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Comment by TameAntelope | Hacker News Reader

One aspect of articles like this that I've noticed is the absolute certainty the author seems to have that these terrible outcomes are inevitable, with no expression of a confidence interval or possible less world-ending alternatives.

I just... can't take articles like this seriously. It's the political equivalent of gore porn, and it feels like a waste of time to think about.

When Nassim Taleb wrote about "Black Swan events", he more or less ended circumspect skepticism, because now everyone is trying to find the next "black swan event" that they can predict, and have discovered calling out hundreds of them is the most effective way to get one right, with minimal/zero consequences for being wrong.

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My lesson has been to neglect or ignore any statement made with certainty without any underlying data. The most credible statements ever made always had an element of probability/odds associated with them.

That being said, some of the points this chap brings up don't add up to they hyperbole.

AirBnB income - being double the actual rent in a particular neighbourhood ? How is this even possible. If you average out AirBnB rental income over a year, you probably will end up with a slightly higher percentage than rent perhaps 10-30%. Then it's not guaranteed, rental income is. So almost every landlord will choose a guaranteed rental income over the fluctuating AirBnB income. Unless they own multiple properties and can afford the risk. Also, good luck managing an AirBnB rental in Miami without ground support sitting somewhere in Manhattan.

Housing as a means of profit and leverage - To some extent this needs to be stopped. Shelter is a basic need and unlike food, hoarding costs nothing. I am yet to understand the mentality of hoarding houses. Many of my friends are owning 2-3 flats/houses for their kids etc. While, it is more prudent to invest that money in liquid index funds. There is still this perceived notion of 'houses are guaranteed sources of income that will keep increasing in value every year' amongst the average family man. This certainly needs to change, I don't know how. So housing as a source of profit and leverage is bad but I don't see a way out. Space is limited, everyone wants a 5000 sft house.

That being said, it's by no means a doomsday scenario as depicted in this article. I don't know why people get into such hyperbole just to bring about such unrealistic doomsday scenarios. The world is still a better place. To hell with these naysayers.

> If you average out AirBnB rental income over a year, you probably will end up with a slightly higher percentage than rent perhaps 10-30%.

Really depends on what kind of 'AirBnB' it is. If it's a condo competing with hotels then that's one thing - although probably still more than 30%. In comparison, vacation rentals can easily take in ~$500 to $1200/night. The only real difference between the two is that the later targets larger parties so the cost per person is actually cheaper than a hotel.

That said there are a lot of costs besides rent but net profit is still going to be 2-3x that of a long term renter but these only work in certain locations (that said the ban on AirBnB in certain cities actually produces more of these areas). Also, the house and other costs are all deductible such that you actually have near zero taxable income while having significant positive cash flow.

Agree with everything but the last sentence. Not sure how that could be the case-- if your actual costs are the same as your revenue your taxable income is zero but your cash flow would also be zero.

100%. This guy has a couple good observations sprinkled in between paragraph after paragraph of hyperbolic ranting.

Also lol at citing 40% annual real estate inflation across Canada unqualified which just links to some other opinion piece which states the exact same case as this guy's.

Canada has seen staggeringly high real estate inflation in many places lately. There have been places that have seen 100%+ increases in prices over just the last few years.

Sure, that doesn't mean that they are experiencing average 40% housing inflation because they arent

You have to give a place and a time frame for these things, there are some places that did see 40% yearly inflation for multiple years in there (along with years of say "only" 10%). So while year on year inflation isn't consistently running at 40% it is still running very hot. Specifically some of the areas outside the major cities have seen spectacular inflation in house prices. A colleague of mine sold a house in Ontario for 200K CAD or so in 2016, same place now recently sold for a bit under 500K. While that's not quite 40% year on year it's close. Sure this is just an anecdote, the place could probably have sold for more the first time around especially if more renovations were done, but there's a lot of such anecdotes and I think that's why people throw around numbers like 40% because that's what they've seen lately and perhaps lack the numeracy or data to look at the bigger picture more accurately. In fairness the inflation in that broader geographical area of that anecdote is "only" 110% over the last 5 years. But the fact that 110% inflation can have happened in 5 years across a broad geographical region is just nuts.

But yeah there's places like Barrie Ontario that are like +70% in 5 years, Hamilton 70%, Oakville 68%. All those three are around +30% in the last year. Then there's some places that were previously cheaper areas like Niagara falls that's +93% in the last 5 years.

Toronto for comparison is around 70% over the last 5 years but 15% in the last year which shows that the Covid situation has meant that inflation of property prices in the major cities has slowed compared to areas surrounding. Given that wages haven't gone up much these numbers in the real estate markets are just nuts. I can't imagine this is good for the stability of the broader banking system over there.

I live in a town of 10,000, and it’s the biggest “metro” area for 150KM.

Yet still:

- houses are being sold as soon as they go up

- foreign investors are buying sight-unseen (I even know the direct story of a Caribbean buyer who purchased a run-down house sight-unseen only to have it immediately shuttered by the town. They had given up on getting money out of the previous owner, but it was not livable even at the time of purchase)

- people from other parts of the country and other parts of the world are flying in then taking taxis to go see empty properties

- people are successfully flipping houses they buy for >500k

I can’t imagine that the story is any better in places where “the market is hot”.

Source: Conversations with taxi drivers who don’t talk to each other, constant exploration on foot and in vehicles, conversations with neighbours of new owners, conversations with municipal employees, and watching town council meetings

A notable trend of the last ten years or so is the way generic financial advice prognosticators have morphed into uniform catastrophic doom sayers (often with a hard-right bent). There are some reasons to be worried but it seems like in area, "doom sells" is a big motivation. But just much, with so much gloom and doom in this area, you don't have to provide any evidence, it's what this audience expects.

Also, article is poorly edited and filled with typos.

There are financial predictions which are akin to shaking the magic 8-ball or looking into your favorite crystal ball. If you are put-off by the certainty, then I suspect you should read a lot more financial markets literature, market commentary etc... because it is replete with people with strong convictions. You would notice that it is quite commonplace.

I do read a decent volume of financial literature (for a layperson) and no, this rhetoric is decidedly not the norm for any research notes of quality.

This is Jim Cramer level writing, and I don't believe it should be encouraged.

I would suggest reading until the end. The author makes a number of recommendations on how this outcome can possibly be avoided (see header starting with "The solution is simple" and all the way through until the end of the piece).

It's hard to make it to the end when the writing is so obnoxious.

I certainly gave up before then.

Henry George's Land Value tax would be a much easier and simpler solution that would ultimately be more effective than all the stuff this guy is proposing.

The reason house prices are going up is because land values are going up, and the reason land values are going up is because there's only so much land (by which I mean locations) in the world, particularly in places where people want to live, and as the population increases and as increased productivity pushes out the margin of productivity the rent goes up.

So tax land. Use existing property tax regimes, shift taxes to land rather than buildings, and raise the rates so that it gets unprofitable to speculate on land and incentivize building as much stuff as possible. Also remove restrictive zoning ordinances and all the other usual YIMBY stuff.

Pure land taxes make it difficult to fund infrastructure that scales with population (eg schools). The only way that a land use tax could work is to either fund population based services differently or just assume that all land is used for high density apartments.

Property tax and land use taxes do make speculation more expensive. In countries that lack property tax (eg China), speculation is much more of a problem than countries that do have such a tax.

Infrastructure can be easily made exempt by law - government need not pay taxes to itself.

(Unless you are trying for anarchocapitalism, in which case you found a neat argument why it might have problems.)

Otherwise I fail to see how having more tax income makes it harder to fund infrastructure investments.

The issue is scaling and evenness. If the land tax is crushing, it will definitely pull in enough revenue, but the people will revolt so it shouldn’t be that. Now it has to be adjusted to somewhat fair, but since it isn’t geared towards the value of buildings on top, it isn’t related to infrastructure needs, so the money to fund those will probably have to at least partially come from other tax sources. And it’s not like we throw all the money into one pot and then distribute as needed (though maybe we should?).

Property tax today scales with improvements, which are more correlated to infrastructure needs. That leads to unbalance as well, as richer districts can get more revenue while poorer ones (whose property are worth less) can starve.

Ah yes, the inevitable, "All we have to do is chop off our arms, and our torsos shall be saved from this terrifying poison ivy. I know, because I read 10 articles on WebMD about bubonic plague, and poison ivy looks a bit like that." argument that comes with every one of these articles.

I did read the entire article, and I considered his solution to be wildly out of touch with reality, almost intentionally so to make the problem he outlines all the more drastic (surely the issue is serious if we have to take such extreme measures to end it).

Steven Pinker and Jordan Peterson built a good career being the anti-taleb, arguing that social progress is good and or inevitable. There is a large market for both extremes of optimism and pessimism.

But the doom and gloomism gets tiring because it's just so wrong all the time, and rather than admit being wrong they just keep digging in.

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