The 2017 tax act had an obfuscated impact on corporate ownership of houses. Capping the personal SALT deduction while simultaneously lowering the corporate tax rate made local tax policies to increase local ownership ineffective.
Saw that directly. Everyone talks about the tax cuts, but my taxes went up as a result of the SALT changes. There was a real effect on people, especially those in high cost of living areas, when they could no longer deduct mortgage interest.
I wonder if it will be allowed to expire on schedule and my taxes will go back down. Probably too much to hope for.
My first order ignorant analysis is this feels like something done to make people dislike higher tax or progressive states. It increases the indigestion/frustration with taxes & the state. Makes the payments compound.
But I'm also willing to admit there may be some very solid policy reasons why this is a good idea. I have tried to imagine some, but no luck so far!
What kind of impact did making SALT tax no longer deductable have on the federal government? Did this change the budget noticeably?
What do federal corporate tax rates have to do with municipalities setting their own property taxes? Nothing stops them from giving preferential treatment either to primary residence homeowners.
Municipalities are their own worst enemies with restrictive zoning and small-minded inability to consolidate services with neighboring districts that don't need so much duplication.
If corporate income taxes are 21%, income is reduced by expenses such as property taxes.
If individual income tax rates are 24%/32%; and a state has a low income tax rate of 5%; then a married couple making $200k earned income, then a salt cap at $10k, pays 25% more in property taxes than the corporation.
So, even if the state and local taxes are massaged to give owners a 25% discount for being owner occupied; they don't.
The idea is not the the state/city needs less services; owner occupied properties often want more services and are willing to pay for it; but now the city can no longer create policy that supports that.
I think there’s a preserve incentive with city council. Most members of city council, and most donors to them, would benefit greatly from having higher local property values that deep pocketed corporate buyers bring.
Not OP nor a tax-lawyer, but I think they meant that the federal tax code changed so that:
1. It became was more-expensive for individuals to own a house, especially in areas with high local property taxes. (Losing the ability to deduct those payments from their personal federal income bill.)
2. Taxes on corporate profits went down in general, and some portion of those corporations may be in the business of buying housing and then renting them out. (Since companies are taxed on profit rather than income, they already pseudo-deduct property taxes and other expenses.)
That said, those two items don't feel like, er, "two ends of the same see-saw" to me, especially given how #2 is very broad.
Yes, relatively, the lever that municipalities had to encourage owner occupied properties (a homestead exemption) is taken away for upper middle class (especially if a married couple each has a tech salary, and if the state has even a low income tax rate)
Therefore, it becomes beneficial for the (even the same individuals) to invest in corporations that rent out real estate; and removes the ability for the city to use homestead exemptions to help discriminate to encourage owner occupied units.
So you get higher home prices/rents with fewer owner occupied properties, with less incentive for community investment (including property taxes), and fewer levers for the state/municipality to pull.
The SoCal housing market is insane, especially San Diego where the pay to mortgage payment ratio is completely off-kilter. Don’t know how this city is going to function in 10-20 years.
The weird thing is that you could have written that same sentence 20 years ago. I remember around 2005 the Union Tribune ran a map of San Diego showing the percentage of household income spent on housing, with the entire coast red even in the rich neighborhoods where people were getting interest-only mortgages on multi-million dollar homes. At the time I remember being amazed at how many people would take such risky loans but now I’m more impressed by how often that worked: unless they couldn’t make it through the 2009 collapse and had to sell right then, they probably did clear a good profit from that strategy.
How long do US people typically fix their mortgage? Are there many people that will refinance their home and have to pay a higher rate or does this just happen if you move house? Can refinancing be avoided if you just move house and transfer the debt to the new property but keep the same rate? In New Zealand you can fix for 6 months, 1 year, 18 months, 2, 3, 4 or 5 years with 2/3 being most common but recently 6 months to 1 year becoming popular due to the expectation that rates will fall. The flip side to that is a lot of people on a historically low < 3% 3 year mortgage had to take a 6%-7% mortgage so a lot of money gets taken out of their pockets and the economy.
All I can suggest is that SoCal prices can and do crash... but the cycles are so long as to skip parts of generations who would/should normally be able to buy homes. I lucked out and bought 14 years ago (after seemingly "priced out" for 10+ years)
Its quite a nice circle. First you limit voting rights to land owners, then people wise up and let everyone vote, then you incentivize anyone that may vote to buy land.
Already you can barely function as a citizen unless you either own a house or pay rent to a landlord. Want to live in your car? Want a bank account registered to a box at the Post Office? Can't do it! Whether you are a human being deserving of rights is determined -- who would have guessed? -- by whether you get a bill from the electric company.
Homeowners are the only caste that matters.
Renters are grudgingly accepted as human in some limited circumstances.
Please don't ask for the goverent to have full control over the entire life cycle of our wealth. They already print the money and set rates that largely define what loans cost us. If the government also directly owns our bank accounts as well we really are entirely at their whims.
Not only could the government implement austerity to pay of debt or attempt to reduce inflation, they could directly control approval over every digital payment you make.
I think the economy is doing decently in aggregate, but doing either extremely great or extremely bad depending on which specific part of the economy you look at. Kind of like how the US Air Force will tell you there is no such thing as The Average Man.
Looking at the securities market (stocks and bonds) they're basically a statistical anomaly with how good they're doing. Inflation is irrelevant with luxury goods and bad with life's necessities. Cost of housing is too high in the metros and reasonable in rural regions. Wages and salaries for the rank and file are stagnant but are going up for management. etc. et al.
And yet US Treasury bonds are the gold standard for bonds.
Besides, if the theory of inverse correlation or no correlation between bonds and stocks (read: the economy) holds, it's arguably a good thing bonds in relative terms aren't doing too hot right now.
That's not really surprising, considering that's exactly how interest rate increases are supposed to work. They crowd out a bit of business investment and a lot of housing investment [1]. This in turn cools the economy by curtailing construction.
Unfortunately, housing in most areas was screwed to begin with. This was not nearly the case with prior inflation bouts that required rate increases. The Fed was left with two bad choices. It did what it had to do.
If the economy was Windows XP, housing would be its networking stack - its most exploitable sector. This is largely because of local governance and regulatory capture [2]. Housing has been artificially undersupplied for 5 decades under a variety of pretexts, such as architectural integrity. It has effectively turned the sector into a pyramid scheme that captures the wages of renters.
If you want to consider interest rates in the usual model where increases are meant to reduce demand and lower prices, the Fed either really screwed up or we're about to see a huge drop in the housing market.
Prices consistently went up over the last couple years of high rates. The recent fed funds rate drop didn't seem to help, and last I checked loan rates had stayed flat or actually gone up a bit.
If loans weren't hurt enough them the Fed stopped raising rates too early and dropped much too early. Otherwise it would seem that they dropped in anticipation of something coming and loan rates are staying high anticipating higher risk of the same issues ahead.
Prices are not the relevant statistic though, it's housing starts [1]. They dropped from ~1.8M in April 2022 to ~1.3M today. Prices are affected by supply and demand equally, while starts are much more affected by supply.
As for how the Treasury and Fed managed the crisis, it was easily the most incredible macro success story since I've been alive. Had you told me in 2022 that they'd manage sub-3% inflation without a recession at all, I'd have said you believed in fairy tales.
> Prices are not the relevant statistic though, it's housing starts [1]. They dropped from ~1.8M in April 2022 to ~1.3M today. Prices are affected by supply and demand equally, while starts are much more affected by supply.
New construction and prices are always connected, I'm not sure how you could consider one without the other. New builds increases supply, but building them requires buyers willing to pay market price for them. You can't have one without the other.
> As for how the Treasury and Fed managed the crisis, it was easily the most incredible macro success story since I've been alive. Had you told me in 2022 that they'd manage sub-3% inflation without a recession at all, I'd have said you believed in fairy tales.
Its too early to make that call either way. They may very well have managed the "soft landing" they kept pitching, but we really won't know for sure for at least a decade or so. Markets move slow and economies move even slower, give it time to shake out before popping bottles and awarding Nobel Prizes.
Any way you look at it, the government has to kick existing owners in the teeth to fix this crisis. Housing prices need to return to a reasonable multiple of wages, and that can only be done with supply. Everyone is going to have to get over the idea that they are "building wealth" and "getting ahead" by merely owning a box.
If you can avoid population loss, it's still going to work out, because a great approach to increasing housing supply is more density. Grab 3 adjacent houses, demolish, turn them into 24 condos that are only a little bit cheaper, and once you account for the costs of construction, it still works out for everyone.
So what happened to the owners of those three houses? Well, their land, which before could only had 3 dwellings, has 24. So while the value of the built houses they had dropped to zero, the value of the land they were built on went up spectacularly, so their investment paid off anyway.
Barring the craziest of regulatory situations, no house is ever a good investment. They degrade and get worse! But most homeowners end up ahead, because they own the land, and it appreciated faster than the house depreciated. And as a city gets bigger and more prosperous all land near it gets more valuable.
So all in all, in cities that aren't shinking, it's likely most homeowners end up way ahead, and the closer to downtown, the more they gain. It's only when a city shrinks that the homeowner really loses money.
As someone who wants higher density, I see very little progress of this happening. Voters consistently vote against it. The one exception is California state has passed some good laws around ADUs and parking minimums. People will keep voting for rent control and affordable units to prevent construction.
The other side of the equation is that wages could increase relative to the price of housing.
Rent control is absolutely important; although it does probably have a measurable effect on how quickly things get built, I don't think it's near the top of the list of bottlenecks.
> The other side of the equation is that wages could increase relative to the price of housing.
It's a system problem with various feedback loops, and people absolutely aren't getting paid enough and don't appreciate how little money they're making relative to what it can buy. In my city we're at a point where a new studio condo with no walls along a major thoroughfare outside the downtown area starts at ~$600k CAD, and older one bedrooms in the same range will still have asbestos and coin-op laundry in the basement. My landlords recently moved out and our living circumstances long-term are being considered. I had a conversation with one of them and she was seemingly clueless about how vulnerable it might have made us, and that's a bit humiliating; "but you guys have been here a while and surely you're making good money since moving in 5 years ago", to which I actually laughed and didn't elaborate, since we now depend on them putting in a good worth with our new overlords. We don't have the job security, we don't have the proportional increase in earning potential. Any decent money made gets erased in the next round of layoffs. Burn it all down.
> kick existing owners in the teeth to fix this crisis
You're assuming a definition of "crisis". 2/3 of households own their own homes, and a big chunk of those that don't aren't looking to buy in any circumstances. As much as we hear about the high cost of housing, it's only an issue for an extremely vocal minority. That's not to say I don't view it as a problem (clearly it is) but I'm skeptical it's going to win any political battles.
1. "Household" is not the right unit of analysis, since a household is defined as the set of people in an existing home. Some of these include adults who would like to move out, creating a new household not accounted for in your denominator.
2. According to the U.S. Census Bureau, the average American moves approximately 11.7 times throughout their lifetime. In other words, current homeowners generate demand for housing just as non-homeowners do.
I have a decent amount of equity in a house that didn't cost me a lot. Small town, housing supply is okay, market has been up in recent years.
If I lost my job and was unable to find something reasonable in my relatively non-existent local job market, I would be looking to move to somewhere with a larger employer base and barely be able to make a down payment on entry level housing.
It's only a political battle to win as long as the disenfranchised accept arguing about it is the only framework for dealing with it. People who consistently oppose change are lucky everyone else is relatively chill—so far—about losing access to a certain kind agency over one's future in their community. One could imagine a tipping point whereby the disenfranchised start approaching the situation more directly.
But is it going to happen? In the next 10 to 20 years that I personally care about? And it’s not just supply, the housing market is rigged in various ways.
Regular homeowners aren't benefiting much from high house prices. If they sell they just have to buy another, so it's a wash. If they borrow against it, they have to repay at currently high interest rates.
> If they sell they just have to buy another, so it's a wash.
They have to buy another at a higher interest rate. It's not a wash, I think it's a loss for most. If I sold my house, then bought another at the same size, the gains would not cover the monthly mortgage increase for very long.
I guess that'll naturally change when there's enough pissed younger millenials, zoomers, and whatever else who don't have boomer parents with money, in aggregate surpassing the soon to be diminishing demo who owns them all. Just the numbers of voters though, no legit policy improvements.
Great. Housing should not be an investment and chasing ever-increasing property values as a society is obviously unsustainable. If you own a house as your primary residence, then its market value shouldn't really matter, because the value has no impact on your quality of life.
If you buy a house and it appreciates 40%, you can borrow against that equity. You've got a heck of a cushion in the case of any negative event. Including losing your job.
Increasing supply in population centers also raises demand. Think about why it's in demand in the first place: it's because there is high density (and more opportunities).
Zoning and parking minimums are the real problem. Ensure houses are safe (fire, collapse, etc.) and let the market decide where, when and what should be built.
Exactly -- Tokyo has kept housing costs under control for this reason.
There are zoning codes in Tokyo, but they're quite flexible compared to what people in the US are used to. In addition, perhaps most importantly, it's not possible to oppose construction, as opposed to the the US, where literally anyone can halt a construction project indefinitely for literally any bogus reason. "It might cast shade on 1 square foot of the street!"
It was a sad day when I learned there exist actual shade inspections as part of the development approval process in some places. I legit thought it was just a way to mock NIMBYs who say that stuff. It was on that day I kind of just stopped hoping for a better future in terms of housing.
I feel like immigration is effectively unlimited from the perspective of big cities. There's friction moving states, and some things keep people anchored, but the market is nationwide. If you built enough in NYC to make rent comparable to other major cities, then significantly more people would want to move to NYC.
Governments will choose the path of least pain everytime and that means EVERY SINGLE TIME they will choose to hyperinflate the money supply rather than pay their debts.
No one is going to purposfully crash the single largest market in the world. Hyperinflation is comming.
Do you think it will get as high as %50 per month or something like %25 a year and would this inflation have any effect on future US Federal liabilities?
Been hearing that since the 1970s, with more reason. 1979 looked a lot more like hyperinflation than 2023 did, with 14% inflation.
By the way, hyperinflation doesn't just mean "large inflation". It's defined as 50% increase in prices per month. Yes, governments often (not always) choose to inflate the money supply rather than pay their debts. No, nobody deliberately chooses hyperinflation.
Mind you, you could be right this time. It could be that the next government will overspend enough (no matter who wins) and Congress will be irresponsible enough that we do in fact wind up in a hyperinflation. But so far, naysayers have predicted ten of the last zero hyperinflations.
I agree, "The USD/American economy will crash!" and "China will implode!" are perhaps the two textbook examples of yokels yapping baselessly about doomsdays I've consistently heard and turn out wrong over my entire lifetime.
Entire foreign countries (read: most of the world worth caring about) invest in and hold the US, whether that's stocks or bonds (Treasury bonds especially) or literal USD. The only way the US crashes at this point is if the entirety of humanity has shit the bed, it's otherwise a force of nature only going up up up.
The 2017 tax act had an obfuscated impact on corporate ownership of houses. Capping the personal SALT deduction while simultaneously lowering the corporate tax rate made local tax policies to increase local ownership ineffective.
Saw that directly. Everyone talks about the tax cuts, but my taxes went up as a result of the SALT changes. There was a real effect on people, especially those in high cost of living areas, when they could no longer deduct mortgage interest.
I wonder if it will be allowed to expire on schedule and my taxes will go back down. Probably too much to hope for.
My first order ignorant analysis is this feels like something done to make people dislike higher tax or progressive states. It increases the indigestion/frustration with taxes & the state. Makes the payments compound.
But I'm also willing to admit there may be some very solid policy reasons why this is a good idea. I have tried to imagine some, but no luck so far!
What kind of impact did making SALT tax no longer deductable have on the federal government? Did this change the budget noticeably?
What do federal corporate tax rates have to do with municipalities setting their own property taxes? Nothing stops them from giving preferential treatment either to primary residence homeowners.
Municipalities are their own worst enemies with restrictive zoning and small-minded inability to consolidate services with neighboring districts that don't need so much duplication.
Relativity;
If corporate income taxes are 21%, income is reduced by expenses such as property taxes.
If individual income tax rates are 24%/32%; and a state has a low income tax rate of 5%; then a married couple making $200k earned income, then a salt cap at $10k, pays 25% more in property taxes than the corporation.
So, even if the state and local taxes are massaged to give owners a 25% discount for being owner occupied; they don't.
The idea is not the the state/city needs less services; owner occupied properties often want more services and are willing to pay for it; but now the city can no longer create policy that supports that.
I think there’s a preserve incentive with city council. Most members of city council, and most donors to them, would benefit greatly from having higher local property values that deep pocketed corporate buyers bring.
Could you explain ?
Not OP nor a tax-lawyer, but I think they meant that the federal tax code changed so that:
1. It became was more-expensive for individuals to own a house, especially in areas with high local property taxes. (Losing the ability to deduct those payments from their personal federal income bill.)
2. Taxes on corporate profits went down in general, and some portion of those corporations may be in the business of buying housing and then renting them out. (Since companies are taxed on profit rather than income, they already pseudo-deduct property taxes and other expenses.)
That said, those two items don't feel like, er, "two ends of the same see-saw" to me, especially given how #2 is very broad.
Yes, relatively, the lever that municipalities had to encourage owner occupied properties (a homestead exemption) is taken away for upper middle class (especially if a married couple each has a tech salary, and if the state has even a low income tax rate)
Therefore, it becomes beneficial for the (even the same individuals) to invest in corporations that rent out real estate; and removes the ability for the city to use homestead exemptions to help discriminate to encourage owner occupied units.
So you get higher home prices/rents with fewer owner occupied properties, with less incentive for community investment (including property taxes), and fewer levers for the state/municipality to pull.
The SoCal housing market is insane, especially San Diego where the pay to mortgage payment ratio is completely off-kilter. Don’t know how this city is going to function in 10-20 years.
The weird thing is that you could have written that same sentence 20 years ago. I remember around 2005 the Union Tribune ran a map of San Diego showing the percentage of household income spent on housing, with the entire coast red even in the rich neighborhoods where people were getting interest-only mortgages on multi-million dollar homes. At the time I remember being amazed at how many people would take such risky loans but now I’m more impressed by how often that worked: unless they couldn’t make it through the 2009 collapse and had to sell right then, they probably did clear a good profit from that strategy.
How long do US people typically fix their mortgage? Are there many people that will refinance their home and have to pay a higher rate or does this just happen if you move house? Can refinancing be avoided if you just move house and transfer the debt to the new property but keep the same rate? In New Zealand you can fix for 6 months, 1 year, 18 months, 2, 3, 4 or 5 years with 2/3 being most common but recently 6 months to 1 year becoming popular due to the expectation that rates will fall. The flip side to that is a lot of people on a historically low < 3% 3 year mortgage had to take a 6%-7% mortgage so a lot of money gets taken out of their pockets and the economy.
It’s quite common in the US for homeowners to have their rate fixed for the full fifteen/thirty years of the loan.
All I can suggest is that SoCal prices can and do crash... but the cycles are so long as to skip parts of generations who would/should normally be able to buy homes. I lucked out and bought 14 years ago (after seemingly "priced out" for 10+ years)
I can't tell what a "great" housing market is defined as in this article. I don't own a house, so to me, house prices decreasing is "great".
Encouraging as many voters as possible to own homes was one of the worst mistakes of all time in the us/canada
Its quite a nice circle. First you limit voting rights to land owners, then people wise up and let everyone vote, then you incentivize anyone that may vote to buy land.
Already you can barely function as a citizen unless you either own a house or pay rent to a landlord. Want to live in your car? Want a bank account registered to a box at the Post Office? Can't do it! Whether you are a human being deserving of rights is determined -- who would have guessed? -- by whether you get a bill from the electric company.
Homeowners are the only caste that matters.
Renters are grudgingly accepted as human in some limited circumstances.
All other adults are considered subhuman.
Allowing the post office to do very basic banking sounds like a fine idea to me.
Please don't ask for the goverent to have full control over the entire life cycle of our wealth. They already print the money and set rates that largely define what loans cost us. If the government also directly owns our bank accounts as well we really are entirely at their whims.
Not only could the government implement austerity to pay of debt or attempt to reduce inflation, they could directly control approval over every digital payment you make.
I think the economy is doing decently in aggregate, but doing either extremely great or extremely bad depending on which specific part of the economy you look at. Kind of like how the US Air Force will tell you there is no such thing as The Average Man.
Looking at the securities market (stocks and bonds) they're basically a statistical anomaly with how good they're doing. Inflation is irrelevant with luxury goods and bad with life's necessities. Cost of housing is too high in the metros and reasonable in rural regions. Wages and salaries for the rank and file are stagnant but are going up for management. etc. et al.
Bonds are not doing well. Far from it.
And yet US Treasury bonds are the gold standard for bonds.
Besides, if the theory of inverse correlation or no correlation between bonds and stocks (read: the economy) holds, it's arguably a good thing bonds in relative terms aren't doing too hot right now.
That's not really surprising, considering that's exactly how interest rate increases are supposed to work. They crowd out a bit of business investment and a lot of housing investment [1]. This in turn cools the economy by curtailing construction.
Unfortunately, housing in most areas was screwed to begin with. This was not nearly the case with prior inflation bouts that required rate increases. The Fed was left with two bad choices. It did what it had to do.
If the economy was Windows XP, housing would be its networking stack - its most exploitable sector. This is largely because of local governance and regulatory capture [2]. Housing has been artificially undersupplied for 5 decades under a variety of pretexts, such as architectural integrity. It has effectively turned the sector into a pyramid scheme that captures the wages of renters.
[1] https://archive.is/8wAry (from https://www.nytimes.com/2022/04/19/opinion/inflation-interes...)
[2] https://en.wikipedia.org/wiki/Regulatory_capture
Its a little more than the networking stack - https://www.investopedia.com/terms/f/fire-economy.asp
If you want to consider interest rates in the usual model where increases are meant to reduce demand and lower prices, the Fed either really screwed up or we're about to see a huge drop in the housing market.
Prices consistently went up over the last couple years of high rates. The recent fed funds rate drop didn't seem to help, and last I checked loan rates had stayed flat or actually gone up a bit.
If loans weren't hurt enough them the Fed stopped raising rates too early and dropped much too early. Otherwise it would seem that they dropped in anticipation of something coming and loan rates are staying high anticipating higher risk of the same issues ahead.
Prices are not the relevant statistic though, it's housing starts [1]. They dropped from ~1.8M in April 2022 to ~1.3M today. Prices are affected by supply and demand equally, while starts are much more affected by supply.
As for how the Treasury and Fed managed the crisis, it was easily the most incredible macro success story since I've been alive. Had you told me in 2022 that they'd manage sub-3% inflation without a recession at all, I'd have said you believed in fairy tales.
[1] https://fred.stlouisfed.org/series/HOUST
> Prices are not the relevant statistic though, it's housing starts [1]. They dropped from ~1.8M in April 2022 to ~1.3M today. Prices are affected by supply and demand equally, while starts are much more affected by supply.
New construction and prices are always connected, I'm not sure how you could consider one without the other. New builds increases supply, but building them requires buyers willing to pay market price for them. You can't have one without the other.
> As for how the Treasury and Fed managed the crisis, it was easily the most incredible macro success story since I've been alive. Had you told me in 2022 that they'd manage sub-3% inflation without a recession at all, I'd have said you believed in fairy tales.
Its too early to make that call either way. They may very well have managed the "soft landing" they kept pitching, but we really won't know for sure for at least a decade or so. Markets move slow and economies move even slower, give it time to shake out before popping bottles and awarding Nobel Prizes.
It was a problem even before the interest rate rises, although that certainly made it worse.
Any way you look at it, the government has to kick existing owners in the teeth to fix this crisis. Housing prices need to return to a reasonable multiple of wages, and that can only be done with supply. Everyone is going to have to get over the idea that they are "building wealth" and "getting ahead" by merely owning a box.
If you can avoid population loss, it's still going to work out, because a great approach to increasing housing supply is more density. Grab 3 adjacent houses, demolish, turn them into 24 condos that are only a little bit cheaper, and once you account for the costs of construction, it still works out for everyone.
So what happened to the owners of those three houses? Well, their land, which before could only had 3 dwellings, has 24. So while the value of the built houses they had dropped to zero, the value of the land they were built on went up spectacularly, so their investment paid off anyway.
Barring the craziest of regulatory situations, no house is ever a good investment. They degrade and get worse! But most homeowners end up ahead, because they own the land, and it appreciated faster than the house depreciated. And as a city gets bigger and more prosperous all land near it gets more valuable.
So all in all, in cities that aren't shinking, it's likely most homeowners end up way ahead, and the closer to downtown, the more they gain. It's only when a city shrinks that the homeowner really loses money.
As someone who wants higher density, I see very little progress of this happening. Voters consistently vote against it. The one exception is California state has passed some good laws around ADUs and parking minimums. People will keep voting for rent control and affordable units to prevent construction.
The other side of the equation is that wages could increase relative to the price of housing.
Rent control is absolutely important; although it does probably have a measurable effect on how quickly things get built, I don't think it's near the top of the list of bottlenecks.
> The other side of the equation is that wages could increase relative to the price of housing.
It's a system problem with various feedback loops, and people absolutely aren't getting paid enough and don't appreciate how little money they're making relative to what it can buy. In my city we're at a point where a new studio condo with no walls along a major thoroughfare outside the downtown area starts at ~$600k CAD, and older one bedrooms in the same range will still have asbestos and coin-op laundry in the basement. My landlords recently moved out and our living circumstances long-term are being considered. I had a conversation with one of them and she was seemingly clueless about how vulnerable it might have made us, and that's a bit humiliating; "but you guys have been here a while and surely you're making good money since moving in 5 years ago", to which I actually laughed and didn't elaborate, since we now depend on them putting in a good worth with our new overlords. We don't have the job security, we don't have the proportional increase in earning potential. Any decent money made gets erased in the next round of layoffs. Burn it all down.
> kick existing owners in the teeth to fix this crisis
You're assuming a definition of "crisis". 2/3 of households own their own homes, and a big chunk of those that don't aren't looking to buy in any circumstances. As much as we hear about the high cost of housing, it's only an issue for an extremely vocal minority. That's not to say I don't view it as a problem (clearly it is) but I'm skeptical it's going to win any political battles.
> 2/3 of households own their own homes
1. "Household" is not the right unit of analysis, since a household is defined as the set of people in an existing home. Some of these include adults who would like to move out, creating a new household not accounted for in your denominator.
2. According to the U.S. Census Bureau, the average American moves approximately 11.7 times throughout their lifetime. In other words, current homeowners generate demand for housing just as non-homeowners do.
I have a decent amount of equity in a house that didn't cost me a lot. Small town, housing supply is okay, market has been up in recent years.
If I lost my job and was unable to find something reasonable in my relatively non-existent local job market, I would be looking to move to somewhere with a larger employer base and barely be able to make a down payment on entry level housing.
It's only a political battle to win as long as the disenfranchised accept arguing about it is the only framework for dealing with it. People who consistently oppose change are lucky everyone else is relatively chill—so far—about losing access to a certain kind agency over one's future in their community. One could imagine a tipping point whereby the disenfranchised start approaching the situation more directly.
But is it going to happen? In the next 10 to 20 years that I personally care about? And it’s not just supply, the housing market is rigged in various ways.
The majority of voters are homeowners so that’s probably why it isn’t going to happen so dramatically.
Regular homeowners aren't benefiting much from high house prices. If they sell they just have to buy another, so it's a wash. If they borrow against it, they have to repay at currently high interest rates.
> If they sell they just have to buy another, so it's a wash.
They have to buy another at a higher interest rate. It's not a wash, I think it's a loss for most. If I sold my house, then bought another at the same size, the gains would not cover the monthly mortgage increase for very long.
I guess that'll naturally change when there's enough pissed younger millenials, zoomers, and whatever else who don't have boomer parents with money, in aggregate surpassing the soon to be diminishing demo who owns them all. Just the numbers of voters though, no legit policy improvements.
Great. Housing should not be an investment and chasing ever-increasing property values as a society is obviously unsustainable. If you own a house as your primary residence, then its market value shouldn't really matter, because the value has no impact on your quality of life.
If you buy a house and it appreciates 40%, you can borrow against that equity. You've got a heck of a cushion in the case of any negative event. Including losing your job.
Letting a majority of voters benefit from their home equity was a colossal mistake that will harm society for ages to come
But it is valued based on its impact to your quality of life.
Increasing supply in population centers also raises demand. Think about why it's in demand in the first place: it's because there is high density (and more opportunities).
Barring unlimited immigration, we could build enough high-density housing in cities to meet demand. (At least, we could if we fixed zoning.)
(Or, we could in most cities. A few, like New York and San Francisco, are very limited in terms of available land.)
Zoning and parking minimums are the real problem. Ensure houses are safe (fire, collapse, etc.) and let the market decide where, when and what should be built.
Exactly -- Tokyo has kept housing costs under control for this reason.
There are zoning codes in Tokyo, but they're quite flexible compared to what people in the US are used to. In addition, perhaps most importantly, it's not possible to oppose construction, as opposed to the the US, where literally anyone can halt a construction project indefinitely for literally any bogus reason. "It might cast shade on 1 square foot of the street!"
It was a sad day when I learned there exist actual shade inspections as part of the development approval process in some places. I legit thought it was just a way to mock NIMBYs who say that stuff. It was on that day I kind of just stopped hoping for a better future in terms of housing.
parking minimums are a red herring.
zoning, absolutely. however, in a lot of places we have homeowners' associations as well.
random density doesn't help much, need to build density near existing and planned infrastructure.
I feel like immigration is effectively unlimited from the perspective of big cities. There's friction moving states, and some things keep people anchored, but the market is nationwide. If you built enough in NYC to make rent comparable to other major cities, then significantly more people would want to move to NYC.
Governments will choose the path of least pain everytime and that means EVERY SINGLE TIME they will choose to hyperinflate the money supply rather than pay their debts.
No one is going to purposfully crash the single largest market in the world. Hyperinflation is comming.
Do you think it will get as high as %50 per month or something like %25 a year and would this inflation have any effect on future US Federal liabilities?
Been hearing that since the 1970s, with more reason. 1979 looked a lot more like hyperinflation than 2023 did, with 14% inflation.
By the way, hyperinflation doesn't just mean "large inflation". It's defined as 50% increase in prices per month. Yes, governments often (not always) choose to inflate the money supply rather than pay their debts. No, nobody deliberately chooses hyperinflation.
Mind you, you could be right this time. It could be that the next government will overspend enough (no matter who wins) and Congress will be irresponsible enough that we do in fact wind up in a hyperinflation. But so far, naysayers have predicted ten of the last zero hyperinflations.
I agree, "The USD/American economy will crash!" and "China will implode!" are perhaps the two textbook examples of yokels yapping baselessly about doomsdays I've consistently heard and turn out wrong over my entire lifetime.
Entire foreign countries (read: most of the world worth caring about) invest in and hold the US, whether that's stocks or bonds (Treasury bonds especially) or literal USD. The only way the US crashes at this point is if the entirety of humanity has shit the bed, it's otherwise a force of nature only going up up up.