The Home Ownership Thread

[otc]

I guess the overall point is why are successful people being penalized for being successful?

I suppose it is somewhat like the monopoly argument. It is 100% legal to have a monopoly over something. What is illegal is being a dick about it.

We're talking about a pretty regulated market here....one in which the existing stakeholders are acting out of self interest to increase their own value. Developers are ready and willing to step in and stabilize the real estate market...but the current residents (by way of zoning and other laws) aren't allowing that. Furthermore, they've got support from laws that prevent them from bearing the full cost of their actions. They can drive the price up as much as they want, because they don't get hurt by it. Then they can sell and leave town. The new person gets a high tax bill, which will lower the possible selling price a little bit...but that's certainly offset by the appreciation and tax savings that occurred during the time the owners were actively fighting new entrants.

If this were a much more open market with lower barriers to entry, I'd be inclined to agree with you. Sure, at first I bet the developers would put up a bunch of 1-2br condo towers to suck dollars out of the techies. But that would likely start to ease demand on the larger unit stock (that are currently being rented by non-family roommates because they can't afford to live in smaller units). And of course, if there's an affordable option, lots of those techies are going to eventually want to raise a family and have a bit more space...so the developers will go there too.

 

[djblisk]

I suppose it is somewhat like the monopoly argument. It is 100% legal to have a monopoly over something. What is illegal is being a dick about it.

We're talking about a pretty regulated market here....one in which the existing stakeholders are acting out of self interest to increase their own value. Developers are ready and willing to step in and stabilize the real estate market...but the current residents (by way of zoning and other laws) aren't allowing that. Furthermore, they've got support from laws that prevent them from bearing the full cost of their actions. They can drive the price up as much as they want, because they don't get hurt by it. Then they can sell and leave town. The new person gets a high tax bill, which will lower the possible selling price a little bit...but that's certainly offset by the appreciation and tax savings that occurred during the time the owners were actively fighting new entrants.

If this were a much more open market with lower barriers to entry, I'd be inclined to agree with you. Sure, at first I bet the developers would put up a bunch of 1-2br condo towers to suck dollars out of the techies. But that would likely start to ease demand on the larger unit stock (that are currently being rented by non-family roommates because they can't afford to live in smaller units). And of course, if there's an affordable option, lots of those techies are going to eventually want to raise a family and have a bit more space...so the developers will go there too.

Which makes sense but the pretty regulated market was backlash as to a laissez faire policy. So how regulated is too regulated? Some group has to get fucked.

 

[sugarbutch]

Successful people aren't being penalized, other than having to pay more for housing of course. The rich are, have been, and will always be fine. It's the middle class and poor who are being penalized.

Rent control helps someone who is currently in an apartment, but it doesn't help anyone who is renting a single-family home or an apartment built after the rent-control law was passed. It also provides the rent stabilization to anyone, regardless of their actual ability to pay market-rate rent. So, as people's needs change (or property owners look to cash in on all of the equity they've built up), they are forced into the market, competing with the well paid people who would be going after, in a functioning market, nicer, newer apartments with amenities. Instead, due to constrained supply, they are paying top dollar for middling, old apartments, pricing out the people you would expect to live there.

Rent control also ensures that every time there's a vacancy and a chance to reset the stabilized rent, the owner will push for the absolute maximum they can get because they may not get a chance to have a substantial increase for a decade. Note that this same owner has property taxes pegged to the value of the property when they (or quite likely, their parents) purchased it 20, 30, even 40 years ago.

As for letting the real estate market eat itself, the sort of corrections you imagine can be expected in most places, but in geographically constrained cities/boroughs like San Francisco, Manhattan, Hong Kong which are also economic engines for their regions, they don't seem to come. During the great recession, the value of my house didn't fall, it just didn't go up for a few years, and now it's appreciating like crazy. This is not a functioning market.

 

[otc]

Was it? I don't claim to know the specifics for SF, but the 2% tax cap dates back to the 70s and is undoubtedly a large contributor.

At the time it was sold as a revolt against aggressive taxation by the little people...and while it has certainly succeeded in keeping people from being pressed out of their homes due to increasing tax basis it has certainly created perverse incentives for homeowners in crowded markets (especially because they only revalue on sale or complete replacement...but nothing happens when you put in a new $100k kitchen).

Poor people losing their homes because they can't afford the taxes sucks (but then, perhaps there could have been some progressive or means-testing allowances), but someone whose 1500sq.ft. house is is suddenly worth $1.5m deciding that the tax bill is way too high and moving to another city where they can buy a 2500sq.ft. house for $300k sounds like the market doing its job.

 

[djblisk]

Was it? I don't claim to know the specifics for SF, but the 2% tax cap dates back to the 70s and is undoubtedly a large contributor.

At the time it was sold as a revolt against aggressive taxation by the little people...and while it has certainly succeeded in keeping people from being pressed out of their homes due to increasing tax basis it has certainly created perverse incentives for homeowners in crowded markets (especially because they only revalue on sale or complete replacement...but nothing happens when you put in a new $100k kitchen).

Poor people losing their homes because they can't afford the taxes sucks (but then, perhaps there could have been some progressive or means-testing allowances), but someone whose 1500sq.ft. house is is suddenly worth $1.5m deciding that the tax bill is way too high and moving to another city where they can buy a 2500sq.ft. house for $300k sounds like the market doing its job.

Yep. Yep.

 

[djblisk]

Successful people aren't being penalized, other than having to pay more for housing of course. The rich are, have been, and will always be fine. It's the middle class and poor who are being penalized.

Rent control helps someone who is currently in an apartment, but it doesn't help anyone who is renting a single-family home or an apartment built after the rent-control law was passed. It also provides the rent stabilization to anyone, regardless of their actual ability to pay market-rate rent. So, as people's needs change (or property owners look to cash in on all of the equity they've built up), they are forced into the market, competing with the well paid people who would be going after, in a functioning market, nicer, newer apartments with amenities. Instead, due to constrained supply, they are paying top dollar for middling, old apartments, pricing out the people you would expect to live there.

Rent control also ensures that every time there's a vacancy and a chance to reset the stabilized rent, the owner will push for the absolute maximum they can get because they may not get a chance to have a substantial increase for a decade. Note that this same owner has property taxes pegged to the value of the property when they (or quite likely, their parents) purchased it 20, 30, even 40 years ago.

As for letting the real estate market eat itself, the sort of corrections you imagine can be expected in most places, but in geographically constrained cities/boroughs like San Francisco, Manhattan, Hong Kong which are also economic engines for their regions, they don't seem to come. During the great recession, the value of my house didn't fall, it just didn't go up for a few years, and now it's appreciating like crazy. This is not a functioning market.

The Middle Class in San Francisco are the one bidding up homes, you know that right? I've never been a fan of "rent control" or regulation. Although the concept sounds fantastic, the execution is poor. Poor families living in an expensive city because their rent is low makes no sense when food, parking, utilities, and everything else is high. This is also assuming a family of less than 4 people.

People who can't afford should just look elsewhere to live and work. That basic formula is why a lot of people have moved out of California and are much happier for it.

 

[sugarbutch]

I am not in favor of rent control, just explaining the market-distorting impact of it.

You seem to accept the current situation as a result of market forces, but what I'm saying is that the very regulation you say you dislike is what's actually causing the affordability crisis in San Francisco. We've added tens of thousands of people to the city while barely adding any housing stock to the supply. A functioning market would reach an equilibrium and put a check on rising prices.

 

[sugarbutch]

but nothing happens when you put in a new $100k kitchen

The value of the remodeling/addition will be added to your assessment.

 

[djblisk]

I am not in favor of rent control, just explaining the market-distorting impact of it.

You seem to accept the current situation as a result of market forces, but what I'm saying is that the very regulation you say you dislike is what's actually causing the affordability crisis in San Francisco. We've added tens of thousands of people to the city while barely adding any housing stock to the supply. A functioning market would reach an equilibrium and put a check on rising prices.

Gotcha.

SF needs to figure out whether it wants to be hippy SF or a huge city. This in the middle thing is annoying everyone.

 

[NorCal]

So permitted work to upgrade my electrical panel in Los Angeles is ranging from $2,200 to $3,500 including permits. Thats a really wide range, don't you guys think?

No. Bids on small jobs like that always come in all over the place. Don't cheap out on electrical, make sure he/she is licensed and bonded.

 

[NorCal]

Successful people aren't being penalized, other than having to pay more for housing of course. The rich are, have been, and will always be fine. It's the middle class and poor who are being penalized.

Rent control helps someone who is currently in an apartment, but it doesn't help anyone who is renting a single-family home or an apartment built after the rent-control law was passed. It also provides the rent stabilization to anyone, regardless of their actual ability to pay market-rate rent. So, as people's needs change (or property owners look to cash in on all of the equity they've built up), they are forced into the market, competing with the well paid people who would be going after, in a functioning market, nicer, newer apartments with amenities. Instead, due to constrained supply, they are paying top dollar for middling, old apartments, pricing out the people you would expect to live there.

Rent control also ensures that every time there's a vacancy and a chance to reset the stabilized rent, the owner will push for the absolute maximum they can get because they may not get a chance to have a substantial increase for a decade. Note that this same owner has property taxes pegged to the value of the property when they (or quite likely, their parents) purchased it 20, 30, even 40 years ago.

As for letting the real estate market eat itself, the sort of corrections you imagine can be expected in most places, but in geographically constrained cities/boroughs like San Francisco, Manhattan, Hong Kong which are also economic engines for their regions, they don't seem to come. During the great recession, the value of my house didn't fall, it just didn't go up for a few years, and now it's appreciating like crazy. This is not a functioning market.

I suggested a means test for rent control the other day. My friend thought I was crazy but it seems reasonable to me.

 

[sugarbutch]

That’s because people are always against government subsidies for the other guy, but as soon as you suggest pulling *them* off the teat, you’re a monster.

 

[FlyingMonkey]

Whenever I hear Americans talking about housing, I realise how different our starting assumptions are (Sugarbutch very much excepted here). For most Europeans, the starting assumption is that housing is a basic human right and one of the roles of the state is to make good on that right in some way. There are many ways to do so, and markets are one of them, but the markets should serve a good a good not become an end in themselves. If a market is excluding people from a city, it's not functioning socially and you regulate the market. And the rich should pay more to support those less fortunate because it's not about individual success above all but social success - functioning, fair societies. But carry on...

 

[brokencycle]

I went to test the new tub tonight, and the water flow is pretty weak. I'm using a fixture, which should be 15-20 gallons/minute depending on the pressure, but I'd be shocked to see it doing 5 gallons/minute. I have a tankless water heater a Rinnai RUC80i, which should do 8 gallons per minute, but even with both the hot and cold going, it isn't getting that much, and the flow is roughly half with only one valve open. All the water lines are new.

I texted the plumber, and he said it is probably the pressure relief valve. That doesn't make sense to me because the pressure doesn't waiver or fluctuate.

Any thoughts? @Numbernine

 

[djblisk]

Whenever I hear Americans talking about housing, I realise how different our starting assumptions are (Sugarbutch very much excepted here). For most Europeans, the starting assumption is that housing is a basic human right and one of the roles of the state is to make good on that right in some way. There are many ways to do so, and markets are one of them, but the markets should serve a good a good not become an end in themselves. If a market is excluding people from a city, it's not functioning socially and you regulate the market. And the rich should pay more to support those less fortunate because it's not about individual success above all but social success - functioning, fair societies. But carry on...

Americans have always been s but more selfish in that regard.