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Comment by nutshell89 | Hacker News Reader

The problem is that not only is there zero appetite to phase out housing-as-investment boosting policies like the mortgage interest deduction, imputed rent exemption, and cap gains exemption at the federal level, en vogue affordable housing strategies have focused on keeping interest rates low, providing 1st time home-buyer tax credits, and strengthening fair lending regulations.

The U.S.(western nations with high housing costs really) are drunk on the housing-as-investment model, and zoning increases and / or social housing positive policies will always take a back seat when speculative profits are involved.

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I think removing many of these housing discounts would only partially impact housing costs, since these affect the majority of buyers and most home purchasing decisions are made on the basis of the monthly payment. That is, after removing some of these policies, people would probably still end up paying the same monthly payment, just with lower nominal housing costs.

The bigger issue to me is the constriction of supply. The suburban development pattern in many areas is simply unable to support the densities needed to manage regional issues well, causing traffic issues and forcing people to live very far from their places of work. I also have more unpopular opinions that there is too much "protected" land in areas like the bay area (specifically in the North Bay). Regardless of that, California needs to do better to fix the supply problem, because these housing policy failures are slowly beginning to affect more and more areas outside of just the bay area and SoCal, and the measures passed so far just don't cut it.

Also, prop 13 has essentially removed much of the "carrying costs" which penalize undeveloped land usage (prop 13 isn't the only thing here, IIRC there are also lots of state/federal tax deductions you can get from not using land, oddly enough). And the low property tax rates across the board really penalize young high earners since the low taxes are made up for with income/sales taxes.

I think both you and OP have a point. The way it ties together is that "owner-occupied housing as a retirement plan" creates the political demand for NIMBY supply restrictions.

When people have 500% of their net worth tied up in a single piece of property, that created very strong incentives to lobby for policies that prop up the value of that asset. You take away the tax incentives, and the mortgage subsidies. People probably still wind up with similar monthly payments. But now as a percentage of their wealth, housing becomes much less important. A 10% decline in home prices no longer leads to a global financial crisis. That makes it a lot easier to build a political coalition to increase housing supply.

I take issue with the “too much protected land” stance. The protected land is a treasure. And paving it over with suburbs will not fix housing. See LA. Vast sprawl and still sky high housing. Oh it’s a wee bit better prices? Let’s pave everything. Turning the Bay Area into la or Phoenix sounds like an awful idea.

Densifying I can get behind, turning the protected lands into a concrete wasteland of parking lots and hoa developments of boxes and mandated office parkish landscaping is not something to advocate. Is that really the best we can do?

They're not talking about protected nature preserves and national parks, they're talking about protected single family zoning which prohibits density increases.

I'm talking about both, but separately. For example Marin County has a lot of natural areas where development is verboten but it's also a big part of the appeal of the area (well, the fact that it's a wealthy white suburban area is a lot of the appeal too, and NIMBY policies keep housing expensive so it stays that way). I just wanted to bring it up because I feel it's yet another piece of the puzzle behind housing costs in the area - but I'm aware it's even more a contentious subject than zoning so it's not a hill I would die on.

The biggest problem, by far, is single family zoning though.

Since this article is about California you can't leave out Prop 13. I'll argue that's done more for real estate investors in the state than all those other policies combined.

https://www.taxfairnessproject.org/ for the unfamiliar

This is pretty cool!

Without additional supply, you might succeed at dampening demand and temporarily decreasing prices - most US homebuyers are shopping a payment similar to rent (and accounting for their downpayment amount). However for places that have more desirable properties (employment, weather, etc), all else being equal, you will still get an influx of people over the less desirable and will still be in a supply shortage.

Bay Area in particular you have a crazy imbalance that basically absorbed the high salaries of those working there. For many, the issue could be fairly easily solved with some additional height and/or townhome density. It’s happening slowly. The pandemic has created other dynamics though, so who knows.

EDIT: just a closing thought on the policy side, you are basically making affordability problem worse by reducing incentives. Those already in the real estate market/ownership will be fine, but price of entry will be a lot higher.

In the UK mortgage interest deductions were eliminated from income tax but it just pushed professional landlords to move to holding property in more elaborate incorporated structures

Did it lower prices for non-landlord home buyers?

Individual tax payers should be able to deduct all interest payments just like corporations. Not just mortgage interest but also interest on auto loans, credit cards, etc.

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