5 ms·

I think this mindset comes from a misunderstanding of the cost of capital. Buying and owning a house is not free - even if the entire thing had zero upkeep and

I think this mindset comes from a misunderstanding of the cost of capital. Buying and owning a house is not free - even if the entire thing had zero upkeep and maintenance. The money spend on the house (lets say 1m) has a cost associated with the foregone interest/income it could have earned you elsewhere (opportunity cost, basically) Buying a 1m house, even if you borrow no money, costs you a net 50kpa (currently) in foregone, zero-risk interest income from a bank or the government. Them renting it out is just trying to earn a return on that investment (which is just putting upfront capital and hoping to earn more than it costs). Sometimes they lose (I think housing in many places costs significantly more in interest than rental return right now), but largely they've done well because supply is constrained in most places leading to bidding up of prices. It's just a supply issue - not enough housing for everyone. There's no reason housing can't be both an investment and a place to live - Do you think farmers grow and sell food out of the goodness of their hearts? Most places make it nigh-impossible to just chuck up a building for people to live in - local governments want permits, you have to provide minimum levels of parking, whatever. Even granny flats will get you in trouble in a lot of places. That's the problem, IMO. In few other fields is it so hard to actually invest in building more of something. Well-meaning regulations that enforce a minimum standard of housing do have drawbacks as well - eg. minimum 50sqm apartments. It means people that might just want a single room apartment to live in have to buy (or rent) more property than they want or need. I think these make sense for things that are definitely net good (eg. insulation, efficiency standards, etc) for everyone as a whole, but less so when they translate into a oversized housing, excessive parking, and so on - things that add expense that might not be used.

dawnbreez 2y ago
The problem isn't that the cost of renting is higher than the cost of mortgaging, the problem is that banks treat people who have to make a $2,500 monthly payment to live decently as if they can't be trusted with a $2,000 payment. People like me are charged a premium for shelter because we did things like...be financially responsible and avoid taking on unnecessary loans or credit card debt. And when we ask why we can't have the cheaper option, the response is...the bank doesn't trust us to make a payment that's _easier_ to make than the payment I'm working with right now? It's blatant nonsense, which makes one wonder what the real reasoning is.
- recursive 2y ago
  I think an insolvent renter is probably a smaller risk than an insolvent loanee, at least with certain assumptions. I'm not defending it, and have no background in it, but it seems possible.
  - dawnbreez 2y ago
    But we're not talking about an insolvent renter, we're talking about a renter who's making their payments. A renter who makes payments every month at 2500 can, and regularly is, not approved for a mortgage at 2000 a month, even though--based on the payment history--the renter would not only be able to make those payments, the mortgage payment would be easier for them to make--and therefore less risky--than the rent payment.
Sohcahtoa82 2y ago
> There's no reason housing can't be both an investment and a place to live - Do you think farmers grow and sell food out of the goodness of their hearts? What an absolute hogwash non-sequitor of an argument. Farmers growing and selling food are actually continually producing things. Also, I didn't say anything about it being both an investment and a place to live, I said it can't both and investment and affordable. If it's affordable, then the value isn't going up and it's a poor investment. If it's an investment, that means the value is expected to go up and it stops being affordable.
- shiroiushi 2y ago
  >If it's affordable, then the value isn't going up and it's a poor investment. Here in Tokyo, values generally do not go up, yet there are still plenty of landlords, who seem to use housing as an investment of sorts. Some landlords seem to be people who simply have owned a property a long time and want to rent it out in case they want to return to that house later (this happens when someone gets transferred somewhere by their employer). But the big apartment buildings are owned by large real estate corporations. I don't work in that industry, but I imagine they're making money simply on volume. Even though the building value falls to zero over the course of 40 or 50 years, it does seem to work out, and there are constantly new apartment buildings being constructed.

dawnbreez 2y ago

The problem isn't that the cost of renting is higher than the cost of mortgaging, the problem is that banks treat people who have to make a $2,500 monthly payment to live decently as if they can't be trusted with a $2,000 payment. People like me are charged a premium for shelter because we did things like...be financially responsible and avoid taking on unnecessary loans or credit card debt. And when we ask why we can't have the cheaper option, the response is...the bank doesn't trust us to make a payment that's _easier_ to make than the payment I'm working with right now? It's blatant nonsense, which makes one wonder what the real reasoning is.

recursive 2y ago
I think an insolvent renter is probably a smaller risk than an insolvent loanee, at least with certain assumptions. I'm not defending it, and have no background in it, but it seems possible.
- dawnbreez 2y ago
  But we're not talking about an insolvent renter, we're talking about a renter who's making their payments. A renter who makes payments every month at 2500 can, and regularly is, not approved for a mortgage at 2000 a month, even though--based on the payment history--the renter would not only be able to make those payments, the mortgage payment would be easier for them to make--and therefore less risky--than the rent payment.

Sohcahtoa82 2y ago

> There's no reason housing can't be both an investment and a place to live - Do you think farmers grow and sell food out of the goodness of their hearts? What an absolute hogwash non-sequitor of an argument. Farmers growing and selling food are actually continually producing things. Also, I didn't say anything about it being both an investment and a place to live, I said it can't both and investment and affordable. If it's affordable, then the value isn't going up and it's a poor investment. If it's an investment, that means the value is expected to go up and it stops being affordable.

shiroiushi 2y ago
>If it's affordable, then the value isn't going up and it's a poor investment. Here in Tokyo, values generally do not go up, yet there are still plenty of landlords, who seem to use housing as an investment of sorts. Some landlords seem to be people who simply have owned a property a long time and want to rent it out in case they want to return to that house later (this happens when someone gets transferred somewhere by their employer). But the big apartment buildings are owned by large real estate corporations. I don't work in that industry, but I imagine they're making money simply on volume. Even though the building value falls to zero over the course of 40 or 50 years, it does seem to work out, and there are constantly new apartment buildings being constructed.