David Cormack
patreon
Stop buying houses if you already own one
🕑 Added 2021-01-24 01:08:38 +0000 UTCMore and more wealth is being captured and held by a smaller group of people.
The housing crisis is a good example of this. According to census data, in 1991, 61 percent of people aged 25 to 29 years lived in an owner-occupied home. By 2018, this had dropped to 44 percent. Similarly, for those aged in their late 30s, the rate dropped from 79 percent in 1991 to 59 percent in 2018.
Owning your own house isn't just the luxury of being able to put a nail in a wall at will, it also opens up other options. You can borrow against your house to buy other things, like other houses. And people do.
The New Zealand dream is no longer a quarter-acre block, it's a quarter-acre block plus a few rentals.
And while this is happening, the people who occupy those rentals get screwed. Even though tenants service the mortgage and rates, and pay for the upkeep through their rent, they don't get to keep the house. Somebody else does because they had capital and the tenant doesn't.
This is ludicrous.
Just recently I came into a reasonable sized inheritance. Not massive, but certainly not a small sum of money. I talked to some financial advisors and they told me that between that inheritance and the equity I had built up in my house (less through paying my mortgage and more from the fact my house has earned more than $50K a year for the past few years), I should buy a rental!
"No!" I said. I would not be doing that. That's a major reason why we're in the situation we're in. And while for me and my family it was the most sensible thing to do financially, I refused to do it. Instead, and this is laughable, I bought shares. I now have a stock portfolio. What the fuck has happened to the country/world when buying shares is the left-wing thing to do?
Now I watch my money earn money. So now I own a house that earns money, and I have money that earns money, and so because I have this capital above and beyond what I need to live off, I get richer.
And this is all through luck. My wife and I bought our house in 2011. We got a 3-bedroom house in Ngaio, Wellington for under $500k. It's now allegedly worth over a million. We've borrowed against the house to make improvements, put in a deck, and a new bathroom etc. And we can do that because we have the capital because we were lucky enough to get into the housing market while it was still (barely) affordable.
The main solution is to just build more fucking houses. That's what we need. But there are some things we can do on the demand side too.
A capital gains tax is not the panacea that people think it is for housing. We've effectively had a housing capital gains tax with the bright line test and it hasn't slowed down shit.
I'm a big supporter of the capital gains tax as a redistributive tool, but there are other things we can do on the demand side to try and mitigate this disaster.
Firstly, and most heavy handed, we can make it illegal to own more than X houses. This would have a consequence of fewer houses being built if people didn't think they could invest in many houses, but if the State picked up the slack there then it would be fine. Failing that, make it legal for housing developers to own many houses because their intention is to sell as soon as built. If the house isn't sold within a certain period of completion, then tax them up the wahzoo.
If not that, then we could make it much, much harder for people to buy houses if they already own one - deposits of 65% for investors, or something like that. While I think for renters, if they can demonstrate that they've been paying their rent without fail for two years then that should count as a deposit.
Right now, it's more expensive to rent in Wellington than it is to have a first-home mortgage. How the fuck are you supposed to save for a deposit when you are paying exorbitant amount for rent? Remove that barrier and get more first home buyers into the market.
Again, this would need to go hand in hand with more houses being built, because more potential purchasers mean prices go up.
I'm not a banker or an economist by a long-shot, and I'm sure there are probably flaws with my ideas, but holy shit man, we need to do something. If this keeps up, we end back at feudalism, and I think it’s within the best interests of the current landed gentry to not have that. They'll get hauled out into the streets and shot.
In my heart I don't actually believe that anyone should profit from owning housing. Housing is a right, not a privilege. I do not believe that lords of land should exist. But I know that I'm a bit out there and so I gotta work within the system.
So upend the system.
Comments
m3me_fr0g
Maybe you should borrow to build a house
