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Outlawing mortgages > 7 years would be counterproductive. This would just shift home ownership to richer people and reduce demand for new housing. The market w

Outlawing mortgages > 7 years would be counterproductive. This would just shift home ownership to richer people and reduce demand for new housing. The market will produce houses as cheap and small as people desire, the real limitation is regulation preventing this. The libertarians and georgists are correct in this: reduce regulation and institute a land value tax and the problem will solve itself.

somenameforme 3y ago
The problem with housing is that people view it as an investment. And it is, but that same mindset tends to drive people to pay as much as they can possibly afford, loans included. This drives housing prices up. Reducing the max mortgage will not reduce demand in the least, but it would reduce the maximum price people could pay. This would drive housing costs sharply downward. For this very reason, this stands exactly 0 chance of ever being passed, but it almost certainly a viable solution. It's not like people would just endlessly sit on vacant houses on a large scale.
- brutusborn 3y ago
  People speculate on housing mainly because it makes sense tax-wise. Georgist LVT is the best policy for preventing this. In many cities people endlessly sit on vacant blocks waiting for the market to move in their favour, with no disincentives to do so. Your policy would just result in houses being owned by richer people, and more people paying rent. It would reduce house prices, but only the riches people would be buying them and receiving the benefits. It would fail in a similar way to rent-control. Sure, it makes things cheaper in the short term, but harms everyone in the long term.
  - somenameforme 3y ago
    In many cities people sit in very limited areas on a very limited number of houses, while continuing to pay taxes on those buildings. This is why I said specifically at scale. And it's nothing about speculation, which I'd say has the connotation of making a profit. Housing is quite similar to education. People are led to believe that the value of their house will endlessly appreciate (in the same way that education is supposed to lead to imminent wealth), so what's the fair price for a house or an education? Literally anything, because it'll be worth more 10 years from now. But of course this is a fallacy because the value of a house is strictly finite. So we are stuck in an endless loop of bubbles. People buy houses on debt they can't afford until that debt eventually explodes at some point, and the housing market crashes. Then we start pumping it up again. This is also the reason housing prices (as well as education) have skyrocketed far ahead of inflation. The availability of exceptionally high amounts of debt, relative to what people have, seems to be a recurring theme in breaking economic systems on a micro scale. And perhaps we might see such happen on a rather macro scale as well, in the not so distant future.
    - brutusborn 3y ago
      Purchasing assets under the expectation that values will increase _is_ speculation. The solution in LVT is staring you in the face, I don’t understand why you reflexively ignore it and reach for worse policies. Read “Progress and Poverty.” It explains in detail why the cycles you describe would be dampened by a LVT.
      - somenameforme 3y ago
        Are people "speculating" when they pursue higher education? People, overwhelmingly, are not purchasing houses to make a profit, but rather using the perception of endless appreciation as a misguided justification for taking on increasingly absurd levels of debt. And that is the core problem that needs to be solved. You can try to change perceptions, or you can change the ability to take on unreasonably high levels of debt. Same with higher education. As for LVT, you can't expect me to go read a book to appreciate your argument. And I'm vastly more inclined to read than average. Owing to that I did at least check out the Wiki on the book. The excerpts section [1] seems to offer an argument that is either false or highly outdated. Any look at San Francisco, NYC, and other places will clearly show that the areas with the highest level of economic development also offer the highest wages, by an overwhelmingly wide margin. What drives the prices up is not some conniving and far-sighted bourgeois, but rather economic development driving defacto unlimited levels of demand. In a place like San Francisco you can earn $70k for labor that would pay $30k in a less developed area. Because of this you will never have affordable housing, because that $40k delta would otherwise drive everybody over to hoover it up. This is the scenario literally everywhere in the world. When you look at what few exceptions there are, they tend to not be exceptions. For instance Tokyo is often cited, yet it seems most people still have an obsolete image of Japain in their minds. They've gone through a 30 year period of stagflation, have a shrinking population, and a declining economy. So housing seems cheap in Tokyo by Western standards, but it's extremely expensive by Japanese standards which is where the overwhelming majority of the demand, and thus the price equilibrium, comes from. [1] - https://en.wikipedia.org/wiki/Progress_and_Poverty#Excerpts https://en.wikipedia.org/wiki/Progress_and_Poverty#Excerpts
        3y ago

somenameforme 3y ago

The problem with housing is that people view it as an investment. And it is, but that same mindset tends to drive people to pay as much as they can possibly afford, loans included. This drives housing prices up. Reducing the max mortgage will not reduce demand in the least, but it would reduce the maximum price people could pay. This would drive housing costs sharply downward. For this very reason, this stands exactly 0 chance of ever being passed, but it almost certainly a viable solution. It's not like people would just endlessly sit on vacant houses on a large scale.

brutusborn 3y ago
People speculate on housing mainly because it makes sense tax-wise. Georgist LVT is the best policy for preventing this. In many cities people endlessly sit on vacant blocks waiting for the market to move in their favour, with no disincentives to do so. Your policy would just result in houses being owned by richer people, and more people paying rent. It would reduce house prices, but only the riches people would be buying them and receiving the benefits. It would fail in a similar way to rent-control. Sure, it makes things cheaper in the short term, but harms everyone in the long term.
- somenameforme 3y ago
  In many cities people sit in very limited areas on a very limited number of houses, while continuing to pay taxes on those buildings. This is why I said specifically at scale. And it's nothing about speculation, which I'd say has the connotation of making a profit. Housing is quite similar to education. People are led to believe that the value of their house will endlessly appreciate (in the same way that education is supposed to lead to imminent wealth), so what's the fair price for a house or an education? Literally anything, because it'll be worth more 10 years from now. But of course this is a fallacy because the value of a house is strictly finite. So we are stuck in an endless loop of bubbles. People buy houses on debt they can't afford until that debt eventually explodes at some point, and the housing market crashes. Then we start pumping it up again. This is also the reason housing prices (as well as education) have skyrocketed far ahead of inflation. The availability of exceptionally high amounts of debt, relative to what people have, seems to be a recurring theme in breaking economic systems on a micro scale. And perhaps we might see such happen on a rather macro scale as well, in the not so distant future.
  - brutusborn 3y ago
    Purchasing assets under the expectation that values will increase _is_ speculation. The solution in LVT is staring you in the face, I don’t understand why you reflexively ignore it and reach for worse policies. Read “Progress and Poverty.” It explains in detail why the cycles you describe would be dampened by a LVT.
    - somenameforme 3y ago
      Are people "speculating" when they pursue higher education? People, overwhelmingly, are not purchasing houses to make a profit, but rather using the perception of endless appreciation as a misguided justification for taking on increasingly absurd levels of debt. And that is the core problem that needs to be solved. You can try to change perceptions, or you can change the ability to take on unreasonably high levels of debt. Same with higher education. As for LVT, you can't expect me to go read a book to appreciate your argument. And I'm vastly more inclined to read than average. Owing to that I did at least check out the Wiki on the book. The excerpts section [1] seems to offer an argument that is either false or highly outdated. Any look at San Francisco, NYC, and other places will clearly show that the areas with the highest level of economic development also offer the highest wages, by an overwhelmingly wide margin. What drives the prices up is not some conniving and far-sighted bourgeois, but rather economic development driving defacto unlimited levels of demand. In a place like San Francisco you can earn $70k for labor that would pay $30k in a less developed area. Because of this you will never have affordable housing, because that $40k delta would otherwise drive everybody over to hoover it up. This is the scenario literally everywhere in the world. When you look at what few exceptions there are, they tend to not be exceptions. For instance Tokyo is often cited, yet it seems most people still have an obsolete image of Japain in their minds. They've gone through a 30 year period of stagflation, have a shrinking population, and a declining economy. So housing seems cheap in Tokyo by Western standards, but it's extremely expensive by Japanese standards which is where the overwhelming majority of the demand, and thus the price equilibrium, comes from. [1] - https://en.wikipedia.org/wiki/Progress_and_Poverty#Excerpts https://en.wikipedia.org/wiki/Progress_and_Poverty#Excerpts
      - 3y ago