If I’m understanding the author’s premise right, this is some crazy cope.
Suppose you own a $1M home, then deregulation halves its value. Yes, someone who has zero desire to live in any other home suffers a $500k loss.
That’s most people. I would think a homeowner rarely buys a house they don’t like.
But suppose they want to upgrade to a better home.
Sure, life circumstances could change like added kids so the house is more cramped, but that’s not the rule, and would require very specific timing for all parents at once to move at the same time.
Then they have an offsetting gain: The dream home that previously cost $2M now only costs $1M, so their consumer surplus potentially rises by a full $1M.
Only if they didn’t own a home before. If they did own a home already, they lost half its value during the price fall. Also, this assumes they even wanted to move. If they didn’t they just lost half the value of their home. Worse, if it has a mortgage, its now underwater and they can’t downsize because their mortgage was base upon the original value. They likely can’t even move to an equal value home because their mortgage carries so much negative equity.
And the same goes to a lesser extent if they were planning on downgrading: The home that cost $500k is now just $250k.
So the homeowners just lost $250k in value. Where is any possible upside to that?
The same holds for any homeowner who loves his children. Even if you’re in your “forever home,” even if you have no desire to travel, crashing housing prices have a massive upside: cheaper housing for your kids. Maybe even cheap enough to buy the house down the street. Yes, their inheritance will be less, but they’ll get to enjoy cheaper housing for a lifetime.
Again, only if your kids don’t own a home already. If they did, your kids are now screwed even worse with 50% negative equity on their mortgages.
Yes, their inheritance will be less, but they’ll get to enjoy cheaper housing for a lifetime.
They’ll have to enjoy it for a lifetime, they’ll never be able to afford to move from all the negative equity. They’re also wiped out from ever tapping the previous equity in their homes via a HELOC. So any large home repairs or possible financial emergencies cannot be saved by owning a house.
TLDR;
If all this sounds like wishful thinking,
Thats exactly what it is.
… consider the polar case where housing deregulation drives the price of housing to zero. Yes, this wipes out the value of whatever housing you already own. But it also means that you can move to a palace anywhere on Earth for free.
No you can’t. Someone is already living there. If the home is worth $0, but someone is paying to maintain and defend that home, you’re not getting a free home.
Indeed, it means that you could own a palace in every location you desire for free. Lose the value of your home, gain access to every home of your dreams. It’s not just a fair trade. It’s the deal of a lifetime.
You may want to lay off whatever chemicals lead you to this conclusion.
Homes are not supposed to be investment vehicles.
The fact that they are treated as such is quite literally the cause of the ongoing housing affordability crisis, and by extension the homelessness crisis.
You cannot seriously be speaking in favour of it?
Homes are not supposed to be investment vehicles.
Unless you’re arguing against the ownership of personal property, home’s are an asset to the homeowner.
The fact that they are treated as such is quite literally the cause of the ongoing housing affordability crisis, and by extension the homelessness crisis.
Homes as investment vehicles are a symptom, but not the cause. Make homes free of charge, and land itself is still a limited resource.
You cannot seriously be speaking in favour of it?
Regardless of either of our feelings about ownership/asset, the author is speaking in the context of the current reality where homes being personal property and that home owners should be happy about half their home values evaporating. That’s pure batshit crazy cope.
Regardless of either of our feelings about ownership/asset, the author is speaking in the context of the current reality where homes being personal property and that home owners should be happy about half their home values evaporating. That’s pure batshit crazy cope.
Right. So what’s your preferred solution to the problem, then?
Either homes can be investment vehicles and their value can be protected by policy, or homes can be attainable to everyone without serious economic hardship. It is not possible to have both. If we want the latter, we have to transition in some way from the homes having inflated values to deflated values.
Right. So what’s your preferred solution to the problem, then?
That is a legitimate policy question for discussion, and I appreciate thats a topic you’re interested in diving into, but I’ll pass today. I’m talking on the topic from the OP post.