Housing discussion from ION

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Re: Housing discussion from ION

Postby Drumheller769 » Wed Feb 15, 2017 8:03 pm UTC

The increase in value is from inflation or improvements to the home. Nobody wants to shackle themselves to a 30 year mortgage where they lose a bunch of money....


Kinda like all those student loans, that you spend years paying off...and then you cant get a job in the field you studied for. So you lost all that money.
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Re: In other news... (humorous news items)

Postby Dark567 » Wed Feb 15, 2017 8:10 pm UTC

Zamfir wrote:If home owners are so powerful that they can bend politics to their favour even in big cities where they are a distinct minority. Why doesn't that work even more in their favour elsewhere?
I think it does. Silicon Valley is a huge example of this. It is not very dense, but very high prices and higher home ownership than the nearby San Francisco.
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Re: Housing discussion from ION

Postby Chen » Wed Feb 15, 2017 8:15 pm UTC

Drumheller769 wrote:If I paid $200,000 for a house, and then due to changes in the area its assessed at $150,000, I've just lost $50,000. I won't be able to sell my house for what I paid for it to break even, or make a profit. If I wanted to lose money I would rent, not buy a house.


A house is never a guaranteed investment. Look at 2008. From a pure monetary point of view, housing tends to be an investment mechanism that forces people to "save". If you are diligent in managing your money and savings, you could very well come out ahead renting and investing your savings, than to put most of it into paying for a house. Clearly this isn't always the case, but few people run the numbers. Possibly because having a home of your own that is mainly under your control has utility in and of itself, in addition to the possibility of added value over time.

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Re: Housing discussion from ION

Postby sardia » Wed Feb 15, 2017 8:56 pm UTC

Chen wrote:
Drumheller769 wrote:If I paid $200,000 for a house, and then due to changes in the area its assessed at $150,000, I've just lost $50,000. I won't be able to sell my house for what I paid for it to break even, or make a profit. If I wanted to lose money I would rent, not buy a house.


A house is never a guaranteed investment. Look at 2008. From a pure monetary point of view, housing tends to be an investment mechanism that forces people to "save". If you are diligent in managing your money and savings, you could very well come out ahead renting and investing your savings, than to put most of it into paying for a house. Clearly this isn't always the case, but few people run the numbers. Possibly because having a home of your own that is mainly under your control has utility in and of itself, in addition to the possibility of added value over time.

Drum, if your house lost half it's value, but your next house cost half as much, did you really lose any money?

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Re: Housing discussion from ION

Postby KnightExemplar » Wed Feb 15, 2017 9:03 pm UTC

sardia wrote:
Chen wrote:
Drumheller769 wrote:If I paid $200,000 for a house, and then due to changes in the area its assessed at $150,000, I've just lost $50,000. I won't be able to sell my house for what I paid for it to break even, or make a profit. If I wanted to lose money I would rent, not buy a house.


A house is never a guaranteed investment. Look at 2008. From a pure monetary point of view, housing tends to be an investment mechanism that forces people to "save". If you are diligent in managing your money and savings, you could very well come out ahead renting and investing your savings, than to put most of it into paying for a house. Clearly this isn't always the case, but few people run the numbers. Possibly because having a home of your own that is mainly under your control has utility in and of itself, in addition to the possibility of added value over time.

Drum, if your house lost half it's value, but your next house cost half as much, did you really lose any money?


Yes. Because you could have rented the entire time, saved money in the stock market or bonds and made money instead.

Another note: while average home values dropped by 50% in 2008, certain neighborhoods dropped 80%. The "death spiral" effect kicks in at a certain point. The only people who can't leave are the people who can't afford to leave, so they turn to crime and drugs to sustain themselves. Crime skyrockets, land values plummet, more people leave, causing land values to drop even more... etc. etc.

Housing purchases are also on leverage. If you buy a $300k home (with say $100k downpayment, just to keep the numbers simple). Then $200k is on loan. If the housing market crashes 80%, you now have a $24k home with a $200k loan. A lot of people allowed their loan to default at this point, and then that cascaded into an economic calamity.

The leverage works both ways of course. If you have a $300k home on $100k down (3-to-1 leverage)... and it goes up 10%... you have a $200k loan but $130k in equity. AKA: you just made 30% profit from a 10% market move.

IIRC, most home purchases are on 20% down (5-to-1 leverage). A lot of homes (most of my friends actually) are closer to 5% down (20-to-1 leverage). So the home tends to be the most important investment decision for most homeowners. Not only because of the mind-boggling large numbers at hand here... but also because the only realistic way to buy a home is to lever up with a mortgage / loan.
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Re: Housing discussion from ION

Postby sardia » Wed Feb 15, 2017 9:08 pm UTC

All good points, but it only shows why we haven't changed policy. It doesn't show we shouldn't change policy. After all, easing back support for housing will gradually increase the cost of single family homes, that hides the effect so it doesn't shock the market.

Building a million homes in the US cities that have the biggest shortages would stem the rise of home prices and allow the city to grow faster. Sure there's potential pain now, but it makes life easier for everyone in the future. The current situation just sucks and people are pretending it's OK.

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Re: Housing discussion from ION

Postby KnightExemplar » Wed Feb 15, 2017 9:15 pm UTC

sardia wrote:All good points, but it only shows why we haven't changed policy. It doesn't show we shouldn't change policy. After all, easing back support for housing will gradually increase the cost of single family homes, that hides the effect so it doesn't shock the market.


Indeed, I haven't taken a stance quite yet. I'm just pointing out that the combination of leverage + large sums of money means that home ownership and retaining land value of your neighborhood is very important. Everyone knows about the "death spiral" effect of neighborhoods... no one wants that to come to them.

Building a million homes in the US cities that have the biggest shortages would stem the rise of home prices and allow the city to grow faster. Sure there's potential pain now, but it makes life easier for everyone in the future. The current situation just sucks and people are pretending it's OK.


As long as it isn't Detroit. Amirite?

If you build a massive amount of homes and no one comes (or worse: people leave the city for some reason), all you've done is throw entire neighborhoods into the "death spiral". $1000 homes for everybody sounds like paradise, until you realize what the hell happened to the people who actually lived in those neighborhoods... and the terrible financial situation they've gotten themselves into.

Buy a home for $150,000 or so, live in it for a few years... watch your neighborhood crash and burn as the new development plummets the value of homes. Then watch the city build programs to try and convince other Americans to move into the crime-infested Ghetto neighborhood at $1000 per home prices. Good luck recouping the cost on your $150,000 home in that kind of atmosphere.

--------------

In any case, people do build homes in growing cities (San Francisco being a clusterfuck and is an exception to the rule). After all, that's where all the money is. The more people want to move in, the more people will pay for a development... and the better the chance that somebody is able to develop a piece of land.

Indeed, the high home prices aren't too big of a deal, because companies start to offer incentives for their workers to move in. I know that tech companies commonly offer "moving costs" for high-skill workers (ie: College Grads) to move into the city. Or maybe they want to encourage their current employees to move to a different city. High-growth high-value areas don't need any help, the problems are virtually self-correcting.

--------

Another note: Its very cheap to set up a trailer park and provide tons of $20,000 housing units for large numbers of people. Indeed, Trailer Parks are a great intersection of density, low-cost mass manufacturing, and cheap enough for virtually anybody to afford... maybe not necessarily own... but lots of Trailer Parks offer rental units too. In short: we all know how to mass produce homes... that's not the problem.

The real problem is figuring out how to do it without diminishing land value.
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Re: Housing discussion from ION

Postby freezeblade » Wed Feb 15, 2017 9:48 pm UTC

KnightExemplar wrote:Indeed, the high home prices aren't too big of a deal, because companies start to offer incentives for their workers to move in. I know that tech companies commonly offer "moving costs" for high-skill workers (ie: College Grads) to move into the city. High-growth high-value areas don't need any help, the problems are virtually self-correcting.


Well, minus in S.F. like you said, where the average home price is over $1M, and expansion that cannot happen within city limits without dramatically increasing density (much like Manhattan).

There are certainly ways of building higher density housing without decreasing property values, the problem is that it's expensive, and takes a solution that expands beyond the confines of that one property, as it means improving nearby facilities, setting up mixed-income housing, changes to zoning, and revitalizing public spaces. All of this costs money, political capital, and the approval of neighbors (which as we see here, is a hard road to climb). Instead the proposals get slashed up, handshakes are done, committees shrink the scope, and we're left with one property getting 85% market rate housing, and 15% below-market-rate housing in the back, with a separate entrance, and a small park across the street.

This might be me speaking from the lens of my major though (Architectural design, with a focus in urban redevelopment).
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Re: Housing discussion from ION

Postby ucim » Wed Feb 15, 2017 11:57 pm UTC

LaserGuy wrote:If people want to have their monstrously inefficient single-family homes...
Irrespective of the rest of the paragraph, you are implying that there is something morally wrong with being "inefficient" in terms of the use of land that you own. I take exeption to that. People who own land (or tubas) don't have a duty to be efficient in using it. In fact, they don't have a duty to use it at all.

sardia wrote:Ucim is a hardliner that thinks only his neighbors should decide whether or not they should admit more neighbors.
That interpretation (while true on the surface) misses the point. It's this whole "efficiency" thing that I object hard-line to.

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Trump aside, sometimes it's two sheep and a wolf, and that's the whole point of it.
elasto wrote:Now, better than democracy is representative democracy whereby lawmakers decide on the best policies for the whole of society including for those who didn't vote.
Only when the scope of the issue and the scope of "whole of society" coincide. I don't want (democratically elected) national government telling me what I must have for breakfast, even if it's more efficient that everyone eat the same thing at the same time. There are quality-of-life issues here; mom can tell the kids what to eat, but the head of the Feeding Efficiency branch of government has no business doing so even if it lowers the cost of eggs and corn flakes.

Arguably the housing situation is a result of the distribution of jobs rather than housing, and (for those that favor "efficiency based" solutions) is better addressed by having government dictate which jobs go where. To some extent, this already happens; when {company} wants to put a plant in {city} it must meet with various levels of approval, and among the considerations are its impact on housing and services. However, that is not (and should not be) overriding; there are many other things to consider. We live in a (relatively) free society, and part of the price of that freedom is that there will be inhomogeneities and inefficiencies. But the market is self-correcting, even if not to the extent that you might like.

Drumheller769 wrote:The increase in value is from inflation or improvements to the home.
No, it's not. Home values fluctuate for many reasons, and important in them is the quality of living in that area, which is influenced by the local economy, the local recreation opportunities, the local demographics, the local school system... all of which is in flux, and all of which is adversely impacted by plopping a bunch of people in the middle.

freezeblade wrote:There are certainly ways of building higher density housing without decreasing property values...
...but that's not at issue, even if those are the words that are used. What's at issue is that you cannot build high density housing in a low density area without profoundly affecting the social environment. Those that already live there probably chose to do so for the existing social environment, thus the impact is profoundly negative. It could even be in this scenario that property values go up, because the high density housing attracts more development, but even if every one of the existing property owners sells out at a profit, you've destroyed a neighborhood to do so, because people don't settle down into a neighborhood for the purpose of making a profit on their home. They do so to form social and business connections; to "put down roots", cliche as it may sound. That is where the value of one's home lies; not in the IRS capital gains form you have to fill out upon sale.

This is my main point - that "property values" does not mean "the price of the property".

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Re: Housing discussion from ION

Postby LaserGuy » Thu Feb 16, 2017 12:18 am UTC

ucim wrote:
LaserGuy wrote:If people want to have their monstrously inefficient single-family homes...


Irrespective of the rest of the paragraph, you are implying that there is something morally wrong with being "inefficient" in terms of the use of land that you own. I take exeption to that. People who own land (or tubas) don't have a duty to be efficient in using it. In fact, they don't have a duty to use it at all.


You've already established that land usage is dictated by the whims of your neighbors, not by individual ownership. Your personal views about what you might or might not want to do with your land are therefore irrelevant.

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Re: Housing discussion from ION

Postby freezeblade » Thu Feb 16, 2017 12:20 am UTC

And my point is that neighborhoods change over time. All cities were at one point low-density, mostly single-family residences, or mixed use in business districts (shop on the bottom, single family above). They are not static, however, and changing trends will cause a shift and density will tick up or down, in sometimes unpredictable ways. Yes, it's generally not ideal to place high density housing, for instance, directly next to suburban style single-family homes, but there can be shades between, such as low-rise or small complexes.

Thinking that the neighborhood you bought into will forever be exactly as dense as it currently is? That is what causes the type of suburban sprawl that we see in LA, with all the problems that come of it, including concentrated ghettos and low-rent districts, where we lump the lowest-cost, highest-density housing all together to forget about and fall apart. Neighborhoods need to evolve naturally, but not enough people take city planning or neighborhood planning seriously, or think that it's only for well-off areas.
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Re: Housing discussion from ION

Postby elasto » Thu Feb 16, 2017 12:27 am UTC

ucim wrote:Only when the scope of the issue and the scope of "whole of society" coincide. I don't want (democratically elected) national government telling me what I must have for breakfast, even if it's more efficient that everyone eat the same thing at the same time. There are quality-of-life issues here; mom can tell the kids what to eat, but the head of the Feeding Efficiency branch of government has no business doing so even if it lowers the cost of eggs and corn flakes.

Arguably the housing situation is a result of the distribution of jobs rather than housing, and (for those that favor "efficiency based" solutions) is better addressed by having government dictate which jobs go where. To some extent, this already happens; when {company} wants to put a plant in {city} it must meet with various levels of approval, and among the considerations are its impact on housing and services. However, that is not (and should not be) overriding; there are many other things to consider. We live in a (relatively) free society, and part of the price of that freedom is that there will be inhomogeneities and inefficiencies. But the market is self-correcting, even if not to the extent that you might like.

FWIW my preferred solution to the housing crisis in the UK is not for government to force a high-rise block on anyone's doorstep, it's for the government to build entire new cities - just as they did in decades gone by.

Therefore, the value of your house drops - perhaps precipitously - but not because anything about your location has changed in absolute terms (your environment is just as aesthetic as it ever was etc.) but because it has changed in relative terms: There are now many, many places both better and cheaper than yours, so natural market forces of supply and demand kick in.

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Re: Housing discussion from ION

Postby ucim » Thu Feb 16, 2017 12:49 am UTC

LaserGuy wrote:You've already established that land usage is dictated by the whims of your neighbors, not by individual ownership. Your personal views about what you might or might not want to do with your land are therefore irrelevant.
Why do you call them "whims"? This suggests opinions which are arrived at sans thought. My position doesn't take a position on whether thought is involved, your interpretation does. Therefore your interpretation of my position is in error, and unfairly characterizes it, which tends to steer discussion into irrelevancies.

I was perhaps imprecise in my use of "neighbors"; I mean owners of neighboring land, as opposed to people who rent but live nearby. And by owners I specifically focus on owner-occupiers, who should have the highest stake in land use. But yes, renters and absentee-landlords should also have a say. How much and in what form is a separate discussion from the main point, which is that housing efficiency should (or should not) trump property owners' rights in their neighborhood.

freezeblade wrote:Thinking that the neighborhood you bought into will forever be exactly as dense as it currently is?
That is ludicrous. As you say, neighborhoods change. But they (should) change organically, not by fiat.
freezeblade wrote:Neighborhoods need to evolve naturally, but not enough people take city planning or neighborhood planning seriously, or think that it's only for well-off areas.
Exactly!

elasto wrote:FWIW my preferred solution to the housing crisis in the UK [is] for the government to build entire new cities - just as they did in decades gone by.

Therefore, the value of your house drops [because] There are now many, many places both better and cheaper than yours...
Not a bad solution at all, but I would disagree that the value of one's house would drop (noticably). Presumably the reason "there are now many, many places both better and cheaper than yours" is that there is demand for it, and that would keep the price from falling. It might keep it from rising into the ozone, but I could live with that.

You imply the UK has a history of this. How do these projects compare with urban renewal projects, where existing (slum) structures and infrastructure is rebuilt? Is the issue (to be crass) "what do we then do with the previous (slum) tenants?", which is more cleanly addressed by leaving them (to rot) in place while building a whole new city for the new people?

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Re: Housing discussion from ION

Postby eran_rathan » Thu Feb 16, 2017 1:22 am UTC

ucim wrote:I was perhaps imprecise in my use of "neighbors"; I mean owners of neighboring land, as opposed to people who rent but live nearby. And by owners I specifically focus on owner-occupiers, who should have the highest stake in land use. But yes, renters and absentee-landlords should also have a say. How much and in what form is a separate discussion from the main point, which is that housing efficiency should (or should not) trump property owners' rights in their neighborhood.


The term you're looking for is 'abutter'.


I don't have much to add to the discussion, but as a land-use professional, I find the whole thing you all are hashing out very interesting.
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Re: Housing discussion from ION

Postby morriswalters » Thu Feb 16, 2017 4:03 am UTC


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Re: Housing discussion from ION

Postby Liri » Thu Feb 16, 2017 4:08 am UTC

morriswalters wrote:

Tl;dr: car culture and dependency ruins everything

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Re: Housing discussion from ION

Postby LaserGuy » Thu Feb 16, 2017 4:40 am UTC

ucim wrote:
LaserGuy wrote:You've already established that land usage is dictated by the whims of your neighbors, not by individual ownership. Your personal views about what you might or might not want to do with your land are therefore irrelevant.


Why do you call them "whims"? This suggests opinions which are arrived at sans thought. My position doesn't take a position on whether thought is involved, your interpretation does. Therefore your interpretation of my position is in error, and unfairly characterizes it, which tends to steer discussion into irrelevancies.

I was perhaps imprecise in my use of "neighbors"; I mean owners of neighboring land, as opposed to people who rent but live nearby. And by owners I specifically focus on owner-occupiers, who should have the highest stake in land use. But yes, renters and absentee-landlords should also have a say. How much and in what form is a separate discussion from the main point, which is that housing efficiency should (or should not) trump property owners' rights in their neighborhood.


How far away does your hypothetical right to tell other people what they can or cannot build on their property extend? Immediately adjacent properties only? Next-nearest neighbors? An entire block? A square mile around your house? Anywhere in the city limits? Do people closer than you get their votes counted for more? If a nearby condo has 300 owners in it, do they all get the same vote as you? Is there an actual vote, or is it just based on who makes the most noise? If the latter, how do you know that your views are representative of what the community actually wants?

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Re: Housing discussion from ION

Postby ucim » Thu Feb 16, 2017 5:31 am UTC

eran_rathan wrote:The term you're looking for is 'abutter'.
Well, a bit more than that, abutter's abutter counts, and abutter's abutter's abutter... but not ad infinitum.

LaserGuy wrote:How far away does your hypothetical right to tell other people what they can or cannot build on their property extend? [...] Is there an actual vote, or is it just based on who makes the most noise?

In real life:
It depends on the (usually zoning) laws of the town in question. Where I live there is a zoning commission that makes the rules (for the town) but everyone (all eligible voters) in the town elects them. Sometimes an issue is contentious enough to warrant a town meeting (or many town meetings) and goes to referendum (a vote of the entire town). Sometimes a special zoning district is set up just for a small area (such as whether roads are to be paved and how they are to be maintained). People are really interested in the kind of life they will have where they live, and land use is a big part of it. "Who makes the most noise" is often correlated with "who cares the most", and it is not inappropriate to consider that. Where I live, the state has the right to step in and mandate a certain percentage of low income housing; developers know this and use this law to shoehorn any kind of monstrosity they want, over the objections of the town, who by law have no say in it.

Were I to rule the world:
I dunno. The real life situation I describe is probably where I'd start, and I don't see any major issues with it, except that I'd get rid of the state's low income law. The general principles I'd use are that people who live here have more rights than people who don't, people who own land here have more rights than people who don't, and "social efficiency" (see below) would get considered in planning, but not in deciding to usurp existing rights. Our town is not to be used as a dumping ground for society in general. Yes, (relatively) high density housing can be built that blends in nicely with adjacent lower density housing, but in my (limited but important) experience what happens is that this nice thing gets proposed, and a monstrosity gets built because their lawyers were more clever than the town's and had more money behind them. Then the developer disappears, leaving the town with this... "thing".

Accommodating a wide range of economic classes has value and should be supported, but the idea of "social efficiency", while it has merit as something for urban designers to consider, has downsides and is of much less value as a reason to put developments in where existing people don't want them. Like the 1960s bussing debacle, it's the wrong answer.

Now, as one moves up in the urbanization scale, there will be more land uses that are compatible with the existing layout. An apartment building that's totally out of place in the middle of an "inefficient" suburb would be quite properly located in the middle of a city. But in those cases, I expect the people in charge of zoning (and of electing the board of zoning, or however they decide to handle it) would also be more welcoming of such an enterprise.

Note also, before you go off on "so, existing residents should be able to reject {race/religion/ethinc/whatever} people" tangent, I'm talking only about land use, not about who gets to live there.

Jose
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Re: Housing discussion from ION

Postby Tyndmyr » Thu Feb 16, 2017 4:06 pm UTC

sardia wrote:
Chen wrote:
Drumheller769 wrote:If I paid $200,000 for a house, and then due to changes in the area its assessed at $150,000, I've just lost $50,000. I won't be able to sell my house for what I paid for it to break even, or make a profit. If I wanted to lose money I would rent, not buy a house.


A house is never a guaranteed investment. Look at 2008. From a pure monetary point of view, housing tends to be an investment mechanism that forces people to "save". If you are diligent in managing your money and savings, you could very well come out ahead renting and investing your savings, than to put most of it into paying for a house. Clearly this isn't always the case, but few people run the numbers. Possibly because having a home of your own that is mainly under your control has utility in and of itself, in addition to the possibility of added value over time.

Drum, if your house lost half it's value, but your next house cost half as much, did you really lose any money?


If you are trading down to a smaller house, then yes. Comes up post-kids retirement age, often. Not a problem for everyone, though. And lower housing prices DO make starting the path of home ownership much easier.

The biggest troublesome factor, of course, is the mortgage deduction. This has several effects. First off, it prioritizes home ownership over renting. It's great once you're IN the home, but it makes it harder to get your first one, because it's tougher to save while renting, and also subsidizing home owners. Secondly, since it makes ownership more desirable relative to renting, it inflates prices. Higher prices are now affordable to people who can get loans, because debt payment on amount x is somewhat lower. So, houses cost a bit more. This *also* makes it harder for renters to get into a house.

But, taking away the mortgage deduction would be very difficult at this point. Many people have made decisions expecting it to always exist, and would be greatly inconvenienced by it's loss. It'd be horribly unpopular.


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