Hacker News Reader

Comment by ChuckMcM | Hacker News Reader

Reaffirming once again that if "nobody can afford to buy them" the actual prices start coming down. A more interesting thing for me however was that owner occupied (which is to say the person buying the house lives there) has not been growing[1]. Instead third parties are buying the houses as investments and renting them. That is a really risky strategy in a place like SF with rent controls as the floor can fall out of the market, and you're unable to raise rents to cover your balloon payment (or other over leveraged strategy) and that squeezes the investor to default.

[1] https://www.homeunion.com/blog/investment-home-prices-rising...

View on HN

Remember that rent control only applies to buildings built before 1978, so it's not _all_ rent controlled.

And rent control doesn't apply to single family homes.

That said, if the market falls it is easy to end up with a mortgage that costs more than rent, a fact that I am unfortunately familiar with.

It's scary to think that in 20-30 years nearly the entire available housing stock will not be covered by rent control. My landlord wanted to raise my rent 40% in one year here in Oakland until I pointed out the laws. Eventually the entire middle class will just be landless peasants again, allowed to live wherever the rich say that they can.

It's only scary if you believe rent control is a net benefit.

No, facing a 40% increase in your rent without an attendant increase in your wages or salary is scary no matter what the macro situation is. Anybody working on or thinking about housing policy needs to keep this in mind -- no matter how right your policy prescriptions may be, you need to keep in mind that they may do massive harm to individuals in the short term. And the failure to even try to ameliorate those harms is one of the reasons why things like getting rid of rent control are politically impossible.

Advocates for the reverse ought to bear in mind that however noble the goal of avoiding harm to individuals in the short term may be, the harm done to individuals in the long term is even more massive, and then much harder to fix.

Two case in point examples: Prop 13, and rent control.

These are not, as popularly concieved, great ways to protect the poor and disadvantaged. They are simply examples of very short term thinking becoming public policy, which has the unintended and paradoxical effect of harming the poor and disadvantaged much more in the long run.

Right, and I agree with you, but the fact that it would be better not to have them in the long run doesn't do anything about the short term harm of thousands of people losing their homes all at once. "It will be better for everyone in the aggregate, eventually" doesn't do anything for someone who just became homeless.

What I'm saying is, if you want this policy, start thinking of ways you could change it while accounting for the harm that changing it would do.

Sometimes the only way to fix systemic issues is via strategic planning.

At some point in your scenario proposition 13 would be tossed out and property taxes would be hiked up which would decrease property values. The process to amend California's state constitution is relatively accessible and particularly susceptible to waves of populist sentiment. If you're a homeowner with a vested interest in the status quo (very low property taxes) you also have a vested interest in keeping the home ownership and owner occupied rates relatively high (whether you know it or not) in order to maintain that political support.

Oh, come on. "Landless peasants".

The middle class will not be able to afford to live in the most expensive housing markets in the country. But that's the way it's always been.

The cutoff is actually June 13, 1979, not 1978.

source: https://www.sftu.org/rentcontrol/

A significant number are bought as investments, but NOT rented out, making the housing situation worse.

Investors from more volatile economies (China) really see a few % up or down as incredibly stable compared to their native currency fluctuations.

A huge chunk (but not a majority) of urban real estate in my city is also unoccupied most of the time, but I wonder how many are parking cash and how many are just summer vacation homes.

Currency fluctuations are peanuts. The real risk in emerging markets is losing everything due to a massive economic downturn, political instability, or corruption.

Even if houses are flat its still better to put your cash into one than the bank...

bank - liquid asset

house - illiquid, with maintenance, property tax, and insurance costs

True, with the other difference being that you can live in a house, but you can't live in securities or the bank vault. A house has actual utility (well, the first one), hence all the tax benefits (in theory).

What I think is kind of ridiculous are all the benefits for second homes and beyond. IMO, if you're wealthy enough to afford a second home, you don't need any more government subsidies; all the benefits should go to people who don't yet have a place to live that they own. I can definitely see how this would be a very unpopular opinion among those with lots of potential money to lose if they could not keep the lower classes of people renting the property which they bought a lifetime++ deed to at a one-time cost.

Contrary to popular belief, real estate is literally never a good investment. At best, prices go up faster than property tax and you profit modestly from the misfortune of others for a couple of years before the bubble bursts. At worst, your investment is rapidly eaten away by depreciation and maintenance costs.

It's true houses aren't a very good investment over the long haul, but for most buyers with the leverage involved you can end up with quite a windfall if you get lucky.

Spoken like someone who's never owned a house.

Reply on news.ycombinator.com