The General Economics Thread

While I broadly agree with what fourthspartan is saying about landlords, my main point was that the large increases in housing prices are due to speculators buying investment properties and leaving them empty, and we need to either ban that or create major taxes on empty properties to avoid it.

Increasing housing supply when it’s not being used as housing does no one any good.

Edited by Galadriel on Mar 11th 2021 at 3:40:03 PM

Ah, that, of course, is a different issue. That could be dealt with using tax incentives, as you point out.

The problem isn't supply, we have close to enough roofs for the most part.

The problem is housing is seen as an investment and an asset. It has speculative value.

Edited by LeGarcon on Mar 11th 2021 at 3:41:28 PM

I don't know what you are going to do about that. Houses and land appreciate in value (they broadly track the cost of living). How do you want to solve that?

Well we need to figure out some way to stop people from buying houses with the intention of reselling them or renting them.

Edited by LeGarcon on Mar 11th 2021 at 3:44:40 PM

For one thing, if we could kill the mortgage interest deduction, that would reduce houses' value as investment properties, as well as make renting and apartments more attractive in general.

Again, rental properties are not the problem. Speculative investment and leaving houses intentionally empty is the problem.

Edited by Ramidel on Mar 11th 2021 at 11:46:20 AM

Why? You want to prevent people from buying things with the intent of reselling them? In that case almost no one will buy a house. Why shouldn't they sell what they own? I just don't see how this is going to work in a practical sense.

Well, the first example that comes to mind is council housing in the UK, though that hasn't been going well ever since the Tories had the idea that if they sold it off and gave tenants the right to buy they could win votes through home ownership, and limiting how much could be built to replace the stock. But the idea there is pretty simple: local authority builds the housing and leases it out, since it's not funded by a mortgage the rents can be low. The original idea when this was started post-WWII was that aside from needing to replace all the destroyed buildings and decrepit urban areas, you wanted somewhere for essential workers to live. Somewhere along the line it became muddied down to "only for the poorly off".

There's also housing associations, which I think work broadly as follows: not-for-profit organisation owns a pool of housing for the long term, buys/builds more, rents it out cheaper than if it was from a landlord because any long-term loans/debts are shared out over the entire portfolio rather than each tenant basically paying off the mortgage on an individual house.

There's more; wikipedia has an entire page on public housing.

Shockingly, the idea is that people should buy houses to live in, not to trade around and make money.

Edited by RainehDaze on Mar 11th 2021 at 8:47:57 PM

If you wanna sell your house and move then sure, I've gone through five houses myself.

If you wanna buy a house and then not live in it solely because you want to sell it later at a profit or rent it then you're objectively an economic problem.

I don't see why. You want to provide more housing, great. You want non-profits to rent out low price rentals, also great. My buying a house and offering it for rent is a problem? I don't get it. If you can't buy a house unless you live in it, how are developers going to function? Isn't that going to depress the housing market? And do you want to eliminate the market for middle class and upper class rental properties too? What if the houses I bought to rent simply ended up ownerless and boarded up? Is that better? The solution here seems more complicated than the problem.

Give people the money they need to obtain housing and you're done.

If you want to rent it out? No. You're not. Rental properties are a valuable service, both to people who can't afford or don't have the credit to buy, and to those who don't want to spend money on putting down roots somewhere.

Treating housing as an inelastic demand that is a fundamental right of all people would effectively mean nationalizing that market and a good portion of its supply chain. Banks in particular would be massively affected since mortgages are their backstop stable financial instrument. A huge amount of their own equity is in those.

It's not a simple or easy transformation.

Selling water to people starving in the desert would also be a valuable service, that doesn't mean its existence would be good.

Yes, people need renting or else worse things will happen to them. That's because of how our society is structured, it's not a virtue of renting out one's property.

Without a doubt, it would be a very radical change to our society.

Edited by Fourthspartan56 on Mar 11th 2021 at 12:59:01 PM

I think you're radically misinterpreting "people shouldn't be allowed to use property as a stack of poker chips with no intention of anyone living in them".†

Also, "just give people money so they can afford private rents" is an awful idea. Look at what providing loans for higher education did without shackling the colleges' ability to charge money.

† There has been a house sitting empty two doors down (previously one door down) as long as I've lived here. The cost for the owner to not finish fixing it up and actually rent it was negligible. This sort of thing is stupid. (Albeit finally they seem to have started working on it again literally this week)

Edited by RainehDaze on Mar 11th 2021 at 9:02:39 AM

Seems to me you guys are conflating two different problems here. One is absentee landlords who sit on a property without improving it in the expectation that the price will go up. Another is a landlord who buys a property, brings it up to code and maintains it in good condition, and then lets it out to someone willing to live there. I can see how the first is a problem. I don't see the problem with the second.

As for giving people money, it worked in Utah. No one suggested loaning the money to cover rental costs.

Edited by DeMarquis on Mar 11th 2021 at 4:11:03 AM

The problem with the second is it adds a profit-seeking layer with a common and recurrent habit of passing the expensive costs of the housing market down onto those least able to pay, and also greatly increases the problems with forcing essential workers out from the very places they're required because of the ever-escalating cost of living.

You're still saying "the government should line the pockets of private landlords rather than actually addressing the cause of unaffordable rent".

As long as we live in a capitalist economy, I think profit seeking is always going to put poor people at a disadvantage. All of your points are just as applicable to home ownership itself as rentals. Anyone who buys a house has a profit seeking motive to improve the house so they can sell it at a profit. This will tend to price poor people out of home ownership. Do you want to provide all houses for free? Do you want to make owning a second home illegal? How exactly do you take profit seeking out of any commodity? How do we keep houses from becoming commodities? I think your problem isn't with home rentals, per se, it's with speculation in general, and that's a much larger problem.

"You're still saying "the government should line the pockets of private landlords rather than actually addressing the cause of unaffordable rent"."

Ignoring the overblown hyperbole, if all you want to do is lower the average cost of renting a house, you just build more. That's literally all you need to do. You don't even have to build enough to house everyone who can't afford average rent—just enough competition to drive prices down. Rental vouchers provide a market to cater to—if enough people can afford rentals at X prices, developers will build more units at X price, but one can go the government built property route as well.

I just don't see how any of this directly engages someone who rents houses.

Edited by DeMarquis on Mar 11th 2021 at 4:23:15 AM

I'm afraid that building more doesn't exactly translate to lower prices when it comes to house speculation.

Location for instance is more than enough to ram up the price of a flat or house depending on how close it is to an important avenue, a train station or to the city centre.

Another factor is the different standard of living between districts, to put an example, Queens is not the same as Manhattan, Harlem or the Bronx despite all of those places being part of the city of New York.

Only if they buy the house with the plan of later selling it. Also the problem isn’t people who buy homes, improve them and then make a profit. it’s people who buy a home, then buy another home (and another, and another...) and make profit not by improving the home but by constricting the supply of housing in the area by building a monopoly.

The landlord problem isn’t small private landlords (though there’s a problem there with people becoming small business owners without proper safeguards and forethought), its investment firms that buy up masses of housing stock at a moments notice and then leverage their large supply of the housing stock to ramp rental prices up.

Why would developers build more units to rent at X price? If via vouchers enough people can afford rentals at X price instead of Y lower price, that means rental prices can be now increased from Y to X with no additional expenditure on the part of landlords.

Generally no. But, during critical food shortages we have historically engaged in rationing. So in areas subject to critical housing shortages it shouldn’t be absurd to engage in property rationing until the supply can be expanded. It would be a short-term emergency measure, not a long-term solution.

So what is the solution? Building more houses (either by encouraging private development or via government construction) is a key one, but limiting the ability of landlord investment groups to monopolise housing in an area is also important.

Edited by Silasw on Mar 11th 2021 at 11:45:38 AM

Socialized/nationalized housing seems like a good end-goal to work toward. A municipality or non-profit group owning a bunch of houses and renting them out for just enough to cover maintenance, workers' wages, etc, would still be less than what private landlords charge. Provides a good, affordable renting option to people who are more mobile or who don't have the capital/credit to buy outright.

As for saying this would cause a radical change to the mortgage market, cost and desirability of home-ownership, etc, etc, so what? So would transitioning to UBI or nationalized healthcare, but it's still a net good. In the meantime start forcing construction of more housing and start penalizing corporate land-hoarding and predatory landlord practices, and stop selling property and land to foreign entities.

This is definitely a better idea.

As a rule, if a competitive solution can be employed in place of a coercive solution, we should favor the former. Taxing landlords to destruction is not the way to make housing available.

@Raziel: Well, I guess that depends. A highly desired location basically reflects increased demand, hence higher prices. More housing units within that location will increase supply, acting to decrease prices. But I would have to ask why we are worried about specific locations: as long as there are neighborhoods with enough affordable housing somewhere, and transportation to work is available, then the presence of higher priced localities shouldn't hinder anyone from finding a place to live.

@Silasw: So you have no objection to what I do? Monopolies aren't hard to avoid: that just requires zoning laws that cap the percent of units owned in any given area. I'm not enough of an expert in this field to know what the percent should be, over how large a locality.

The supply of housing (or any good) is dictated by the total amount of money available to be spent at a given price point. That's why you can only buy clothes that are fashionable at the time (or car designs, or whatever). Most markets cater to the middle class, with a few more exclusive ones aimed at the wealthy. No one builds for the poor, because even though there might be many of them, collectively they don't control enough disposable income to be worth developing products for (although the cheaper the product is to make, the more flexible manufacturers can be). Houses are expensive, so the supply is going to be limited regardless.

Giving vouchers to poor people in need of housing increases the total disposable income controlled by people of that economic class. It won't be enough to propel them into middle class housing, but enough that it becomes cost-effective to develop some housing just for them. It seems to work, but only if you hand out enough checks.

"So in areas subject to critical housing shortages it shouldn’t be absurd to engage in property rationing until the supply can be expanded."

I could get behind that, depending on what criteria one uses to define a critical housing shortage. I would point out once again that not everyone can afford to buy a house, so eliminating rentals restricts the housing supply for certain people.

"So what is the solution? Building more houses (either by encouraging private development or via government construction) is a key one, but limiting the ability of landlord investment groups to monopolise housing in an area is also important."

We seem to basically be in agreement here.

"Socialized/nationalized housing seems like a good end-goal to work toward. A municipality or non-profit group owning a bunch of houses and renting them out for just enough to cover maintenance, workers' wages, etc, would still be less than what private landlords charge."

I wouldn't assume that. That's basically what I charge for rent. I see no reason why a non-profit could undercut me, although I admit that the competition could help keep rental prices "honest".

Edited by DeMarquis on Mar 11th 2021 at 10:16:44 AM

That's a major problem with major cities, though; they have a high demand for low-paid workers and retail staff but also become highly desirable. The cost to remain in the city is extremely high but there exists little in the way of affordable housing (which is often in decreasing supply). It's not something that can be fixed by increasing supply because, well, building more in an already built-up area is already difficult.

"Low paid workers can also have a long/expensive time getting to work" obviously isn't a good outcome either.

I believe you mentioned just about covering mortgages. I think I mentioned housing associations earlier? IIRC, they charge more than the council does but in general are also below the private market by some margin. I think it's partly because they've existed for decades (and became far more important once the Tories started selling everything off), so the ratio of debt to assets is drastically lower; partially because the government does still, sometimes, recognise the need for social housing and supplies funding, and partially because they're large enough to have better financial options than owners. But they're under far more regulation and can't use funding for personal profit.

That and you are one person. I doubt the vast majority of landlords are as generous. Plus, the renter(s) basically pays for the mortgage of the house, but see none of the equity. And in some cases, even if the mortgage is eventually paid off, this is not reflected in a lowered rent. Not to mention if the landlord eventually sells off the house, and whoever acquired it also took out a mortgage in order to buy it, it basically keeps renters in a perpetual cycle of paying for landlords' mortgages.

Oh, and the landlord can ask the tenant to leave at any point, depending on how the agreement is structured and local laws†. Which doesn't just add in the problem of finding a new place to live but has the other fun effect of potentially exposing said tenant to a large price hike due to changed conditions and damage to their credit score because of a change of residence. Though that's less of a pure economic problem and more of a "this sector really needs stringent regulation given that we put an adequate standard of living as a universal human right".

† I think it's six weeks' notice here or something?