That’s interesting about housing sizes - good to know, thank you. It kind of confirms my general sense about those places, but it’s hard to sort stereotypes from reality sometimes.
Australia and the US are the other big-houses places. I suspect it’s down to available lumber and low land values. Maybe car culture too, but the history of that is intertwined with low land values. (Russia and China score lower because they’re just generally poorer)
I’m not really sure what point you’re making with it, though. We could start renting out oversize closets and spare rooms as separate housing, and people do, but that’s not generally regarded as a good solution to the housing crisis, and in fact is fairly illegal. We could start building more smaller houses, and as far as I can anecdotally see are, but that’s still building houses.
The tax has to be high enough to make sure you and everyone else always lose money on the house. Then, you’ll only pay for what you need, or maybe splurge a little bit more for some extras, but you wouldn’t go crazy unless you were rich.
Ah, but you’re not accounting for rental income, or equivalently the rent you won’t pay if you’re buying. People need to live somewhere, legally speaking, and legally speaking will keep paying more until it’s a profitable asset for the owners again.
Illegally speaking we absolutely would have a spike in homelessness, to the point where there might be more permanent Hoovervilles/favillas being built on land that’s not technically set aside for the residents. The appreciation you’re talking about isn’t an economic fluke, it’s driven by fundamentals. Land literally just does become more sought after as the population grows (and the buildings themselves slowly depreciate as they become old, musty and awful).
My Boomer parents wouldn’t get that tax break because they retired
Presumably they get some kind of income, right? They still eat. You mean a tax break just working individuals, then. That’s kind of the same as making the house tax 65+ only, except disabled people and similar will also get swept up.
This is a nitpick since it has nothing to do with our topic, but I would also like to point out that you don’t buy something just because it appreciates, like you implied. Lots of assets do, and they do it in varying percentages that always end up matching the volatility (or actual existential risk if it’s that kind of investment) they experience on the way. The rational move is to buy whichever ones make sense given when you want to actually have your earnings available to spend (investment horizon).
I’m not really sure what point you’re making with it, though. We could start renting out oversize closets and spare rooms as separate housing, and people do, but that’s not generally regarded as a good solution to the housing crisis, and in fact is fairly illegal. We could start building more smaller houses, and as far as I can anecdotally see are, but that’s still building houses.
I’m getting at the point that we need to heavily incentivize people to move out of too much home, into appropriate sized housing for their current situation. Families need more rooms than couples. Just because you USED to have a family doesn’t mean you should be allowed to keep that same amount of space after they move out.
There is enough housing right now for everyone to have a reasonable amount, we just need to give people who have an unreasonably large amount a reason to get the fuck out.
Ah, but you’re not accounting for rental income, or equivalently the rent you won’t pay if you’re buying. People need to live somewhere, legally speaking, and legally speaking will keep paying more until it’s a profitable asset for the owners again.
Rents are tied directly to housing prices. If the price of housing goes down, so do rents. There can only be so much of a gap before renters just tell landlords to fuck off and buy their own place because it’s significantly cheaper.
The current rent prices are a reflection of the house prices being high, current house prices are not a reflection of rent prices being high. That distinction matters. House prices are high because they are profitable investments (even when sitting empty in many cases). Take away that profit, and house values with take a swan dive off a cliff.
You say it’s because there’s limited land, but the limit isn’t actually what you think it is. Vancouver has a lot of land, enough for millions of more people at density levels similar to cities like Paris or Tokyo. The problem is that it’s not available because people currently live there in detached homes that they refuse to sell because there’s no incentive to do so. The longer they hold it, the more money they make for retirement, and it doesn’t cost them anything more than they already paid to just stay.
Presumably they get some kind of income, right? They still eat. You mean a tax break just working individuals, then. That’s kind of the same as making the house tax 65+ only, except disabled people and similar will also get swept up.
I mean, some of their pensions are technically counted as income, but you’re right, I’m talking about income from jobs not pensions or other investments. It shouldn’t be age based at all, since there would be plenty of younger people who don’t work in the traditional sense either. Lots of people live off investments, family money, etc. and they shouldn’t get the break on taxes.
This is a nitpick since it has nothing to do with our topic, but I would also like to point out that you don’t buy something just because it appreciates, like you implied. Lots of assets do, and they do it in varying percentages that always end up matching the volatility (or actual existential risk if it’s that kind of investment) they experience on the way. The rational move is to buy whichever ones make sense given when you want to actually have your earnings available to spend (investment horizon).
What are you talking about, buying appreciating assets is literally what investment is. Given that you also need somewhere to live, a house is WAY too lucrative an investment for most people to avoid. If they can afford it, they buy it, that’s why home ownership is still at like 65% in Canada, a historically high percentage. I have purchased 3 houses with my wife over the years (consecutively, not at the same time) and each time we’ve bought as much as we were allowed to by the bank. We’ve made over $750k in the last 14 years in appreciation alone, in addition to the couple hundred grand in paid equity we’ve got, and that’s exactly why housing is unaffordable for everyone. That should never have happened.
The houses should have been cheaper because appreciation should have been either staved off by taxes in the first place, or taxed away.
The other thing is that wages shouldn’t have gone up as much either, because it wasn’t needed to pay for housing. Making everything else cheaper too.
Right now all the money that home owners make is coming from somewhere, and that somewhere is workers who are the only ones who actually produce value to be taxed.
Rents are tied directly to housing prices. If the price of housing goes down, so do rents.
Plus expenses of running the property. Those are relatively small right now, but wouldn’t be in this scenario.
You say it’s because there’s limited land, but the limit isn’t actually what you think it is. Vancouver has a lot of land, enough for millions of more people at density levels similar to cities like Paris or Tokyo. The problem is that it’s not available because people currently live there in detached homes that they refuse to sell because there’s no incentive to do so. The longer they hold it, the more money they make for retirement, and it doesn’t cost them anything more than they already paid to just stay.
Yeah, if we could make it denser overnight that would be a great option. Actually, even gradually it’s where we need to go. I’m not sure if I mentioned that Calgary abolished single-family zoning in the last year. Buying lots hasn’t been the problem so much as labour, and just everyone trying to time interest rates, but I dunno, maybe it will be.
Lots of people live off investments, family money, etc. and they shouldn’t get the break on taxes.
Sure, but a lot of them already are in the lowest tax bracket and owe nothing to start - especially the ones on government programs, which you skipped over. It’s worth considering that if there’s any inflation that happens as a result they’re in trouble, so maybe you want a negative tax as well.
What are you talking about, buying appreciating assets is literally what investment is.
It is. There’s a vast number of choices of investment, though, and housing is not the fastest growing.
Given that you also need somewhere to live, a house is WAY too lucrative an investment for most people to avoid.
Less “lucrative” than “more convenient”; a mortgage kind of forces you to save. It’s also been pushed as a cultural ideal. I’m not that rich, but if I was I’d still rent rather than buying, because I’ve always been a borderline-problematic saver anyway. What little I’ve scraped together is in an index fund.
We’ve made over $750k in the last 14 years in appreciation alone, in addition to the couple hundred grand in paid equity we’ve got, and that’s exactly why housing is unaffordable for everyone. That should never have happened.
Congratulations on living in Vancouver or Toronto. Assuming that means it doubled, it comes out to almost exactly 5% per annum. Meanwhile, the stock market has gotten 10% over the last century.
Yeah, if we could make it denser overnight that would be a great option. Actually, even gradually it’s where we need to go. I’m not sure if I mentioned that Calgary abolished single-family zoning in the last year. Buying lots hasn’t been the problem so much as labour, and just everyone trying to time interest rates, but I dunno, maybe it will be.
The cost of those lots IS a problem though, both in terms of carrying costs for developers during construction and in terms of final sale price for the purchasers.
Buying 16 properties to build an apartment in Vancouver is going to set you back $50 million or more before you even start planning the building. If you can get 100 units in that space, that’s $500,000 per unit in land price alone. Even at 200 units, it’s still a quarter of a million dollars prior to constructing a damn thing.
So if you have say $2 million a year in land value taxes between the 16 homes would mean each family is paying $124,000 a year PLUS the regular property tax. For 100 apartments, it would be $20,000 a year each though, and for 200 apartments it would be $10,000 a year for each unit.
You aren’t going to have too many people wanting to stay in their detached home with yearly costs like that, they’d be abandoning the properties in droves, that makes the cost of the land go to almost nothing. Developer swoops in, builds a condo and the new units are almost solely priced based on the construction costs with a bit of profit for the developer rather than the land values. Condos that start at $300,000 instead of $700,000 sound real fucking good, even if they’re attached to $10,000 a year in extra property tax (that most working people would get completely covered by a larger drop in their income taxes)
Sure, but a lot of them already are in the lowest tax bracket and owe nothing to start - especially the ones on government programs, which you skipped over. It’s worth considering that if there’s any inflation that happens as a result they’re in trouble, so maybe you want a negative tax as well.
A negative tax on the lowest bracket would also probably work, that’s just a minor adjustment though. The big goal is to refund the land value taxes so that the net change for an average family taking up a reasonable amount of land would be $0. Use more land, pay more. Use less land, end up better off than you are right now.
Less “lucrative” than “more convenient”; a mortgage kind of forces you to save. It’s also been pushed as a cultural ideal. I’m not that rich, but if I was I’d still rent rather than buying, because I’ve always been a borderline-problematic saver anyway. What little I’ve scraped together is in an index fund.
Yes it is a forced save, and it’s been culturally inflicted. It’s still bad. We need to stop that entirely with these taxes. That being said, given we don’t have those taxes you would be stupid to rent if you could afford a mortgage. You have to play the game with the current rules, and you’d be losing. I want the rules to change, but that doesn’t mean I’m going to make poorly optimized decisions and put my family at risk while I try to get the rules changed.
Congratulations on living in Vancouver or Toronto. Assuming that means it doubled, it comes out to almost exactly 5% per annum. Meanwhile, the stock market has gotten 10% over the last century.
I actually don’t live in either of these cities.
You’re also missing how mortgages work. The return was 5% on the property value, but not 5% on my investment. In the first year of my mortgage of my first house, I invested only around $45,000 including the down payment for 10% and the first year of mortgage payments. Lets say the property went up 5% in that time, which would have been around $15,000 on that first starter house I owned. So on an investment of $45k, I made $15,000k, that’s a return of 33%. But it’s worse than that, because the 45k is only my cash output value, not my actual costs. The whole down payment of $30,000 went to my principal, and is essentially 100% equity. Given it’s my first year of my mortgage, almost all of the monthly payment is for interest, equity from my monthly payment was only like 20% or something, so that’s another $3000 paid off on the home as equity. Of course there’s insurance, maintenance, etc. costs, a few thousand dollars so that pretty much eliminates that amount. So my actual investment costs is actually closer to the mortgage payments of $15,000, which gave me a return of $15000 (5% on the property value) for a 100% return on investment.
How’s your stock doing against that kind of return? Now of course that value changes, but any time there’s a difference between my mortgage interest rate and the inflation in the home cost, I’m making a lot more than just the 1-2% difference because of that leverage factor.
This is how home owners have gotten so rich in the last 30 years.
A negative tax on the lowest bracket would also probably work, that’s just a minor adjustment though. The big goal is to refund the land value taxes so that the net change for an average family taking up a reasonable amount of land would be $0. Use more land, pay more. Use less land, end up better off than you are right now.
Ah, well that’s more reasonable. It’s a low-density tax. Wouldn’t you want to calculate by (residentially-allocated) area rather than property value, then?
You’re also missing how mortgages work. The return was 5% on the property value, but not 5% on my investment. In the first year of my mortgage of my first house, I invested only around $45,000 including the down payment for 10% and the first year of mortgage payments. Lets say the property went up 5% in that time, which would have been around $15,000 on that first starter house I owned. So on an investment of $45k, I made $15,000k, that’s a return of 33%. But it’s worse than that, because the 45k is only my cash output value, not my actual costs. The whole down payment of $30,000 went to my principal, and is essentially 100% equity. Given it’s my first year of my mortgage, almost all of the monthly payment is for interest, equity from my monthly payment was only like 20% or something, so that’s another $3000 paid off on the home as equity. Of course there’s insurance, maintenance, etc. costs, a few thousand dollars so that pretty much eliminates that amount. So my actual investment costs is actually closer to the mortgage payments of $15,000, which gave me a return of $15000 (5% on the property value) for a 100% return on investment.
It’s a leveraged investment. It earns more in good times as a result, as would leveraged equities. To be fair, I haven’t actually looked into what kind of leverage the average mortgage-holder could get for that, but double the rate of return for the underlying instrument is no joke.
The proper way to calculate this would include the entire period of amortisation, all the payments together, and whatever you finally sell the house for added to the rent you didn’t pay as the return. Risk is also a consideration - where I live, out in the country, the return would have been be a lot lower than that. If you bought a house in somewhere like Detroit you’re just in the hole, because your house is only in one place and not diversified.
As for my own situation, I’m still young and building back up from rock bottom so I can’t really talk about the last 14 years.
Ah, well that’s more reasonable. It’s a low-density tax. Wouldn’t you want to calculate by (residentially-allocated) area rather than property value, then?
It’s not really a low-density tax, because it doesn’t apply to everywhere with low-density. If you were in a rural area, it shouldn’t be a high amount at all.
The property (land) value already calculates the desirability of the area and the specifics of that property (things like views, water access, access to schools, rec centers, etc) in much finer detail than a per-area calculation would do. I don’t see the point of re-inventing the wheel when the existing one works pretty well.
It’s a leveraged investment.
Yes, but it’s a secured leveraged investment, which makes the rate for borrowing stupidly low compared to what you’d pay to do it with equities. Yes there’s still some risk, but I don’t know a single home owner in my province who has lost money in the last 40 years. I’m sure they exist, just absolutely terrible timing followed by a divorce or something, but it’s really rare.
All I’m saying at the core is that we need a land value tax to fix the housing market, probably something that escalates over 40-50 years so as to not absolutely crash the economy while we’re implementing it. Doing it overnight would literally wipe out the majority of equity of every single home owner, and unfortunately due to what’s happened a lot of those people are relying on that for retirement. It would also be political suicide given how many homeowners exist.
That’s interesting about housing sizes - good to know, thank you. It kind of confirms my general sense about those places, but it’s hard to sort stereotypes from reality sometimes.
Australia and the US are the other big-houses places. I suspect it’s down to available lumber and low land values. Maybe car culture too, but the history of that is intertwined with low land values. (Russia and China score lower because they’re just generally poorer)
I’m not really sure what point you’re making with it, though. We could start renting out oversize closets and spare rooms as separate housing, and people do, but that’s not generally regarded as a good solution to the housing crisis, and in fact is fairly illegal. We could start building more smaller houses, and as far as I can anecdotally see are, but that’s still building houses.
Ah, but you’re not accounting for rental income, or equivalently the rent you won’t pay if you’re buying. People need to live somewhere, legally speaking, and legally speaking will keep paying more until it’s a profitable asset for the owners again.
Illegally speaking we absolutely would have a spike in homelessness, to the point where there might be more permanent Hoovervilles/favillas being built on land that’s not technically set aside for the residents. The appreciation you’re talking about isn’t an economic fluke, it’s driven by fundamentals. Land literally just does become more sought after as the population grows (and the buildings themselves slowly depreciate as they become old, musty and awful).
Presumably they get some kind of income, right? They still eat. You mean a tax break just working individuals, then. That’s kind of the same as making the house tax 65+ only, except disabled people and similar will also get swept up.
This is a nitpick since it has nothing to do with our topic, but I would also like to point out that you don’t buy something just because it appreciates, like you implied. Lots of assets do, and they do it in varying percentages that always end up matching the volatility (or actual existential risk if it’s that kind of investment) they experience on the way. The rational move is to buy whichever ones make sense given when you want to actually have your earnings available to spend (investment horizon).
I’m getting at the point that we need to heavily incentivize people to move out of too much home, into appropriate sized housing for their current situation. Families need more rooms than couples. Just because you USED to have a family doesn’t mean you should be allowed to keep that same amount of space after they move out.
There is enough housing right now for everyone to have a reasonable amount, we just need to give people who have an unreasonably large amount a reason to get the fuck out.
Rents are tied directly to housing prices. If the price of housing goes down, so do rents. There can only be so much of a gap before renters just tell landlords to fuck off and buy their own place because it’s significantly cheaper.
The current rent prices are a reflection of the house prices being high, current house prices are not a reflection of rent prices being high. That distinction matters. House prices are high because they are profitable investments (even when sitting empty in many cases). Take away that profit, and house values with take a swan dive off a cliff.
You say it’s because there’s limited land, but the limit isn’t actually what you think it is. Vancouver has a lot of land, enough for millions of more people at density levels similar to cities like Paris or Tokyo. The problem is that it’s not available because people currently live there in detached homes that they refuse to sell because there’s no incentive to do so. The longer they hold it, the more money they make for retirement, and it doesn’t cost them anything more than they already paid to just stay.
I mean, some of their pensions are technically counted as income, but you’re right, I’m talking about income from jobs not pensions or other investments. It shouldn’t be age based at all, since there would be plenty of younger people who don’t work in the traditional sense either. Lots of people live off investments, family money, etc. and they shouldn’t get the break on taxes.
What are you talking about, buying appreciating assets is literally what investment is. Given that you also need somewhere to live, a house is WAY too lucrative an investment for most people to avoid. If they can afford it, they buy it, that’s why home ownership is still at like 65% in Canada, a historically high percentage. I have purchased 3 houses with my wife over the years (consecutively, not at the same time) and each time we’ve bought as much as we were allowed to by the bank. We’ve made over $750k in the last 14 years in appreciation alone, in addition to the couple hundred grand in paid equity we’ve got, and that’s exactly why housing is unaffordable for everyone. That should never have happened.
The houses should have been cheaper because appreciation should have been either staved off by taxes in the first place, or taxed away.
The other thing is that wages shouldn’t have gone up as much either, because it wasn’t needed to pay for housing. Making everything else cheaper too.
Right now all the money that home owners make is coming from somewhere, and that somewhere is workers who are the only ones who actually produce value to be taxed.
Plus expenses of running the property. Those are relatively small right now, but wouldn’t be in this scenario.
Yeah, if we could make it denser overnight that would be a great option. Actually, even gradually it’s where we need to go. I’m not sure if I mentioned that Calgary abolished single-family zoning in the last year. Buying lots hasn’t been the problem so much as labour, and just everyone trying to time interest rates, but I dunno, maybe it will be.
Sure, but a lot of them already are in the lowest tax bracket and owe nothing to start - especially the ones on government programs, which you skipped over. It’s worth considering that if there’s any inflation that happens as a result they’re in trouble, so maybe you want a negative tax as well.
It is. There’s a vast number of choices of investment, though, and housing is not the fastest growing.
Less “lucrative” than “more convenient”; a mortgage kind of forces you to save. It’s also been pushed as a cultural ideal. I’m not that rich, but if I was I’d still rent rather than buying, because I’ve always been a borderline-problematic saver anyway. What little I’ve scraped together is in an index fund.
Congratulations on living in Vancouver or Toronto. Assuming that means it doubled, it comes out to almost exactly 5% per annum. Meanwhile, the stock market has gotten 10% over the last century.
The cost of those lots IS a problem though, both in terms of carrying costs for developers during construction and in terms of final sale price for the purchasers.
Buying 16 properties to build an apartment in Vancouver is going to set you back $50 million or more before you even start planning the building. If you can get 100 units in that space, that’s $500,000 per unit in land price alone. Even at 200 units, it’s still a quarter of a million dollars prior to constructing a damn thing.
So if you have say $2 million a year in land value taxes between the 16 homes would mean each family is paying $124,000 a year PLUS the regular property tax. For 100 apartments, it would be $20,000 a year each though, and for 200 apartments it would be $10,000 a year for each unit.
You aren’t going to have too many people wanting to stay in their detached home with yearly costs like that, they’d be abandoning the properties in droves, that makes the cost of the land go to almost nothing. Developer swoops in, builds a condo and the new units are almost solely priced based on the construction costs with a bit of profit for the developer rather than the land values. Condos that start at $300,000 instead of $700,000 sound real fucking good, even if they’re attached to $10,000 a year in extra property tax (that most working people would get completely covered by a larger drop in their income taxes)
A negative tax on the lowest bracket would also probably work, that’s just a minor adjustment though. The big goal is to refund the land value taxes so that the net change for an average family taking up a reasonable amount of land would be $0. Use more land, pay more. Use less land, end up better off than you are right now.
Yes it is a forced save, and it’s been culturally inflicted. It’s still bad. We need to stop that entirely with these taxes. That being said, given we don’t have those taxes you would be stupid to rent if you could afford a mortgage. You have to play the game with the current rules, and you’d be losing. I want the rules to change, but that doesn’t mean I’m going to make poorly optimized decisions and put my family at risk while I try to get the rules changed.
I actually don’t live in either of these cities.
You’re also missing how mortgages work. The return was 5% on the property value, but not 5% on my investment. In the first year of my mortgage of my first house, I invested only around $45,000 including the down payment for 10% and the first year of mortgage payments. Lets say the property went up 5% in that time, which would have been around $15,000 on that first starter house I owned. So on an investment of $45k, I made $15,000k, that’s a return of 33%. But it’s worse than that, because the 45k is only my cash output value, not my actual costs. The whole down payment of $30,000 went to my principal, and is essentially 100% equity. Given it’s my first year of my mortgage, almost all of the monthly payment is for interest, equity from my monthly payment was only like 20% or something, so that’s another $3000 paid off on the home as equity. Of course there’s insurance, maintenance, etc. costs, a few thousand dollars so that pretty much eliminates that amount. So my actual investment costs is actually closer to the mortgage payments of $15,000, which gave me a return of $15000 (5% on the property value) for a 100% return on investment.
How’s your stock doing against that kind of return? Now of course that value changes, but any time there’s a difference between my mortgage interest rate and the inflation in the home cost, I’m making a lot more than just the 1-2% difference because of that leverage factor.
This is how home owners have gotten so rich in the last 30 years.
Ah, well that’s more reasonable. It’s a low-density tax. Wouldn’t you want to calculate by (residentially-allocated) area rather than property value, then?
It’s a leveraged investment. It earns more in good times as a result, as would leveraged equities. To be fair, I haven’t actually looked into what kind of leverage the average mortgage-holder could get for that, but double the rate of return for the underlying instrument is no joke.
The proper way to calculate this would include the entire period of amortisation, all the payments together, and whatever you finally sell the house for added to the rent you didn’t pay as the return. Risk is also a consideration - where I live, out in the country, the return would have been be a lot lower than that. If you bought a house in somewhere like Detroit you’re just in the hole, because your house is only in one place and not diversified.
As for my own situation, I’m still young and building back up from rock bottom so I can’t really talk about the last 14 years.
It’s not really a low-density tax, because it doesn’t apply to everywhere with low-density. If you were in a rural area, it shouldn’t be a high amount at all.
The property (land) value already calculates the desirability of the area and the specifics of that property (things like views, water access, access to schools, rec centers, etc) in much finer detail than a per-area calculation would do. I don’t see the point of re-inventing the wheel when the existing one works pretty well.
Yes, but it’s a secured leveraged investment, which makes the rate for borrowing stupidly low compared to what you’d pay to do it with equities. Yes there’s still some risk, but I don’t know a single home owner in my province who has lost money in the last 40 years. I’m sure they exist, just absolutely terrible timing followed by a divorce or something, but it’s really rare.
All I’m saying at the core is that we need a land value tax to fix the housing market, probably something that escalates over 40-50 years so as to not absolutely crash the economy while we’re implementing it. Doing it overnight would literally wipe out the majority of equity of every single home owner, and unfortunately due to what’s happened a lot of those people are relying on that for retirement. It would also be political suicide given how many homeowners exist.