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Two points: 1. Being a landlord has become a more attractive investment because in job-rich regions, cities don’t let developers build enough new homes. The la

Two points: 1. Being a landlord has become a more attractive investment because in job-rich regions, cities don’t let developers build enough new homes. The lack of competition from new units allows landlords to raise rents on existing units. Let us be clear on a point of confusion: Developers DO NOT EQUAL landlords. Sometimes developers will rent the units they build, but often not. Developers are the good guys here. When they build shiny luxury towers, it gives the Amazon tech bro something to buy instead of coming into your neighborhood and bidding up the price of older units. 2. Financialization of homes as a personal investment is a BAD thing. It’s essentially a Ponzi scheme operating over decades where home buyers depend on people wealthier than themselves to buy their home at a higher price decades later. This is clearly unsustainable. Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods. The Atlantic had a good article exploring this topic: https://www.theatlantic.com/newsletters/archive/2022/12/homeownership-real-estate-investment-renting/672511/ https://www.theatlantic.com/newsletters/archive/2022/12/home... The solution to our housing crises will include A. State governments allow lots of new homes such that homes are no longer a scarce (thus expensive) commodity, and B. We put in better tenant protections or practices such as multi-year leases that can be broken without too much of a penalty. That is, a family can, say, sign a 10-15 year lease on a home and still break the lease if life events make it necessary.

rhaway84773 4y ago
We also need to eliminate the massive government incentives for owning a home, or adding similar incentives for renting.
- BenFranklin100 4y ago
  The mortgage tax deduction and the Homes Sales Tax exclusion should be eliminated. They are regressive pieces of legislation that serve to widen inequality.
  - sokoloff 4y ago
    The mortgage interest deduction serves to put prospective owner-occupants on an equal footing with prospective landlords (for which business loan interest is deductible against profits). The capital gains exclusion I have less strong feelings about, but it amounts in large part to excluding being taxed on the effect of inflation.
    - NoToP 4y ago
      The MDI defines "owner occupant" over "landlord" in such a way as to effectively subsidize the single family detached suburban home lifestyle preference. It encourages the middle class to tie up a big chunk of their net worth in sprawling developments with questionable claims of being an appreciating asset.
      - sokoloff 4y ago
        I’m trying to gain understanding of your first sentence, but have been unable. Landlords can deduct mortgage interest just like any profit-seeking business can deduct interest on loans taken on in furtherance of their business. That’s true for single-family homes or duplexes in a suburb same as a rowhouse, 4-plex or 50-unit building in a city. The owner-occupant deduction applies to their unit, whether that’s all of an SFR, half a duplex, one level of a triple-decker, or 1 unit in a 4-plex.
  - lotsofpulp 4y ago
    The mortgage interest tax deduction is effectively eliminated for 90% of Americans because the standard deductions are high enough that 90% of people do not itemize to be able to claim the mortgage interest tax deduction.
    - deleted 4y ago
      [deleted]
    - rcpt 4y ago
      Great let's simplify the tax code and clear it out completely. It's never been good policy.
- devmor 4y ago
  I dont think we need to eliminate them, just have them only apply to a primary residence.
  - ilyt 4y ago
    Yeah the person finally getting enough to own a house is not enemy here
  - BenFranklin100 4y ago
    They positively must be eliminated on the primary residence if want to halt the financialization of personal homes. Why should the related well-off be given a tax break anyway? It’s regressive. The US is one of the very few countries that allow mortgage interest to be deducted: https://www.progressivemaryland.org/home_mortgage_interest_deduction_is_regressive https://www.progressivemaryland.org/home_mortgage_interest_d...
    - devmor 4y ago
      I don't think someone buying a home for their family should be considered "well-off". That should be our base standard of living. The US is also one of the only countries where mortgages are so expensive. We wouldn't need the tax breaks if housing prices were low, I suppose.
  - maxerickson 4y ago
    To the extent that they probably put upward pressure on housing prices, we should eliminate them.
- prox 4y ago
  I would file that under A. There is a massive market now that would see any devaluation as bad (they bought into the investment scheme)
- amelius 4y ago
  And can we please make home ownership (or renting) cost part of the inflation level?
  - sokoloff 4y ago
    It already is. Tenant Rent and Owners’ Equivalent Rent (OER) is included. That’s capturing the cost of occupying the property, which is the “cost of living [there]” as separated from the cost of buying it. https://www.brookings.edu/blog/up-front/2022/05/18/how-does-the-consumer-price-index-account-for-the-cost-of-housing/amp/ https://www.brookings.edu/blog/up-front/2022/05/18/how-does-...
geoduck14 4y ago
>Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods. I'm a little skeptical that homes being disposable is a good idea.
- BenFranklin100 4y ago
  Who said anything about disposable? In fact, they could make attractive rental investments maintained and held over decades if not a century. See Vienna’s social or privately owned housing that is rented out. Housing simply should not be seen as the primary personal investment vehicle for the average person.
  - deleted 4y ago
    [deleted]
- gtirloni 4y ago
  By their own nature, they will never be disposable in the original sense of that word.
- geocon 4y ago
  "Consumption" doesn't mean disposable, it means homes should be used to be used to fulfill needs and desires, and not used to increase wealth (as an investment good). Easiest way to do that is a land value tax; the home itself is not what is appreciating in value anyways, the land is what is appreciating.
  - postalrat 4y ago
    So instead of private megalandlords you want government gigalandlords.
    - geocon 4y ago
      Please, taxing something doesn't mean the government owns it. Does the government own someone's home because they have to pay property taxes to the city for paving the streets and running the garbage service?
TrackerFF 4y ago
Developers purchase land where they get the best ROI, and as I’ve witnessed it, that means first and foremost very central apartment blocks aimed at yuppies and financially secure people over 40. In order to get the attractive spots, they’ll throw you a very lucrative bid, which also raises the surrounding property values considerably (well, until the blocks have been finished, that is. Could take years in cities with strong NIMBYism). To be honest, many of the newer and “cheaper” apartments in such blocks (still costs you $350k minimum) kind of suck. Small, narrow, etc.
iso1631 4y ago
> Financialization of homes as a personal investment is a BAD thing there's two parts to home ownership Physical asset, which deprecates (or needs a lot of maintenance to keep its value) Land, which appreciates, as they aren't making any more The former is fine. If you take a wreck and improve/renovate it and sell it for more than you paid, that's great, should be encouraged. The problem is the land value. Ironically the US tends to tax the physical asset far more than the land.
- s1artibartfast 4y ago
  I'm not even sure homes are depreciating assets any more. The increase in labor costs may now exceed the rate of home degradation.
mandmandam 4y ago
> Developers are the good guys here. Doubt. Property developers are one of the most despised groups in Ireland, despite our extreme housing shortage, and there are many very fucking good reasons for that.
- computerphage 4y ago
  Like what?
  - gambiting 4y ago
    I don't know about Ireland, but in UK they are known for buying huge amount of land getting all the grants and permits for building say, 10k houses, then they build ~500 houses a year, because if they built more it would crash the price. So now there is no land to buy and build on by yourself, and developers build fewer houses than they theoretically could to keep the prices high. Not to mention absolutely abysmal quality of newbuilds at every price level, and the smallest(by area) size of newbuilds anywhere in Europe - the average new house in the UK is smaller than an average flat in most of EU. And of course there are only really 3 big companies which have completely strong armed the market so you either buy from them, or pay 4x the price from a "boutique" developer just so your walls aren't made out of cardboard.
    - geocon 4y ago
      Yeah this is the landbanking problem. The solution is something like a land value tax which penalizes this kind of speculation and development-throttling. In fact there was a great article about that I just posted: https://progressandpoverty.substack.com/p/land-and-the-liberty-to-build-on https://progressandpoverty.substack.com/p/land-and-the-liber...
    - walthamstow 4y ago
      20% of all Conservative donations 2010-2020 came from housebuilders and property developers https://www.opendemocracy.net/en/dark-money-investigations/20-tory-donations-come-property-tycoons/ https://www.opendemocracy.net/en/dark-money-investigations/2...
aidenn0 4y ago
If a small number of bored NIMBYs can stymie development, what can a giant firm like JP Morgan do?
- credit_guy 4y ago
  A giant like JP Morgan does it either way. JP Morgan originates mortgages (via Chase Home Finance). It likes to do that in places where the price of homes does not go down. Put it differently, it likes to do that in places with strong NIMBYs. I suspect Citi and Bank of America and Wells Fargo have the same preferences. I'm not sure how these preferences manifest themselves, and I'm also sure they are not doing anything illegal. But they create some market pressure to hinder development.
rcpt 4y ago
Also taxes. The housing bubble is a choice that voters make because voting demographics skew towards property owners. 1031 exchange Mortgage interest deduction Opportunity zones Taxpayer backing of Fannie and Freddie (allows insane leverage and eliminates interest rate risk for borrowers) Lack of any federal property/land tax Historical precedent that the government will bail out property owners in times of financial uncertainty Countless local tax cuts (Prop 13 etc)
- pjc50 4y ago
  I note these are mostly US-specific reasons, but the property bubble has been a thing all over the world both now and pre-2008. It's a phenomenon of popular cities everywhere.
  - gruez 4y ago
    Those specific reasons might be US-specific, but other countries have other policies to favor home ownership for the same reason (ie. "voting demographics skew towards property owners"). For instance, it's pretty common in other countries to have capital gains exemption on houses.
    - rcpt 4y ago
      Ah capital gains exemptions. I knew I was forgetting something!
    - rightbyte 4y ago
      > other countries have other policies to favor home ownership You make it sound like a bad thing? Policies should favor the people. There are policies that favor renting flats too. I believe the problem is not "making it a good deal to own your home". That should be the default anyway.
  - rcpt 4y ago
    Whichever nation you live in likely has similar crap. In China for example there's no property taxes and you can't send your kids to public schools unless you own property.
scifibestfi 4y ago
> Being a landlord has become a more attractive investment This is changing as we speak due to the interest rate. These investments are less attractive if you can get a safe 4% or higher return without having to deal with tenants and maintenance.
- tppiotrowski 4y ago
  Is 4% an average rate of return for landlords? 4% of what: the capital you used to buy the house? So if I buy a house for $100,000, I get $4000 in rent per year? Or I get $4000 in my pocket after I use the rent money to pay the mortgage and property tax?
  - toomuchtodo 4y ago
    Typical RE return targets are 10-20%. Anything less than that and you might as well be in public securities. There are different ways to calculate returns: IRR, cash on cash, but it’s immaterial for this discussion. TLDR you want returns higher than you can get elsewhere easier. (you must not just develop housing, you must lock it up from investors if you want to ensure long term affordability; capital is callous, uncaring, and voracious for returns)
wolverine876 4y ago
> Financialization of homes as a personal investment is a BAD thing. It’s essentially a Ponzi scheme operating over decades where home buyers depend on people wealthier than themselves to buy their home at a higher price decades later. This is clearly unsustainable. Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods. What do you mean by 'bad'? Morally bad? Macro-economically negative? A money-losing investment for the investor? The investment has been a good one for generations. One reason is we have continued to grow wealthier for generations. Owning your property, with the rights and independence that come with it, is fundamental to personal liberty and security. Your home is your castle; the landlord's home is not. Not everyone has to do it, but you are handing over a lot of power to someone else when you rent.
- cloverich 4y ago
  I believe they are generalizing past owning your own home, to owning _other_ homes as a pure investment. I.e. becoming a landlord. Owning your own home wouldn't require someone wealthier than you purchasing it -- even if it did not go up in price. When home prices don't rise, purchasing investment properties becomes less lucrative and more risky (where as purchasing your own home remains low risk).
  - BenFranklin100 4y ago
    No I am not ‘generalizing past owning your own home’. I am saying the official government policies that preferentially promote personal, primary residences as investment vehicles are bad public policy. As stated, these policies have manifested in practice as a decades long Ponzi scheme that is built on ever increasing home prices. It’s not sustainable. Younger generations will not be able to afford housing, as we are now witnessing.
    - cloverich 4y ago
      Hmm in that case I think your argument doesn't make sense. "Good investment" regarding purchasing your own home is in comparison to renting. The price of the home doesn't need to go up for it to be a good place to put money, nor does it require any sort of "Ponzi scheme". It only requires the total price of maintenance not exceed the price of forever paying rent.
meltyness 4y ago
Homes are durable goods, hence an investment. Homes that are cared for can last a hundred years or more. Contrary to your statements, it benefits everyone if these are seen as a personal investment - but not a liquid asset like stock or something. Financiers shouldn't make broad stroking national moves on this, and it's basically up to state governments to beat back their capital by regulating things like quality, tax levels, and even build rates to prevent gluts, stem out-of-state "investment", maintainable infrastructure. If the banks try to dive into "house" be assured that they mindlessly leave it up to government to assure upkeep of every other dependency. Banks can't even upkeep the property they plan to buy, they are so dumb and myopic that they'll buy a place, turn off the sump pumps in the basement to "save money" and literally destroy 2% of the available housing in an area -- which is fine for them since they can write it off pricing everything else up a bit, not as fine for the people who already couldn't afford a home, and are more deeply priced-out. Governments could make them liable for this, akin to how you are contractually obligated not to destroy a leased car, but most homeless folks make poor lobbyists.
- bumby 4y ago
  >Homes are durable goods, hence an investment. Homes that are cared for can last a hundred years or more. This is largely context dependent. For example, Japan's homes aren't built to last as long as many American ones. Additionally, even heavily depreciating assets like cars can last virtually indefinitely with proper maintenance. (E.g., Model T's aren't really worth much because there still are many around and they are relatively easily maintained)
  - meltyness 4y ago
    Right, but there remains a need to have responsible parties between financiers that are exposed to toxic assets, like leverage, expiring options, margins, dark pools, EV ponzi schemes, and derivatives markets large enough to collapse housing loans up into the fed every 4 years. If the banks turn off the sump pump, the fed lights candles to get rid of the stink.
- geocon 4y ago
  Sure, but durable goods aren't necessarily investment goods. Homes do depreciate in value- their quality declines and they become increasingly expensive to maintain, and they simply don't have the same amenities as newly-built homes without increasingly expensive remodeling. What makes "homes" appreciate in value is almost never the building itself, it is the land.
taeric 4y ago
"Has become?" Seems that being a landlord has always been one of the more profitable things you could do. And it has always been an odd split of who you want as tenants. Commonly, you either wanted very poor, or commercial tenants. Middle class was not desired. For the middle class, you wanted to be their bank.
mythhouse 4y ago
every single post that has anything to do with housing turns into this - prices dropping is a good thing - nimby are the real evil - we should promote the idea of housing as utility not a store of wealth - but govt encourages housing as wealth via subsidies, tax breaks, bailouts ect. - poc should be allowed to build inter-generational wealth via housing. This shouldn't be suddenly cancelled. - we should be building more public housing like germany and france. - some random side convo about gentrification - another side convo about suburban housing = bad. we should all live in tightly packed cities with no cars. Rinse and repeat. I think this topic is might be second only to 'tech interviews and hiring' in terms of predictability
- geocon 4y ago
  How dare people get concerned over something so trivial as "having someplace to live"
  - mythhouse 4y ago
    well..lets hear your genius idea then. Idea that isn't people voting to bring down their own property values.
    - geocon 4y ago
      Implement a land value tax by exempting buildings and improvements from paying a property tax, shift state income and sales taxes onto land value, and ease zoning regulations.
      - notatoad 4y ago
        that's still going to have the effect of lowering property values though. it's a catch-22. "lowering the cost of housing" and "lowering property values" are the exact same thing. there's no actual political appetite to lower the cost of housing, because all the people in charge of making those decisions are property owners who don't want to see their investment lose value.
parineum 4y ago
> It’s essentially a Ponzi scheme It isn't, at all. The increase in prices is tied to increase in GDP, interest rates and disposable income. Unless you think investing is a Ponzi scheme.
- crote 4y ago
  The problem is that this isn't true. Since 1965, home prices have increased 7.6x faster than income.[0] This obviously cannot continue indefinitely (that'd lead to everyone spending >100% of their income on housing), so at some point the price increase will have to stop. [0]: https://www.realestatewitch.com/house-price-to-income-ratio-2021/ https://www.realestatewitch.com/house-price-to-income-ratio-...
- BenFranklin100 4y ago
  You’re not even wrong.

rhaway84773 4y ago

We also need to eliminate the massive government incentives for owning a home, or adding similar incentives for renting.

BenFranklin100 4y ago
The mortgage tax deduction and the Homes Sales Tax exclusion should be eliminated. They are regressive pieces of legislation that serve to widen inequality.
- sokoloff 4y ago
  The mortgage interest deduction serves to put prospective owner-occupants on an equal footing with prospective landlords (for which business loan interest is deductible against profits). The capital gains exclusion I have less strong feelings about, but it amounts in large part to excluding being taxed on the effect of inflation.
  - NoToP 4y ago
    The MDI defines "owner occupant" over "landlord" in such a way as to effectively subsidize the single family detached suburban home lifestyle preference. It encourages the middle class to tie up a big chunk of their net worth in sprawling developments with questionable claims of being an appreciating asset.
    - sokoloff 4y ago
      I’m trying to gain understanding of your first sentence, but have been unable. Landlords can deduct mortgage interest just like any profit-seeking business can deduct interest on loans taken on in furtherance of their business. That’s true for single-family homes or duplexes in a suburb same as a rowhouse, 4-plex or 50-unit building in a city. The owner-occupant deduction applies to their unit, whether that’s all of an SFR, half a duplex, one level of a triple-decker, or 1 unit in a 4-plex.
- lotsofpulp 4y ago
  The mortgage interest tax deduction is effectively eliminated for 90% of Americans because the standard deductions are high enough that 90% of people do not itemize to be able to claim the mortgage interest tax deduction.
  - deleted 4y ago
    [deleted]
  - rcpt 4y ago
    Great let's simplify the tax code and clear it out completely. It's never been good policy.
devmor 4y ago
I dont think we need to eliminate them, just have them only apply to a primary residence.
- ilyt 4y ago
  Yeah the person finally getting enough to own a house is not enemy here
- BenFranklin100 4y ago
  They positively must be eliminated on the primary residence if want to halt the financialization of personal homes. Why should the related well-off be given a tax break anyway? It’s regressive. The US is one of the very few countries that allow mortgage interest to be deducted: https://www.progressivemaryland.org/home_mortgage_interest_deduction_is_regressive https://www.progressivemaryland.org/home_mortgage_interest_d...
  - devmor 4y ago
    I don't think someone buying a home for their family should be considered "well-off". That should be our base standard of living. The US is also one of the only countries where mortgages are so expensive. We wouldn't need the tax breaks if housing prices were low, I suppose.
- maxerickson 4y ago
  To the extent that they probably put upward pressure on housing prices, we should eliminate them.
prox 4y ago
I would file that under A. There is a massive market now that would see any devaluation as bad (they bought into the investment scheme)
amelius 4y ago
And can we please make home ownership (or renting) cost part of the inflation level?
- sokoloff 4y ago
  It already is. Tenant Rent and Owners’ Equivalent Rent (OER) is included. That’s capturing the cost of occupying the property, which is the “cost of living [there]” as separated from the cost of buying it. https://www.brookings.edu/blog/up-front/2022/05/18/how-does-the-consumer-price-index-account-for-the-cost-of-housing/amp/ https://www.brookings.edu/blog/up-front/2022/05/18/how-does-...

geoduck14 4y ago

>Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods. I'm a little skeptical that homes being disposable is a good idea.

BenFranklin100 4y ago
Who said anything about disposable? In fact, they could make attractive rental investments maintained and held over decades if not a century. See Vienna’s social or privately owned housing that is rented out. Housing simply should not be seen as the primary personal investment vehicle for the average person.
- deleted 4y ago
  [deleted]
gtirloni 4y ago
By their own nature, they will never be disposable in the original sense of that word.
geocon 4y ago
"Consumption" doesn't mean disposable, it means homes should be used to be used to fulfill needs and desires, and not used to increase wealth (as an investment good). Easiest way to do that is a land value tax; the home itself is not what is appreciating in value anyways, the land is what is appreciating.
- postalrat 4y ago
  So instead of private megalandlords you want government gigalandlords.
  - geocon 4y ago
    Please, taxing something doesn't mean the government owns it. Does the government own someone's home because they have to pay property taxes to the city for paving the streets and running the garbage service?

TrackerFF 4y ago

Developers purchase land where they get the best ROI, and as I’ve witnessed it, that means first and foremost very central apartment blocks aimed at yuppies and financially secure people over 40. In order to get the attractive spots, they’ll throw you a very lucrative bid, which also raises the surrounding property values considerably (well, until the blocks have been finished, that is. Could take years in cities with strong NIMBYism). To be honest, many of the newer and “cheaper” apartments in such blocks (still costs you $350k minimum) kind of suck. Small, narrow, etc.

iso1631 4y ago

> Financialization of homes as a personal investment is a BAD thing there's two parts to home ownership Physical asset, which deprecates (or needs a lot of maintenance to keep its value) Land, which appreciates, as they aren't making any more The former is fine. If you take a wreck and improve/renovate it and sell it for more than you paid, that's great, should be encouraged. The problem is the land value. Ironically the US tends to tax the physical asset far more than the land.

s1artibartfast 4y ago
I'm not even sure homes are depreciating assets any more. The increase in labor costs may now exceed the rate of home degradation.

mandmandam 4y ago

> Developers are the good guys here. Doubt. Property developers are one of the most despised groups in Ireland, despite our extreme housing shortage, and there are many very fucking good reasons for that.

computerphage 4y ago
Like what?
- gambiting 4y ago
  I don't know about Ireland, but in UK they are known for buying huge amount of land getting all the grants and permits for building say, 10k houses, then they build ~500 houses a year, because if they built more it would crash the price. So now there is no land to buy and build on by yourself, and developers build fewer houses than they theoretically could to keep the prices high. Not to mention absolutely abysmal quality of newbuilds at every price level, and the smallest(by area) size of newbuilds anywhere in Europe - the average new house in the UK is smaller than an average flat in most of EU. And of course there are only really 3 big companies which have completely strong armed the market so you either buy from them, or pay 4x the price from a "boutique" developer just so your walls aren't made out of cardboard.
  - geocon 4y ago
    Yeah this is the landbanking problem. The solution is something like a land value tax which penalizes this kind of speculation and development-throttling. In fact there was a great article about that I just posted: https://progressandpoverty.substack.com/p/land-and-the-liberty-to-build-on https://progressandpoverty.substack.com/p/land-and-the-liber...
  - walthamstow 4y ago
    20% of all Conservative donations 2010-2020 came from housebuilders and property developers https://www.opendemocracy.net/en/dark-money-investigations/20-tory-donations-come-property-tycoons/ https://www.opendemocracy.net/en/dark-money-investigations/2...

aidenn0 4y ago

If a small number of bored NIMBYs can stymie development, what can a giant firm like JP Morgan do?

credit_guy 4y ago
A giant like JP Morgan does it either way. JP Morgan originates mortgages (via Chase Home Finance). It likes to do that in places where the price of homes does not go down. Put it differently, it likes to do that in places with strong NIMBYs. I suspect Citi and Bank of America and Wells Fargo have the same preferences. I'm not sure how these preferences manifest themselves, and I'm also sure they are not doing anything illegal. But they create some market pressure to hinder development.

rcpt 4y ago

Also taxes. The housing bubble is a choice that voters make because voting demographics skew towards property owners. 1031 exchange Mortgage interest deduction Opportunity zones Taxpayer backing of Fannie and Freddie (allows insane leverage and eliminates interest rate risk for borrowers) Lack of any federal property/land tax Historical precedent that the government will bail out property owners in times of financial uncertainty Countless local tax cuts (Prop 13 etc)

pjc50 4y ago
I note these are mostly US-specific reasons, but the property bubble has been a thing all over the world both now and pre-2008. It's a phenomenon of popular cities everywhere.
- gruez 4y ago
  Those specific reasons might be US-specific, but other countries have other policies to favor home ownership for the same reason (ie. "voting demographics skew towards property owners"). For instance, it's pretty common in other countries to have capital gains exemption on houses.
  - rcpt 4y ago
    Ah capital gains exemptions. I knew I was forgetting something!
  - rightbyte 4y ago
    > other countries have other policies to favor home ownership You make it sound like a bad thing? Policies should favor the people. There are policies that favor renting flats too. I believe the problem is not "making it a good deal to own your home". That should be the default anyway.
- rcpt 4y ago
  Whichever nation you live in likely has similar crap. In China for example there's no property taxes and you can't send your kids to public schools unless you own property.

scifibestfi 4y ago

> Being a landlord has become a more attractive investment This is changing as we speak due to the interest rate. These investments are less attractive if you can get a safe 4% or higher return without having to deal with tenants and maintenance.

tppiotrowski 4y ago
Is 4% an average rate of return for landlords? 4% of what: the capital you used to buy the house? So if I buy a house for $100,000, I get $4000 in rent per year? Or I get $4000 in my pocket after I use the rent money to pay the mortgage and property tax?
- toomuchtodo 4y ago
  Typical RE return targets are 10-20%. Anything less than that and you might as well be in public securities. There are different ways to calculate returns: IRR, cash on cash, but it’s immaterial for this discussion. TLDR you want returns higher than you can get elsewhere easier. (you must not just develop housing, you must lock it up from investors if you want to ensure long term affordability; capital is callous, uncaring, and voracious for returns)

wolverine876 4y ago

> Financialization of homes as a personal investment is a BAD thing. It’s essentially a Ponzi scheme operating over decades where home buyers depend on people wealthier than themselves to buy their home at a higher price decades later. This is clearly unsustainable. Homes need to stop being seen as an investment, but rather a consumption, much like a car or other goods. What do you mean by 'bad'? Morally bad? Macro-economically negative? A money-losing investment for the investor? The investment has been a good one for generations. One reason is we have continued to grow wealthier for generations. Owning your property, with the rights and independence that come with it, is fundamental to personal liberty and security. Your home is your castle; the landlord's home is not. Not everyone has to do it, but you are handing over a lot of power to someone else when you rent.

cloverich 4y ago
I believe they are generalizing past owning your own home, to owning _other_ homes as a pure investment. I.e. becoming a landlord. Owning your own home wouldn't require someone wealthier than you purchasing it -- even if it did not go up in price. When home prices don't rise, purchasing investment properties becomes less lucrative and more risky (where as purchasing your own home remains low risk).
- BenFranklin100 4y ago
  No I am not ‘generalizing past owning your own home’. I am saying the official government policies that preferentially promote personal, primary residences as investment vehicles are bad public policy. As stated, these policies have manifested in practice as a decades long Ponzi scheme that is built on ever increasing home prices. It’s not sustainable. Younger generations will not be able to afford housing, as we are now witnessing.
  - cloverich 4y ago
    Hmm in that case I think your argument doesn't make sense. "Good investment" regarding purchasing your own home is in comparison to renting. The price of the home doesn't need to go up for it to be a good place to put money, nor does it require any sort of "Ponzi scheme". It only requires the total price of maintenance not exceed the price of forever paying rent.

meltyness 4y ago

Homes are durable goods, hence an investment. Homes that are cared for can last a hundred years or more. Contrary to your statements, it benefits everyone if these are seen as a personal investment - but not a liquid asset like stock or something. Financiers shouldn't make broad stroking national moves on this, and it's basically up to state governments to beat back their capital by regulating things like quality, tax levels, and even build rates to prevent gluts, stem out-of-state "investment", maintainable infrastructure. If the banks try to dive into "house" be assured that they mindlessly leave it up to government to assure upkeep of every other dependency. Banks can't even upkeep the property they plan to buy, they are so dumb and myopic that they'll buy a place, turn off the sump pumps in the basement to "save money" and literally destroy 2% of the available housing in an area -- which is fine for them since they can write it off pricing everything else up a bit, not as fine for the people who already couldn't afford a home, and are more deeply priced-out. Governments could make them liable for this, akin to how you are contractually obligated not to destroy a leased car, but most homeless folks make poor lobbyists.

bumby 4y ago
>Homes are durable goods, hence an investment. Homes that are cared for can last a hundred years or more. This is largely context dependent. For example, Japan's homes aren't built to last as long as many American ones. Additionally, even heavily depreciating assets like cars can last virtually indefinitely with proper maintenance. (E.g., Model T's aren't really worth much because there still are many around and they are relatively easily maintained)
- meltyness 4y ago
  Right, but there remains a need to have responsible parties between financiers that are exposed to toxic assets, like leverage, expiring options, margins, dark pools, EV ponzi schemes, and derivatives markets large enough to collapse housing loans up into the fed every 4 years. If the banks turn off the sump pump, the fed lights candles to get rid of the stink.
geocon 4y ago
Sure, but durable goods aren't necessarily investment goods. Homes do depreciate in value- their quality declines and they become increasingly expensive to maintain, and they simply don't have the same amenities as newly-built homes without increasingly expensive remodeling. What makes "homes" appreciate in value is almost never the building itself, it is the land.

taeric 4y ago

"Has become?" Seems that being a landlord has always been one of the more profitable things you could do. And it has always been an odd split of who you want as tenants. Commonly, you either wanted very poor, or commercial tenants. Middle class was not desired. For the middle class, you wanted to be their bank.

mythhouse 4y ago

every single post that has anything to do with housing turns into this - prices dropping is a good thing - nimby are the real evil - we should promote the idea of housing as utility not a store of wealth - but govt encourages housing as wealth via subsidies, tax breaks, bailouts ect. - poc should be allowed to build inter-generational wealth via housing. This shouldn't be suddenly cancelled. - we should be building more public housing like germany and france. - some random side convo about gentrification - another side convo about suburban housing = bad. we should all live in tightly packed cities with no cars. Rinse and repeat. I think this topic is might be second only to 'tech interviews and hiring' in terms of predictability

geocon 4y ago
How dare people get concerned over something so trivial as "having someplace to live"
- mythhouse 4y ago
  well..lets hear your genius idea then. Idea that isn't people voting to bring down their own property values.
  - geocon 4y ago
    Implement a land value tax by exempting buildings and improvements from paying a property tax, shift state income and sales taxes onto land value, and ease zoning regulations.
    - notatoad 4y ago
      that's still going to have the effect of lowering property values though. it's a catch-22. "lowering the cost of housing" and "lowering property values" are the exact same thing. there's no actual political appetite to lower the cost of housing, because all the people in charge of making those decisions are property owners who don't want to see their investment lose value.

parineum 4y ago

> It’s essentially a Ponzi scheme It isn't, at all. The increase in prices is tied to increase in GDP, interest rates and disposable income. Unless you think investing is a Ponzi scheme.

crote 4y ago
The problem is that this isn't true. Since 1965, home prices have increased 7.6x faster than income.[0] This obviously cannot continue indefinitely (that'd lead to everyone spending >100% of their income on housing), so at some point the price increase will have to stop. [0]: https://www.realestatewitch.com/house-price-to-income-ratio-2021/ https://www.realestatewitch.com/house-price-to-income-ratio-...
BenFranklin100 4y ago
You’re not even wrong.