Home Ownership Is The West’s Biggest Economic-Policy Mistake

[Jonesy55]

That's why they abolished mortgage interest tax relief here in the UK, it became seen as a subsidy for those who didn't need it, the more you could afford to borrow the more you got subsidised.

But abolishing it didn't stop people wanting to be homeowners and didn't stop prices rising.

[Investing In Chicago]

Originally Posted by iheartthed

I don't mind helping poor people not die from cancer, eat, and get to work. Especially since health care and transit would also benefit me. But why should my tax dollars be used to subsidize home ownership for people who are not poor?

It doesn't matter what you mind doing / or don't doing. How is that relevant? It's the system that is in place.

How can you generalize 100% of home owners as not being poor?

Also, you don't mind for paying something that benefits you - imagine if we all only paid into stuff that benefited each individual person? Hence my last post.

[iheartthed]

Originally Posted by Investing In Chicago

It doesn't matter what you mind doing / or don't doing. How is that relevant? It's the system that is in place.

How can you generalize 100% of home owners as not being poor?

Also, you don't mind for paying something that benefits you - imagine if we all only paid into stuff that benefited each individual person? Hence my last post.

I'm not poor. How do food stamps benefit me?

Simply put: We shouldn't be subsidizing each others assets.

[TexasPlaya]

Originally Posted by iheartthed

I'm not poor. How do food stamps benefit me?

Simply put: We shouldn't be subsidizing each others assets.

Disagreed, Roth 401Ks are great.

[iheartthed]

Originally Posted by TexasPlaya

Disagreed, Roth 401Ks are great.

How are Roth IRAs subsidized?

[Investing In Chicago]

Originally Posted by iheartthed

How are Roth IRAs subsidized?

Pre Tax Dollars

[iheartthed]

Originally Posted by Investing In Chicago

Pre Tax Dollars

Roth IRAs are not pre-tax dollars.

[Alxx611]

I understand the crux of the argument here - policy makers' emphasis on creating homeownership for so many decades has led this larger pool of homeowners who are only interested in protecting their property values, thus leading to this greater resistance of newer rental projects, particularly larger density ones and thus stifling the rental housing market on a massive scale. This phenomenon seems to occur among homeowners and HOAs regardless of their racial makeup, income bracket, or geographic location, but it seems to be even more pronounced in areas of economic opportunity i.e up and coming cities and suburbs where demand would be higher.

But as someone who works in affordable housing, I've also seen firsthand how much homeownership can transform a person's life more than anything else could, and give them multi-generational wealth.

I'd like to think there's a middle ground here - we can promote homeownership but keep zoning and land use policy from being so restrictive and from giving other home/property owners so much sway over it. Its gotten out of control in my opinion.

[Investing In Chicago]

Originally Posted by iheartthed

Roth IRAs are not pre-tax dollars.

error on my part, I was referring to 401K's as mentioned in what you quoted.

[TexasPlaya]

Originally Posted by iheartthed

How are Roth IRAs subsidized?

Hmm. I wrote 401K but meant what you wrote.

Why aren’t Roth IRAs taxed like capital gains? Maybe “subsidized” isn’t the right word or maybe it is, but we have incentivized retirement vehicles. I’ll be paying a less overall tax burden because I use these vehicles than if I just invested in stocks.

[jtown,man]

Didn't think I would get a decent investment debate on SSP. But here I am(thanks, actually).

Good points all around!

[Alxx611]

Originally Posted by TexasPlaya

Hmm. I wrote 401K but meant what you wrote.

Why aren’t Roth IRAs taxed like capital gains? Maybe “subsidized” isn’t the right word or maybe it is, but we have incentivized retirement vehicles. I’ll be paying a less overall tax burden because I use these vehicles than if I just invested in stocks.

IRAs are a tax shelter allowed within the IRS tax code. That's what its designed to be. It was put into place by Congress as a vehicle for retirement. Its an investment vehicle that really benefits one person: the original investor.

But other investment vehicles that do get taxed on Capital Gains are taxed that way because they are actual assets that get transferred between individuals on a market and can gain and lose value. That's how I understand it.

[mousquet]

Home ownership is obviously some way to feel safer, when you're not an ultra rich that can afford to rent a 5-star suite anywhere in the world.
It's basically about financial insecurity. In my country, people like to own their homes so they can tell themselves - if anything wrong happened to the economy, to me, to society or to anything, at least I would have a sure shelter of my own.
There is constantly a lot of that kind feeling of uncertainty and distrust over here.

It's not been entirely rational since widely based on a feeling of fear, but that's the way it goes.
I guess it wouldn't be anything really wrong if it didn't eventually feed NIMBYism.

[PhillyRising]

Originally Posted by Jonesy55

New roof would be expensive yes, I've never needed that myself, and if you bought a house that needed a new roof it would be reflected in the price.

Over the last 15 years I have had a new water/central heating boiler, around US$2,900, a couple of new washing machines at maybe US$500 each (but don't you buy those if renting too? I'm pretty sure people here do) we've also done work on redecorating, new kitchen appliances, a bit of work on remodelling the yard, maybe $US15,000 to $20,000 over 15 years, which is about $80-110 a month.

Any landlord with any sense renting a property to you will look at how much maintenance costs and will build that into the rent they charge you anyway.

Maybe for you renting works out better, in which case great, for me it almost certainly wouldn't though.

Renting has worked wonderfully for me.

I "owned" two different houses from 1994-2014. If I could go back to 1994, I would have never bought a house. Not everyone is meant for home ownership. I am not handy. I hated having to maintain the houses. The first house was my parents house that needed a lot of work. The cost of the house wasn't the issue but I got myself into debt trying to fix it up. Sold that and made hardly anything on it (because it was in Norristown where you can't give homes away) because we wanted a brand new house in 2001. Still had the debt and now a bigger house payment. Total disaster and all our fault. After 13 years the house did appreciate about 80 grand over what we paid for it but then after all the closing costs and giving "buyers assistance" we only netted 60K. It made zero sense to keep that house. I was Pushing 50 years old with 20 plus years left on that mortgage (we refinanced twice) and having a whole lot of replacement on the horizon over the next 5-10 years of the roof, HVAC systems, the windows were crappy builder grade so they needed to go, new driveway, new deck, new applicances and most likely bathrooms needing full renovations..all while still paying the mortgage for the original house so I would still be paying for what I would be replacing and paying for that too..it was not a winning formula. I was only putting 6% into my 401K because I needed to keep money liquid in cash...oh I don't know...garage door needed replaced or the heater goes out again...and there was always a threat of an HOA assessment. The thing that broke the camels back was when high winds blew off a quarter of our neighbors 13 year old roof. I was done. I wanted no part of keeping up a house. Why should I keep paying this interest to a bank and have to pay all the upkeep. The tax benefit on a mortgage is barely worth it after 15 years on a 30 year mortgage. The amount of interest you wind up paying if you don't get a shorter mortgage is highway robbery.

After we cashed out, I upped my 401K to 11% and saw it add 200 grand in 5 years. My old house has only appreciated 27 grand in 5 years per Zillow. It was also a suburban townhouse which don't hold their value all that well as they age.

So this whole owning is always better than renting is just not true. It depends on the person and what they desire. I desire not having to be bothered with fixing anything and I like convenient living. So when something breaks, I want to call the landlord and make him come fix it. I want a pool but I don't want the cost of one. I want a free gym. See...you can get all that with renting. So I do not believe I am tossing my money away. I am paying for the lifestyle that I desire. I have more money now than I ever had in my life. I don't stress about bills. I don't stress about what needs to be replaced or fixed. It is just not what I value.


However if you have kids, you plan to settle in an area for a long time, then yes you want to get a house. If you have money for a big down payment, it's a good deal especially if you can do a 15 year mortgage. A 30 year one is dumb to me. I would never do that again. I also think people need to put down at least 30 to 40 percent on the purchase of a home. You want a lot of equity from the start. Also, it helps to be handy and do a lot of things yourself. A home is not a good investment. It's just an asset that you pay a lot of money on and you can use years down the road.

All I can say is I've never been happier since I went back to renting. I am debt free after years of carrying heavy debt owning the houses. it also helps I live in a planned community that embraces walkabilty and has amenities at my front door. But what is good for me, will not be good for all. So I don't tell people who buy they are crazy. I just wish them luck and hope they don't make any of the mistakes I made..

[PhillyRising]

Originally Posted by chris08876

I feel the people who are against home ownership are the ones that either don't own a home (or never have) or rent. Own a home, and than report back.

On a side note, a lot of folks that buy homes are not thinking about wealth. A roof over their head, a place for their screaming kids, and screaming wife, and in areas with good schools with safety in mind. That's what a lot of Americans are thinking. Hell, some like to buy away from the cities because they hate traffic, noise, want a yard, and hate people (less people generally in some rural suburb).

For the urban lovers and development crackfiends that makes up our beloved SSP community (including myself, an architecture addict), this might seem like blasphemy, but for your average guy named Todd and average wife named Sarah, these are the main thought points that come up with home ownership. Not wealth, at least not in the acute sense.

Done both.

Like renting better.

...and in the general area where I live in Chester County, PA...new construction in apartments is far outpacing any new home construction. The new homes that are being built are mostly townhouses too because a new single home around here is very expensive. The townhouses are starting in 300 and 400's. You can get a 20 year old single home for about 500K. The 50 year old single homes with the bigger yards are getting what the new townhouses are selling for because most of them are outdated. You are basically paying for the land because those 1960's tract houses aren't worth a darn.

[Investing In Chicago]

Originally Posted by PhillyRising

Renting has worked wonderfully for me.

I "owned" two different houses from 1994-2014. If I could go back to 1994, I would have never bought a house. Not everyone is meant for home ownership. I am not handy. I hated having to maintain the houses. The first house was my parents house that needed a lot of work. The cost of the house wasn't the issue but I got myself into debt trying to fix it up. Sold that and made hardly anything on it (because it was in Norristown where you can't give homes away) because we wanted a brand new house in 2001. Still had the debt and now a bigger house payment. Total disaster and all our fault. After 13 years the house did appreciate about 80 grand over what we paid for it but then after all the closing costs and giving "buyers assistance" we only netted 60K. It made zero sense to keep that house. I was Pushing 50 years old with 20 plus years left on that mortgage (we refinanced twice) and having a whole lot of replacement on the horizon over the next 5-10 years of the roof, HVAC systems, the windows were crappy builder grade so they needed to go, new driveway, new deck, new applicances and most likely bathrooms needing full renovations..all while still paying the mortgage for the original house so I would still be paying for what I would be replacing and paying for that too..it was not a winning formula. I was only putting 6% into my 401K because I needed to keep money liquid in cash...oh I don't know...garage door needed replaced or the heater goes out again...and there was always a threat of an HOA assessment. The thing that broke the camels back was when high winds blew off a quarter of our neighbors 13 year old roof. I was done. I wanted no part of keeping up a house. Why should I keep paying this interest to a bank and have to pay all the upkeep. The tax benefit on a mortgage is barely worth it after 15 years on a 30 year mortgage. The amount of interest you wind up paying if you don't get a shorter mortgage is highway robbery.

After we cashed out, I upped my 401K to 11% and saw it add 200 grand in 5 years. My old house has only appreciated 27 grand in 5 years per Zillow. It was also a suburban townhouse which don't hold their value all that well as they age.

So this whole owning is always better than renting is just not true. It depends on the person and what they desire. I desire not having to be bothered with fixing anything and I like convenient living. So when something breaks, I want to call the landlord and make him come fix it. I want a pool but I don't want the cost of one. I want a free gym. See...you can get all that with renting. So I do not believe I am tossing my money away. I am paying for the lifestyle that I desire. I have more money now than I ever had in my life. I don't stress about bills. I don't stress about what needs to be replaced or fixed. It is just not what I value.


However if you have kids, you plan to settle in an area for a long time, then yes you want to get a house. If you have money for a big down payment, it's a good deal especially if you can do a 15 year mortgage. A 30 year one is dumb to me. I would never do that again. I also think people need to put down at least 30 to 40 percent on the purchase of a home. You want a lot of equity from the start. Also, it helps to be handy and do a lot of things yourself. A home is not a good investment. It's just an asset that you pay a lot of money on and you can use years down the road.

All I can say is I've never been happier since I went back to renting. I am debt free after years of carrying heavy debt owning the houses. it also helps I live in a planned community that embraces walkabilty and has amenities at my front door. But what is good for me, will not be good for all. So I don't tell people who buy they are crazy. I just wish them luck and hope they don't make any of the mistakes I made..

I'm not sure anyone is advising that home ownership is ALWAYS better than renting as you claim, that's a pretty stupid comment, isn't it? Always and Never are two words that should not be used with investing and real estate as every situation is unique.

It sounds like you had a bad experience owning a home, which based on the little information you provided, is probably based on poor decision making on your part, rather than home ownership as a whole.
Generally speaking, buying more house than one can afford or buying a home that needs more work than you are willing to take on is usually not a good idea.

Also, your "advise" about 15 year mortgage and 30-40% down is somewhere between bad and terrible advise for most people, especially young/first time home buyers.
Have you seen interest rates lately, why on earth would you take a 15 year mortgage? It makes no sense; and 30-40% down? that typically won't buy your rate down, and that additional money is probably better used invested in something that will get you a 8% return or better.

Like any investment, it isn't wise to invest in something you don't understand. Perhaps a little more research would have been a good idea?

I'll say it again, for the vast majority of Americans, home ownership is the #1 wealth building vehicle out there.

[dubu]

my family has always been building houses and living in them. my dad, grandpa ect, but they were always poor. now days they would be rich if they built homes though.

[38R]

Originally Posted by dubu

my family has always been building houses and living in them. my dad, grandpa ect, but they were always poor. now days they would be rich if they built homes though.

That's what happens when we treat houses as an investment instead of a place to sleep.

[dubu]

Originally Posted by 38R

That's what happens when we treat houses as an investment instead of a place to sleep.

if it wasnt for people like them that build houses then sell them, there probably wouldnt be that many cheep houses now.

but the system works more artificial then organic so maybe nothing in the past really had a affect now. otherwise oregon would be rich because there are so many trees.

[Steely Dan]

Originally Posted by PhillyRising

Done both.

Like renting better.

i would imagine that most people who own their own home also rented at one point or another when they were younger.

i lived in 4 different rentals in my 20s before biting the bullet on my first condo when i was 30.

i've been a home owner ever since, and can't foresee ever going back to renting.

different strokes for different folks.