Progressive Housing Policy

Discussion in 'General Discussion' started by Kanmuk_Sealclubber, Mar 23, 2020.

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  1. Kanmuk_Sealclubber

    Kanmuk_Sealclubber Yes

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    Over the past couple of years, I've become increasingly interested in the economics behind housing. To me, it's the single largest humanitarian threat to western countries (even more than health care and education). The reason being that almost everyone needs housing all the time, and in certain areas (usually urban), housing prices are so high that the median worker struggles to afford them. This isn't a "poor people" problem. And there are a ton of downstream effects when people are paying 40-60+% of their income in housing costs.

    Anecdotally, the Coronavirus has really highlighted it for me, as even my high-income social circle is getting wrecked due to $3000-$6000 in monthly rent/mortgage payments and being cash poor in order to afford housing.

    However, I know that there is evidence suggesting a lot of current protections (e.g. rent controls, mortgage assistance) don't work. And beyond basic supply and demand, the macro-economics of housing aren't really intuitive to me.

    TLDNR - So the point of this thread is to discuss with TZT's economists and housing experts:

    A) Why are prices so extreme
    B) What ar resolutions that could actually work
     
  2. Kanmuk_Sealclubber

    Kanmuk_Sealclubber Yes

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    (I'm specifically interested in regards to condos, apartments, and other multi-family dwellings. I think single-family detached dwellings need to be phased out, anyway, and give zero fucks if they become a rich person-only luxury).
     
  3. Fais

    Fais TZT Abuser

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    Them Chinese buying up all the property causing prices to rise.
     
  4. Kanmuk_Sealclubber

    Kanmuk_Sealclubber Yes

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    The real "Chinese Virus" is greed.
     
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  5. Samassi Abou

    Samassi Abou TZT Abuser

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    House prices are high, but not quite as high as they look. The reason for that is that the real price of a property is the face price + all the interest payments you make for the rest of your life.

    Because interest rates are so low, people can spend more money on the face price of the house. So the current situation is that face prices are extremely high, but interest rate payments are relatively low.

    As Fais says, the rise of the Asian middle class and their emigration to Western countries is another reason behind the extra demand for property.
     
  6. Fais

    Fais TZT Abuser

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    I am no expert by any means. But I know the prices in our area have doubled in the last ~4 years. Real wages can't keep up, so I have been expecting a correction. Now I'm a little worried because it almost looks like 2008 again. With the exception that the fed this time won't let it get near as far as it did in 2008. They will just buy up the securities early this time.
     
  7. AgelessDrifter

    AgelessDrifter TZT Neckbeard Lord

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  8. Vlaara

    Vlaara Maaruk the Mighty

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    Been seeing a lot of posts about rent, and I lowkey agree that renting is immoral. The person who had to vacate the house before we bought it had been renting for 20+ years and had paid in rent a significant amount of the value we bought it for and was understandably salty about it. He asked to buy it for what he paid in rent + the extra and was ofc refused. My buddy makes all his income from renting though, he owns two 4 plexes and almost bought a 10 unit deal. The whole thing strikes me as wrong and only serves to enrich those with good credit + cash on hand on the backs of those with bad credit living often paycheck to paycheck. This is all being made plain rn.

    Ofc I also think private property is questionable, morally and philosophically.
     
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  9. Czer

    Czer I'm a poor person. The lambo is my cousin's.

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    I've seen no data points describing asian people who live here as as being a majority issue that is contributing to it.

    It's mainly caused by individuals and groups who can buy them in large quantities.

    Regular people can't buy a ton of income properties, and the more income property the less affordable housing.

    Average wages can't produce a homeowner any longer, and even people at the higher end of income find it impossible to live in most US coastal cities, this also coincides with most jobs being in these places as well. Even the good paying jobs are not matching the local economy.

    There is no limit on how much housing you can buy, I know people who purchase homes on the outskirts of LA county and buy up neighborhoods as rental income.
     
  10. Velox

    Velox TZT Abuser

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    I'm not an economist, but property prices are high even in countries where it's rare for individuals to rent out properties as a profit generating scheme.

    This seems to be primarily due to two reasons:
    1) The price of property, and land more generally, near cities has skyrocketed due to increased demand for urbanization and cheap credit (universal)
    2) Building standards, materials and wage increases in construction have gone up (varies from country to country)

    Of course investment/speculation in "income properties" by people leveraging cheap credit exacerbates that problem. Except for structural changes from urbanization and increased building standards, pretty much everything comes back to the availability of cheap credit. We live in an era where most people barely own even a fraction of their homes, they rent it for cheap from a bank. As Samassi said, they are not really as expensive as they look, because the high prices come with the implicit implication that you will not actually pay most of it.

    I'll add that this heavily favors people with high salaries, because your max loan amount is often proportional to the amount of money you make above a minimum cost of living threshold. Doubling your salary can increase your max loan amount by x4.
     
    Last edited: Mar 23, 2020
  11. Czer

    Czer I'm a poor person. The lambo is my cousin's.

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    You can't just bring up other countries, that's an entirely different market. There are certain variables that will stay similar.

    The US has terrible estate and inheritance laws, coupled with massive investment into land and property by individual or organizational entities, has driven away any regular person outside of the top 10 percent being able to afford anything.

    You're already warping the discussion talking about specific types of credit, you get to that point AFTER the main causation and correlation.
     
  12. Czer

    Czer I'm a poor person. The lambo is my cousin's.

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  13. Mern is Best

    Mern is Best TZT Addict

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  14. TulionKT

    TulionKT Spamaton Will Rise Again

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  15. TulionKT

    TulionKT Spamaton Will Rise Again

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  16. Velox

    Velox TZT Abuser

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    The OP is Canadian. Not everything revolves around the USA.

    The cheap credit problem is pretty much global. Look up median wage vs. property prices in any big city in the world.

    A quick google turned up 100sqm house prices/ GDP per capita: https://www.globalpropertyguide.com/Europe/Italy/price-gdp-per-cap

    Except for a select few areas, US property prices are actually on the cheap side since you typically have a bit more restrictive lending.
     
  17. Czer

    Czer I'm a poor person. The lambo is my cousin's.

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    you can't talk about progressive house policy for the earth, that becomes a philosophical argument

    Canada and the US probably have similar factors, where the EU we have much less

    What are you talking about US property prices are on the cheap side, that makes no sense

    You say things in a context which you are not fully describing
     
  18. Sear

    Sear TZT Neckbeard Lord

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    From what I've read:
    • More higher-income people are renting
    • There's a focus on new construction & gentrification of higher-cost rentals (i.e., low-end rental properties aren't being replenished)
    • New construction of any type of property is not outpacing household growth (i.e., there are too many fucking people in big cities and not enough houses to go around)
    Income inequality and overpopulation further amplify the problem. The median price of owning a house, accounting for inflation, has more than doubled since boomers were reaching adulthood.

    I think physical limitations combined with population growth make this somewhat inevitable. NYC has been "full" for a long time now, so the tradeoff of distance and desirability/convenience just keeps extending farther out for potential owners. In Dallas, you can own a mansion for peanuts as long as you're willing to live 15 minutes away from the city - but you'll pay five times that if you insist on living in Highland Park. For that matter, there's a massive discrepancy between major cities that is worth noting (compare prime LA to Cleveland or Atlanta).

    I don't know how we solve the problem, to be honest. I have no idea. Count yourself lucky if you own property. Raising our minimum wage couldn't hurt. Right now the path to ownership for a minimum wage worker is ridiculously difficult, even with full concessions made and a strict budget.

    We could try an annual cap that limits rent increases. Get rid of exclusionary zoning laws. I don't know tho - I'd have to read more about what has already been attempted.
     
  19. Samassi Abou

    Samassi Abou TZT Abuser

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    Yeah, there's a deep question in economics about how our whole economies are set up to create asset bubbles like stock bubbles or property bubbles. These bubbles will be popped from time to time, but they'll keep inflating each time because the modern post-70s economy is structured to encourage them to inflate.

    The concepts of asset inflation and asset deflation are probably more important for economics than the inflation of goods and services (ie, regular inflation), yet get a fraction of the attention. A cynic might wonder whether that was because economists and/or investors are big beneficiaries of asset inflation.
     
  20. Samassi Abou

    Samassi Abou TZT Abuser

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    Oh, by the way, the unless you want to completely overhaul your economy, the quickest way to solve housing affordability is to, at least in part, follow the Singapore model. The HK property market is often unfavourably compared to Singapore's. It's the example of two different economic structures helping to create two very different political environments.

    https://www.scmp.com/comment/opinio...ore-so-similar-yet-so-different-its-all-about
     
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