is quite low (I understand that a lot of the land doesn't support high density living). They have an issue in that their major cities have some constraints on perpetual outwards growth. Maybe this will help encourage remote work and relocation of offices to places that aren't the core downtown area of Melbourne and Sydney?
- foxpurple 5y ago
  There is very limited land in places where you want to be. There is endless land in the middle of nowhere but that isn’t very useful for most people.
  - bussierem 5y ago
    This comes up often in these discussions but, barring any indigenous lands, there's nothing especially inhospitable about central aus. Las Vegas is in the middle of a damn desert, and Arizona/New Mexico are both extreme climates compared to much of the US but they are still livable and many people actually prefer it. I can't see why this would be any different in Australia...
    - foxpurple 5y ago
      It’s not about how possible it is to live, it’s about places people actually want to live. There is virtually unlimited land with good climate. But people don’t want to live there because it’s far from everything. Most people have picked paying more to live closer to events, jobs, stores and friends. Australia doesn’t have the population to start a new major city in the center. There are still multiple cities like Adelaide which could grow instead.

shalmanese 5y ago

Housing can be both affordable and profitable with a organized system of infill development. eg: You buy a single family home in an inner ring suburb in 1990 for $150K. You sell it in 2021 to a developer for $2.1M (9% RoR), the developer tears it down and spends $1.5M to build 12 apartments on the same footprint of land that sell for $350K each (~400K profit net transaction costs). People in 2021 are paying the same amount for housing as you did in 1990 but you also made a good return on your investment.

handmodel 5y ago
That sounds like it is affordable and profitable if you are in the top half of incomes. In that situation - a renter who made ~40k a year (in today's dollars - probably 30k in 1990 dollars) in 1990 could not afford a single family home and had to deal with expensive rents (because the city didn't allowed apartments buildings where there was demand).
ryankupyn 5y ago
The critical thing is that this also requires a growing population - which is not guaranteed in all places/timeframes!
nicoburns 5y ago
So what you're saying is housing was affordable in the 1990, but not you're paying twice as much for a much smaller space.
- handmodel 5y ago
  It is also worth noting that in the example above (assuming we accept the 150k as normal and that growth as typical) that 150k was a solid amount of money. In 1990 the median income for someone with a a high school diploma was 26k. For someone with a masters degree it was still 50k. An educational attainment was lower across the board. So if you didn't have 150k then I guess you're screwed since they weren't going to let apartments to be built for so long? The only situation where you'd get that ROI is if the supply of houses had been constrained strictly for so long - which almost by definition means that rents grew at that rate too.

paxys 5y ago

The reason this doesn't work is that people want to live in very specific places. If you aggregate at the national level, the cost of land or housing hasn't gone up all that much in America over the last century. For every San Francisco there is a Detroit to balance things out.

AnimalMuppet 5y ago
Having looked around a bit lately, it seems to me that if you don't buy in a major metro area, and you buy a house that was built in the 1950s, you pay something that, inflation-adjusted, would look reasonable to someone in the 1950s. But lots of people don't want to live in houses that small. Well, if you want more, you pay more. And maybe the comparison isn't fair. In the 1950s, those houses weren't 70 years old, but they are now...

pedalpete 5y ago

As a Canadian who now lives in Australia, I'm astounded by the levers the Australian gov't will pull in order to keep the housing market "booming". In my 10 years here I've seen them split them make it difficult for foreigners to buy existing houses, but easy to buy off-plan https://treasury.gov.au/sites/default/files/2019-03/Stronger-rules-for-foreign-investors-owning-Australian-housing.pdf https://treasury.gov.au/sites/default/files/2019-03/Stronger... I've seen them restrict the amount of money retirement plans can use to invest in equities, promoting the use of more funds going to real estate (this was my understanding of the changes) - https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia And now including your housing as part of your superannuation, which I wasn't aware of. Every time I think they've run out of levers to pull, they find another one. When I arrived here in 2011, I thought real estate was cheap compared to rents, that equation has completely flipped.

nl 5y ago
> I've seen them restrict the amount of money retirement plans can use to invest in equities, promoting the use of more funds going to real estate (this was my understanding of the changes) I don't believe this is the case and haven't seen any coverage indicating a change like this. > And now including your housing as part of your superannuation, which I wasn't aware of. No, it's the opposite. You can withdraw part of any voluntary contributions to buy your first house. See https://www.abc.net.au/news/2021-05-13/budget-superannuation-changes-benefit-workers-women-retirees/100135376 https://www.abc.net.au/news/2021-05-13/budget-superannuation...
nickcox 5y ago
> When I arrived here in 2011, I thought real estate was cheap compared to rents, that equation has completely flipped. As long as it's possible to negatively gear unrelated income while building up a property portfolio it makes sense that people will be happy to lose money on rents in order to take advantage of capital gains discounts down the track.

Gatsky 5y ago

Not sure this generational divide argument holds water much. The children of boomers, who grew up in relatively nice houses with backyards, similarly want nice houses. Increasing supply in an urban planning context involves increasing high density dwellings in the inner city. This is a hard pill to swallow for adults who remember playing cricket in the backyard with their Dad or whatever idyllic notion they are left with from their wonderful childhoods (not a joke, Australian kids have great childhoods by any metric). The boomer parents also want the same thing for their adult children, and help fund the acquisition. As boomers die off and the wealth passes to their kids, they will invariably spend it on houses (or second houses) as well. I also think different cities in Austrlia have differnet issues. Adelaide has a very old demographic and little migration, and has the problem that their health care costs are going to greatly exceed their revenue. Melbourne has had too much migration, which tends to just make the economy look fine but causes a lot of strain on infrastructure. Melbourne and Sydney also suffer from being gravity wells for migration, so that people don't leave for better paying work elsewhere or cheaper housing. They choose to suffer underemployment in very competitive and saturated labour markets with unaffordable housing. I include myself here. Housing affordability is not going to improve. There is no way prices are going to correct by the 30% - 40% in desirable places to live to get into the realm of affordability. Increasing urban density is neither attractive to people nor likely to happen. It's done and dusted. The only thing to hope for is that the rate of change will slow down, and wages will improve so that at some point in 30 years time affordability will be better. That means there will be a generation of people who don't own their homes, and the comparison to the previous generation will be highly unfavourable. Being an elderly renter is a greatly inferior experience, and the government outlay for housing the elderly will simply increase more and more. The 'solution' to my mind is to strongly encourage people to move to places with more affordable housing and good living conditions.

siquick 5y ago
> Melbourne and Sydney also suffer from being gravity wells for migration, so that people don't leave for better paying work elsewhere or cheaper housing. This is exactly it, I'd love to leave Sydney to live somewhere else but until remote working is ingrained in our culture, it's just too risky for my partner and I to move away to a smaller city/town incase our current employment changes. I've been amazed to hear of so many people who, as soon as they started working from home because of the pandemic, bought a house 2.5 hours away from their office. You're one bosses decision away from having a very miserable daily life.

xf1cf 5y ago

> Without changing the supply of housing how is this anything other than another attempt from boomers to steal more wealth from their children so they can line their coffins with more gold. I don't think you can reduce this so easily. Houses can be profitable without be exorbitantly expensive. For example, a 6% increase per year would beat inflation and provide a small gain as an investment. Housing is, even under your proposed system, the largest purchase most people will ever make. People want to know the largest purchase they will ever make will be net profitable. Even marginally so. You have to be careful because disincentivizing ownership of houses (by making them net neutral or negative) will simply push more money into the rental market. The exact opposite of your intention of "striking back at the rich boomers". Moreover, there are several concerns regarding government interventionism. Some of housing prices can be described by the law of unintended consequences. I'm speaking as an American: (1) Land Use Rights: governments in many states won't let you bulldoze public land to build houses. This dwindles supply. (2) Disability requirements. Houses need to be built to support disabled people. ADA requirements can often significantly increase not only material costs (compliant walkways and such are not cheap) as well as legal costs (in case you get sued). (3) Foreign investment. In America foreign citizens can own property. This means prosperous nationals (for example from China and Saudi Arabia) can buy large swaths of houses to rent. So with (1) we lose supply because of land use. (2) we lose supply because of legal requirements. (3) we lose supply because foreign investment, ostensibly good for the country, is terrible for housing. Now you turn to finance and realize that with money easier to get through FHA loans, military-specific loans, and other hand out programs the amount of capital available in the market is much higher than 40 years ago. The solution isn't as simple as blaming boomers. There are many reasons housing is absurdly expensive and I don't think it's a conspiracy recently created to screw over millennials. This has been in the works for many, many decades and in my eyes the majority of it can be explained by unintended consequences.

xienze 5y ago

> You shouldn’t be able to make a tonne of money by just buying a house and sitting on it. Maybe you should instead think of it as sitting on a piece of _land_, not a house. Twenty years ago you bought a house in the middle of nowhere, now because of people moving to the area it’s desirable and thus worth a lot more. Whose fault is that?

mikem170 5y ago
One could argue that if the community expanding over a couple of decades is what made a house more valuable then it would be appropriate for the community to receive the profit, and not the home owner who just sat there.

Sophistifunk 5y ago

It's very clear that our (Strayan) government will sacrifice anything on the altar of the housing bubble, because that's what the boomers demand, and they're still in charge for some reason. The rest of us get the shaft.

foobar33333 5y ago
It's because half the population has their retirement based on housing values so if you crush that, you have a generation of boomers with no retirement money.
- 8note 5y ago
  Keeping the housing price expensive seems less efficient than just paying the boomers retirement money. All kinds of people get to profit off of the high housing prices that could otherwise be part of the retirement money
- Sophistifunk 5y ago
  ...so instead we have gen x and younger with mostly no retirement money and mostly no houses either. Great plan.

atweiden 5y ago

> You shouldn’t be able to make a tonne of money by just buying a house and sitting on it. But humans occupy physical space. Almost everyone would prefer more privacy and space to less. Hence if the human population keeps growing, the price of having physical privacy and space will also keep growing. It’s just the bitter reality of it. In addition, often times the architecture or established land use patterns of certain neighborhoods act as an upper limit on population density. It really grinds my gears when people advocate for essentially paving over these crucial neighborhood characteristics. This effectively destroys local culture in the name of “inclusivity”. Granted, there are definitely more neighborhoods without any unique character than not, and it’s hard to feel any sympathy for paving them over. But there are certainly quite a few neighborhoods globally that are quite special, and in these places inclusivity tends to be a tragedy of the commons scenario.

mertd 5y ago
How do you define a neighborhood characteristic? Usually it's nothing but an arbitrary snapshot in time that some folks decided is ideal and should be frozen. Curiously it tends to correlate with the date they moved in to the said neighborhood.
- atweiden 5y ago
  > How do you define a neighborhood characteristic? Usually it's nothing but an arbitrary snapshot in time that some folks decided is ideal and should be frozen. Usually so, but sometimes not. What are the characteristics of Gion Kyoto, for example?
8note 5y ago
I think that is to say that land needs to be taxed quite heavily. If you're taking up a lot of space, you're keeping important resources tied up in nothinh
- Tagbert 5y ago
  Sounds like you want to significantly increase the price of housing to do…?

nickcox 5y ago

There is definitely a serious intergenerational fairness issue here. One of the best expositions of the problem I've seen is this talk by Tory peer (and boomer!) Lord David Willetts. https://www.youtube.com/watch?v=ZuXzvjBYW8A https://www.youtube.com/watch?v=ZuXzvjBYW8A