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Home ownership used to be one of the few accessible investments that directly benefit less well off people. Rather than throw rent money in a black hole they bu

Home ownership used to be one of the few accessible investments that directly benefit less well off people. Rather than throw rent money in a black hole they build equity. How is that a sham?

californical 5y ago
Housing cannot by definition be a good investment, without becoming gradually more scarce and unaffordable in the future. Keeping housing affordable means that it should grow with inflation, approximately. A good investment should outpace inflation.
- mrsuprawsm 5y ago
  In the case when population remains constant, sure, but with a growing population, more housing is always required, thus the value should always increase, no?
  - avz 5y ago
    Prices increase when you have a shortage. Prices decrease when you have a surplus. We can maintain prices by growing housing stock in line with population. (The same applies to everything else from semiconductors to cars to human labor.) In California, people used zoning regulations to create a shortage and predictably house prices rose. Some people got richer. Other people got evicted. Ideally, we'd create a slight housing surplus to reduce prices. As an added benefit, this would reduce rent-seeking opportunities and create a buffer of empty housing stock that would make moving and searching for a new place to live less of a hassle increasing people's mobility.
- cascom 5y ago
  I interpreted the parent post to be more as “sound financial strategy to saving” rather than “good investment” (buying for levered appreciation) Would also note that housing can be affordable nationally, and unaffordable in some markets given the local nature of housing.
  - Ericson2314 5y ago
    > Would also note that housing can be affordable nationally, and unaffordable in some markets given the local nature of housing. True, but if we don't densify (the natural result of that thinking), we'll condemn ourselves to waste inefficiency low growth and environmental destruction. > I interpreted the parent post to be more as “sound financial strategy to saving” rather than “good investment” (buying for levered appreciation). This is still a bit fraught, especially as housing has historically reason too fast. Remember there are net 0 dollars (basically), and saving is a mostly monetary phenomenon. Arguably it's because terrible cost disease in healthcare, education, housing, etc. that people want to save so much in the first place!
- adverbly 5y ago
  I commented this previously, but simply owning-and-then-selling a house should not be a good investment. What you do with it is supposed to make it a good investment. This idea that investing means squatting valuable assets needs to die. Save on rent, farm, rent to others, make a shop... preventing others who would put the land to better use is doing more harm than good.
  - Ericson2314 5y ago
    So if you turn your house into an apartment, you should come out ahead, but this only works if enough population growth (including immigration). Still a pretty bad investment. There are increasing returns to density, but they don't show up quick enough to defeat NIMBYism on the margins. The margins, of course, are where NIMBYism thrives. No one likes moving!
knownjorbist 5y ago
The point is it never should have been that way.
avz 5y ago
In a hypothetical world where humans eat something durable like wood, making wood an investment would create a group of people who cannot afford food. In the real world where shelter is durable, making it an investment creates a group of people who cannot afford shelter. Homeownership-as-investment is a mechanism to increase one's wealth at the expense of the less fortunate. It is ethically bankrupt. It is also a disgrace that even though technological progress makes more and more things people need affordable, we use political means like zoning regulations to artificially drive up home prices in order to turn them into a good investment and thus unaffordable for some.

Home ownership used to be one of the few accessible investments that directly benefit less well off people. Rather than throw rent money in a black hole they build equity. How is that a sham?

californical 5y ago

Housing cannot by definition be a good investment, without becoming gradually more scarce and unaffordable in the future. Keeping housing affordable means that it should grow with inflation, approximately. A good investment should outpace inflation.

mrsuprawsm 5y ago
In the case when population remains constant, sure, but with a growing population, more housing is always required, thus the value should always increase, no?
- avz 5y ago
  Prices increase when you have a shortage. Prices decrease when you have a surplus. We can maintain prices by growing housing stock in line with population. (The same applies to everything else from semiconductors to cars to human labor.) In California, people used zoning regulations to create a shortage and predictably house prices rose. Some people got richer. Other people got evicted. Ideally, we'd create a slight housing surplus to reduce prices. As an added benefit, this would reduce rent-seeking opportunities and create a buffer of empty housing stock that would make moving and searching for a new place to live less of a hassle increasing people's mobility.
cascom 5y ago
I interpreted the parent post to be more as “sound financial strategy to saving” rather than “good investment” (buying for levered appreciation) Would also note that housing can be affordable nationally, and unaffordable in some markets given the local nature of housing.
- Ericson2314 5y ago
  > Would also note that housing can be affordable nationally, and unaffordable in some markets given the local nature of housing. True, but if we don't densify (the natural result of that thinking), we'll condemn ourselves to waste inefficiency low growth and environmental destruction. > I interpreted the parent post to be more as “sound financial strategy to saving” rather than “good investment” (buying for levered appreciation). This is still a bit fraught, especially as housing has historically reason too fast. Remember there are net 0 dollars (basically), and saving is a mostly monetary phenomenon. Arguably it's because terrible cost disease in healthcare, education, housing, etc. that people want to save so much in the first place!
adverbly 5y ago
I commented this previously, but simply owning-and-then-selling a house should not be a good investment. What you do with it is supposed to make it a good investment. This idea that investing means squatting valuable assets needs to die. Save on rent, farm, rent to others, make a shop... preventing others who would put the land to better use is doing more harm than good.
- Ericson2314 5y ago
  So if you turn your house into an apartment, you should come out ahead, but this only works if enough population growth (including immigration). Still a pretty bad investment. There are increasing returns to density, but they don't show up quick enough to defeat NIMBYism on the margins. The margins, of course, are where NIMBYism thrives. No one likes moving!

knownjorbist 5y ago

The point is it never should have been that way.

avz 5y ago

In a hypothetical world where humans eat something durable like wood, making wood an investment would create a group of people who cannot afford food. In the real world where shelter is durable, making it an investment creates a group of people who cannot afford shelter. Homeownership-as-investment is a mechanism to increase one's wealth at the expense of the less fortunate. It is ethically bankrupt. It is also a disgrace that even though technological progress makes more and more things people need affordable, we use political means like zoning regulations to artificially drive up home prices in order to turn them into a good investment and thus unaffordable for some.