4 ms·

Plenty of observations and suggestions in the comments, but most missing the core issue: we turned housing into a retirement scheme, and encouraged investment,

Plenty of observations and suggestions in the comments, but most missing the core issue: we turned housing into a retirement scheme, and encouraged investment, which of course inflated prices. We then concocted a lot of policies to sustain demand, and hamper supply, the keep this scheme afloat. Housing cannot be both affordable and a good investment.

JKCalhoun 4y ago
> we turned housing into a retirement scheme You make it sound like a nefarious plan or some backroom deal. It seems more like real estate became our de facto retirement scheme due to everything else paling in comparison. Pensions? Gone. Savings? Nope, no interest (ha ha) in that. Stock market? Sure, but its volatility prevents sane people from putting their entire nest egg into it....
- thicknavyrain 4y ago
  If you're in the U.K., I'd highly recommend reading "Rethinking the economics of land and housing" which outlines the history of several clear policies decisions that _encouraged_ housing as an investment which (along with supply restrictions) are in turn why it outperforms lots of other forms of investment. It's not just the market speaking, it's been shaped through lots of conscious decision making that can be undone.
- qeternity 4y ago
  It wasn’t a nefarious backroom deal. But it was a very conscious choice by many governments, spearheaded by the UK and US. And once we ventured a little bit down that path, it’s impossible to unwind bc nobody wants to lose money on their home.
- userabchn 4y ago
  the word "scheme" has negative connotations (of something shady) in America that it doesn't have in other countries. Also, it is very much an intentional policy of governments in some countries to encourage people to invest in a house as their retirement savings.
  - qeternity 4y ago
    I am an American living in London, well aware of the difference. I meant scheme in the American sense. Housing policies for the past 50 years are rotten to the core.
- pessimizer 4y ago
  It was a nefarious front-room deal. Administrations used to campaign on higher housing values (as if that were a different thing to higher housing costs/prices.) Policies have been designed to pump public money into the housing market through subsidies and tax breaks. If housing prices drop, the middle-class homeowner gets vocally angry at the presiding administration.
twblalock 4y ago
Housing used to be both affordable and a good investment. That is how it worked for a long time. What's new is that it is harder to build housing than it used to be. The escape valve for an overpressured market used to be building new housing -- and if the new housing meets demand it does not cause the prices of existing housing to tank. The market simply reaches an equilibrium. That's what is not functioning today. We don't need land value taxes or weird rules about rentals or discouraging investment or any of that -- we need to make it easier to supply new housing. Any solution that does not involve making it easier to build new housing is just not going to work.
- twiceaday 4y ago
  Housing cannot be both affordable and a good investment indefinitely. Obviously. A good investment means the price goes up quickly and at some point the price is higher than what most people can afford. Whatever solution you propose must stop housing from being such a good investment. If you say the approach is to build more, the answer to "how much more?" is "until housing is not a good investment," so the point stands. A lot of people will agree with you on "build more" but I bet only with an explicit caveat of "as long as housing continues to be a good investment for me" and so the agreement is completely useless. There is no agreement to actually fix anything.
  - twblalock 4y ago
    > A good investment means the price goes up quickly and at some point the price is higher than what most people can afford. No, a good investment is something that increases in value over time. Not "quickly." That's a get-rich-quick expectation, not an investment expectation. You also seem to be assuming that housing prices increase but incomes do not. That is not the case in a healthy economy. (And growth in an economy is normal and expected and good, not unsustainable.) This is not a theoretical situation. We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time. And we also know what changed -- barriers to building new housing have increased.
    - 4y ago
BirdieNZ 4y ago
> we turned housing into a retirement scheme It wasn't turned into a scheme by anyone, it's the nature of land. See Ricardo's Law of Rent; owners of land are able to extract rent from the tenants, and in desirable locations they can extract larger amounts of rent. If you want to make money without doing any work, buy land in desirable, growing locations and rent it out. The solution is a land value tax, accompanied with a citizen's dividend or a reduction in other taxes such as income taxes.
nmfisher 4y ago
Hit the nail on the head. Promoting housing as a vehicle for wealth accumulation will be viewed as one of the greatest failures in modern economic policy in the West. It's easy to blame Wall Street, corporations, immigrants, but the reality is much simpler: these policies are wildly popular with the first few generations of voters who saw their property prices go up, so governments are deathly afraid to touch them. The next generations are the ones who suffer, but they don't vote (yet). Politically safer to kick the can down the road and make it someone else's problem in 10 to 20 years' time.

JKCalhoun 4y ago

> we turned housing into a retirement scheme You make it sound like a nefarious plan or some backroom deal. It seems more like real estate became our de facto retirement scheme due to everything else paling in comparison. Pensions? Gone. Savings? Nope, no interest (ha ha) in that. Stock market? Sure, but its volatility prevents sane people from putting their entire nest egg into it....

thicknavyrain 4y ago
If you're in the U.K., I'd highly recommend reading "Rethinking the economics of land and housing" which outlines the history of several clear policies decisions that _encouraged_ housing as an investment which (along with supply restrictions) are in turn why it outperforms lots of other forms of investment. It's not just the market speaking, it's been shaped through lots of conscious decision making that can be undone.
qeternity 4y ago
It wasn’t a nefarious backroom deal. But it was a very conscious choice by many governments, spearheaded by the UK and US. And once we ventured a little bit down that path, it’s impossible to unwind bc nobody wants to lose money on their home.
userabchn 4y ago
the word "scheme" has negative connotations (of something shady) in America that it doesn't have in other countries. Also, it is very much an intentional policy of governments in some countries to encourage people to invest in a house as their retirement savings.
- qeternity 4y ago
  I am an American living in London, well aware of the difference. I meant scheme in the American sense. Housing policies for the past 50 years are rotten to the core.
pessimizer 4y ago
It was a nefarious front-room deal. Administrations used to campaign on higher housing values (as if that were a different thing to higher housing costs/prices.) Policies have been designed to pump public money into the housing market through subsidies and tax breaks. If housing prices drop, the middle-class homeowner gets vocally angry at the presiding administration.

twblalock 4y ago

Housing used to be both affordable and a good investment. That is how it worked for a long time. What's new is that it is harder to build housing than it used to be. The escape valve for an overpressured market used to be building new housing -- and if the new housing meets demand it does not cause the prices of existing housing to tank. The market simply reaches an equilibrium. That's what is not functioning today. We don't need land value taxes or weird rules about rentals or discouraging investment or any of that -- we need to make it easier to supply new housing. Any solution that does not involve making it easier to build new housing is just not going to work.

twiceaday 4y ago
Housing cannot be both affordable and a good investment indefinitely. Obviously. A good investment means the price goes up quickly and at some point the price is higher than what most people can afford. Whatever solution you propose must stop housing from being such a good investment. If you say the approach is to build more, the answer to "how much more?" is "until housing is not a good investment," so the point stands. A lot of people will agree with you on "build more" but I bet only with an explicit caveat of "as long as housing continues to be a good investment for me" and so the agreement is completely useless. There is no agreement to actually fix anything.
- twblalock 4y ago
  > A good investment means the price goes up quickly and at some point the price is higher than what most people can afford. No, a good investment is something that increases in value over time. Not "quickly." That's a get-rich-quick expectation, not an investment expectation. You also seem to be assuming that housing prices increase but incomes do not. That is not the case in a healthy economy. (And growth in an economy is normal and expected and good, not unsustainable.) This is not a theoretical situation. We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time. And we also know what changed -- barriers to building new housing have increased.
  - 4y ago

BirdieNZ 4y ago

> we turned housing into a retirement scheme It wasn't turned into a scheme by anyone, it's the nature of land. See Ricardo's Law of Rent; owners of land are able to extract rent from the tenants, and in desirable locations they can extract larger amounts of rent. If you want to make money without doing any work, buy land in desirable, growing locations and rent it out. The solution is a land value tax, accompanied with a citizen's dividend or a reduction in other taxes such as income taxes.

nmfisher 4y ago

Hit the nail on the head. Promoting housing as a vehicle for wealth accumulation will be viewed as one of the greatest failures in modern economic policy in the West. It's easy to blame Wall Street, corporations, immigrants, but the reality is much simpler: these policies are wildly popular with the first few generations of voters who saw their property prices go up, so governments are deathly afraid to touch them. The next generations are the ones who suffer, but they don't vote (yet). Politically safer to kick the can down the road and make it someone else's problem in 10 to 20 years' time.