5 ms·

> this cannot be solved from the federal level. I disagree. The federal government invests enormous resources into subsidizing home ownership. Everything from

> this cannot be solved from the federal level. I disagree. The federal government invests enormous resources into subsidizing home ownership. Everything from Fannie Mae guaranteeing mortgages to not taxing home owners on the imputed value of rent. And I think that's all well and good, home ownership has many positive externalities. But there's zero point subsidizing demand for something when supply in inelastic. In those cases subsidies don't result in expanded supply, only increased prices. For example even if diamonds are good, it wouldn't make sense for the government to match first time diamond buyers payment, because the supply of diamonds is inherently limited. All it would do is drive up prices. Modest proposal: the federal government should revoke all of its housing subsidies in any municipality that restricts the supply of housing. San Francisco would be more than free to continue to block development. But if it chooses to do so, then San Francisco home owners should no longer be eligible for Fannie/Freddie mortgages, no longer be able to tax deduct mortgage interest, and should have to pay income tax on the imputed rental value of their home.

snarf21 4y ago
This is interesting. I wonder if it would work to make all FHA loans be required to be NEW properties/units. So the only way to get access to the money is to expand the housing. I'm sure there are consequences but I need to think them through a bit more.
- celtain 4y ago
  I don't know about policy consequences, but one political hurdle is that this would be attacked as "welfare for the rich" or something along those lines, since new construction is generally more expensive than existing units.
  - snarf21 4y ago
    Yeah, I haven't thought everything through yet. However, the hope that this would force more of the new housing to be more affordable. A poor person isn't going to be buying a luxury condo so I was trying to think of a way to incentivize builders to increase stock and create more affordable housing. There are definitely some second order effects.
ChrisLomont 4y ago
>Fannie Mae guaranteeing mortgages FM does not guarantee most mortgages, only certain govt types like FHA and VA loans, which the govt decided to back in order to help low income people get loans (otherwise the rates would be even higher for them). FM buys up a lot of mortgages and sells them to investors, then turns around and puts the money back into productive use. >taxing home owners on the imputed value of rent What does this mean? You want to tax homeowners as if they paid themselves rent? (Which even then is net zero, so no tax...) If you want people to pay income tax on the imputed rental value (which is likely not even legal - they are not getting an income from ownership - and courts have held income tax must be on sources of income), then you will increase the cost of home ownership, putting even further out of reach for most people. >In those cases subsidies don't result in expanded supply, only increased prices. Yet many places subsidies do result in new housing.....
- ambernightcrush 4y ago
  Both Fannie and Freddie buy mortgages, but your description is much more stringent than in truth. Fannie buys from big banks, Freddie buys from thrift banks; both buy conforming loans(conforming to their standards) which is a large part of the home buying audience. In addition to that, the non-conforming loans that you listed e.g. FHA and VA. Those government-backed loans are for special populations. These mortgages are assembled into MBS and then sold to investors; the banks that originated the loans get their liquidity back.
  - ChrisLomont 4y ago
    >Both Fannie and Freddie buy mortgages Yes, I said as much. The OP claimed they guaranteed mortgages, which they do not. I'm decently aware of the MBS market - I developed MBS pricing algorithms in the late 90s/early 00s for putting houses in tranches after a friend at a mortgage company asked for help with algorithms. Turns out the problem was NP-hard (a lattice based linear programming problem if I recall), but good heuristics from the literature and some special sauce outperformed their current (at that time) pricing. Around the time the whole market blew up I was considering going to hedge funds, and was working out details of how all the math, science, and computer algos work to prepare for interviewing. After the market crash, I moved on more into scientific and R&D computing. But I still read papers in the area out of curiosity. But the fact is the market is not "guaranteed" in any sense - which is likely good as 2008 showed.
flakeoil 4y ago
OP doesn't talk about subcidies, but instead about the fact that the federal level needs to force the city level to build for example smaller apartments/houses, or build denser or whatever. However, cities and the ones already living there don't like it because it will bring in poorer people, which drives down the tax income and increases the costs, makes the neighborhood less attractive etc.
cheriot 4y ago
> there's zero point subsidizing demand for something when supply in inelastic. Agree, but that also means cutting those subsidies will not affect supply either. Minimal impact and politically difficult...

snarf21 4y ago

This is interesting. I wonder if it would work to make all FHA loans be required to be NEW properties/units. So the only way to get access to the money is to expand the housing. I'm sure there are consequences but I need to think them through a bit more.

celtain 4y ago
I don't know about policy consequences, but one political hurdle is that this would be attacked as "welfare for the rich" or something along those lines, since new construction is generally more expensive than existing units.
- snarf21 4y ago
  Yeah, I haven't thought everything through yet. However, the hope that this would force more of the new housing to be more affordable. A poor person isn't going to be buying a luxury condo so I was trying to think of a way to incentivize builders to increase stock and create more affordable housing. There are definitely some second order effects.

ChrisLomont 4y ago

>Fannie Mae guaranteeing mortgages FM does not guarantee most mortgages, only certain govt types like FHA and VA loans, which the govt decided to back in order to help low income people get loans (otherwise the rates would be even higher for them). FM buys up a lot of mortgages and sells them to investors, then turns around and puts the money back into productive use. >taxing home owners on the imputed value of rent What does this mean? You want to tax homeowners as if they paid themselves rent? (Which even then is net zero, so no tax...) If you want people to pay income tax on the imputed rental value (which is likely not even legal - they are not getting an income from ownership - and courts have held income tax must be on sources of income), then you will increase the cost of home ownership, putting even further out of reach for most people. >In those cases subsidies don't result in expanded supply, only increased prices. Yet many places subsidies do result in new housing.....

ambernightcrush 4y ago
Both Fannie and Freddie buy mortgages, but your description is much more stringent than in truth. Fannie buys from big banks, Freddie buys from thrift banks; both buy conforming loans(conforming to their standards) which is a large part of the home buying audience. In addition to that, the non-conforming loans that you listed e.g. FHA and VA. Those government-backed loans are for special populations. These mortgages are assembled into MBS and then sold to investors; the banks that originated the loans get their liquidity back.
- ChrisLomont 4y ago
  >Both Fannie and Freddie buy mortgages Yes, I said as much. The OP claimed they guaranteed mortgages, which they do not. I'm decently aware of the MBS market - I developed MBS pricing algorithms in the late 90s/early 00s for putting houses in tranches after a friend at a mortgage company asked for help with algorithms. Turns out the problem was NP-hard (a lattice based linear programming problem if I recall), but good heuristics from the literature and some special sauce outperformed their current (at that time) pricing. Around the time the whole market blew up I was considering going to hedge funds, and was working out details of how all the math, science, and computer algos work to prepare for interviewing. After the market crash, I moved on more into scientific and R&D computing. But I still read papers in the area out of curiosity. But the fact is the market is not "guaranteed" in any sense - which is likely good as 2008 showed.

flakeoil 4y ago

OP doesn't talk about subcidies, but instead about the fact that the federal level needs to force the city level to build for example smaller apartments/houses, or build denser or whatever. However, cities and the ones already living there don't like it because it will bring in poorer people, which drives down the tax income and increases the costs, makes the neighborhood less attractive etc.

cheriot 4y ago

> there's zero point subsidizing demand for something when supply in inelastic. Agree, but that also means cutting those subsidies will not affect supply either. Minimal impact and politically difficult...