Property taxes should generally be borne by those who own property for investment purposes, and as the easiest taxes to levy, I would favor significantly higher rates and a corresponding rise in the homeowner exemption (let's say, any home up to 150% of the median price in a given MSA is tax free to an owner occupant.) Mr. Leary has a point there. This combination would skew the tax burden toward investors and away from families, for whom their property is not an investment but a home.
However, his added complication of children living at home is hard to enforce and just plain dumb. Using tax policy to force empty nesters out of their 4 bedroom homes could only be justified if there were some constraint on the number of 4 bedroom homes. There is not.
If you want to make homes more affordable for families, relax zoning laws and environmental requirements so you can build more of them. Everyone who has ever been involved in real estate development (as I have) knows this. Forcing grandma to move out of her home of 30 years is just plain wrong. Only someone in their 20's could think that's a good idea.
Build cheap houses. Small, less than 1,000 square feet, on a postage stamp lot. With no building codes. Under $100,000 so someone on the median income which is about $45K now, can buy it. Easy peasy.
Running water, sewer, electricity, a heating system. It doesn't take much.
Our governor passed a law allowing Accessory Dwelling Units everywhere. So potentially every house can become two. Building code is still a pain, and permit departments, but there are more places to live.
Also deport. Rents here are way down. 10% in the metro area. There are ways other than taxes. What I'd like to know is a way to make second home less attractive. They sit empty or the primary residence does. One way or another with a second home you got an empty house.
I served on the as a local planning commissioner for 10 years. This is the solution.
Suburban houses are expensive because we've decided everyone deserves to have a fire sprinkler system, a rack of solar panels, R-50 insulation, 15 foot street setbacks, etc... on a lot that the builder paid $100,000 extra for just to mitigate a couple of hawks and an big oak tree being removed.
Simple homes. No code standards beyond actual safety. Streamlined enviro processes. No CEQA (in CA). That solves half your supply problem.
You're forgetting that a lot of what we're doing on zoning is done to protect the schools. So half the solution is moving to voucher programs for schools.
If you want to understand why everything just keeps breaking down, then you have to realize that we keep trying to ignore the ways things are connected. Both the things that shouldn't be connected and the things that should.
You can't fix housing as long as it remains connected to schools. We the middle class won't sacrifice our kids either as pawns for the unions or as guinea pigs to be used in someone else's social experiments. You also can't fix education as long as the majority of the schools are government run, either. I say that as someone who's wife is a teacher. Until they can kick a few kids out each year, the parents of the disruptive kids will keep making excuses and blaming the schools.
Going further, the whole reason the international rules based order is collapsing is that we keep pretending that we can disconnect trade from mutual defense and shared values. So we reward the national security threat and corruption that is Mexico with more factories. Then when is comes to Canada, which keeps losing its industrial base to countries like Mexico, we demand they spend more on defense so they can keep helping us protect the foreign supply chains feeding those foreign factories.
It actually gets worse when you turn to Europe. France is our best ally in many ways, but they have also piled themselves in debt and watched as their industrial base has been hollowed out. Germany is a lousy ally in more ways then one, yet we give them both the same low tariffs. Meanwhile Ireland who is not an ally, gets dozens of American company's European headquarters thanks to their low taxes. Low taxes Ireland can offer since they spend only 0.25% on defense.
So I don't care what we're trying to fix, as long as we keep trying to ignore the connections between things, we will just keep failing.
I agree about the connections, but saying everything is connected makes it easy for political leaders to do nothing. And there are lots of things that could improve education or housing without having to touch anything else.
My wife teaches 3rd grade too. You're 100% correct about the 5-10% of the kids that cause 90% of the problems. But that's not hard to solve even within the govt school framework. Make education a privilege instead of a right: you are entitled to send your kid to school as long as your kid doesn't seriously disrupt the classroom. Every charter operates that way; why not govt run schools too?
Housing policy suffers from a similar problem: a belief that every home should meet a minimum (and rather expensive) standard. We used to have boarding houses, hostels, SROs... but since middle-class+ people found them substandard or demeaning, we did away with those legislatively. Unfortunately, those same middle-class+ legislators didn't arrange to build any equally low-priced replacements.
Fixing these things requires us to change our assumptions: about school; about what's important in a home. But it can be done. I live in CA and am completely appalled at our homeless problems, 80% of which is self-inflicted, the combination of poor involuntary mental health treatment and lack of affordable housing.
You probably could build a building this cheap. The road out in front of each building plus the sewer and electric is going to be 30-40k, but maybe you could get a 'tiny home' in therefore $30k and still have a profit margin as a developer.
However, this system will also make future development difficult because a developer who wants to increase density will need to buy up all the tiny lots.
A better solution might be to rezone single family residential areas to multifamily where the residential building values are stagnant. Then we get the same density increases and price as the small lots, but still retain the larger lot size for large development projects.
For some reason your comment isn't showing up but to answer your question about using zoning to protect schools, you can use minimum lot sizes, minimum square footage, and the granddaddy of them all bans on multifamily. On the building code side, requirements for two car garages, bans on carports, and requirements for fire suppression rather then just fire alarms.
Some of the local town near me use all of those. One that hasn't has a single fire related fatality for over 15 years updated their codes. It adds about 10K to the construction costs which translates into about $12k on the purchase price plus interest on the loan, and more maintenance during the life of the house.
A lot of this started back in the 70s because of white flight. No good to pull up stakes and move out to the sticks if the blacks could just rent a cheap apartment and get into your school district. Turns out, keeps those low rent whites out as well. Now if you're black and can afford a $750k house, you will probably blend in fine.
Different states have different laws. Florida never got so nasty against condos in part because every district is county wide. Even then, they have gotten a bit aggressive since the elementary schools usually wound up exempt from bussing and crime is also an issue.
What that used to mean near me, is if you live in south Dallas, and you get a raise, one that would allow you to comfortably get your kids in a better school when combined with a state voucher, instead you have to push the edges of going bankrupt to move to the northern suburbs with all our zoning restrictions. Texas just passed a universal voucher program so we will see how that does.
Careful most people get history wrong. Either because they just find it boring or because they try to ignore human nature. Back in the 70s the leaders of America tried to treat people like widgets. This ignores that we are complex social creatures. Race was only one factor and had they allowed desegregation to run it's natural course, things would not have gotten as bad as they did when they decided to pursue forced integration. That approach ignored the role schools had in creating communities as well as the fact that we naturally segregate by class and beliefs.
Then you had a concurrent issue of changing attitudes to crime. That led to increasingly trying to blame society rather then the criminal for their actions. Add the two together and you triggered both the fight and flight responses. Whole communities fled, reformed out in the suburbs and started building up barricades to keep the barbarians out. In the process, it set housing on a path that would lead to today's affordability crisis.
Ironically, once again too many of our "leaders" are trying to treat us like widgets in their social experiments. The ham handed attempts by first Obama and then Biden to shove the whole woke agenda down our throats via federal controls over public schools has done more to move Texas to adopting universal vouchers then all the much better and well reasoned arguments. This in turn should over time curb the hostility towards more affordable housing.
So I guess the moral of the story is, "Thank god for historically ignorant people".
So the vouchers are essential, in addition to increasing the supply but, the vouchers break the link between where you live and the quality of education you receive thus curbing the hostility to more housing.
If I’ve got that right, are there any losers in this scenario?
And if I hear a politician proposing increasing supply but not advocating for vouchers, should I head for the door?
Three things, first any policy change produces winner and losers. One of the biggest problems is that the current winners usually know they are winning and will fight tooth and nail to stop any changes. Meanwhile the current losers don't know they are losing or even may believe they are winning. An example would be that teacher's unions are winning but that doesn't mean the teachers are winning. The company that supplies the milk is winning but that doesn't mean the taxpayers or students are winning. Summer babies are losing but then relatively few people know how big and persistent a problem that is, so they don't know their kid is losing.
That said and in fairness, there is another model that would break housing from education. You can force the schools and districts to compete against each other. You do this by making the state more in charge of the funding, force the districts to allow students to transfer at will, and make the funding follow the students. I'm not a fan but it has been successful in places like Sweden.
Finally, staking an all or nothing position in politics is usually a bad idea. I don't know what the attitudes are in your state toward school vouchers are, but I wouldn't pass up an opportunity to rein in housing prices just because it didn't give me everything I wanted. That said, anyone pushing more subsidies for middle class housing, yes run for the door. All that will do is generate more waste and fraud. Literally, they same communities that are already making houses more expensive will just add more regulations that suck up the subsidies.
Beyond that, all policies matter. Texas just changed the law so that local governments have to allow multifamily to be built in areas zoned light commercial. This should work well. California on the other hand, changed the law so that existing single family properties can add up to 3 more housing units. This will go poorly.
The reason California's new law will be bad, is because when you develop a subdivision, it's based on X number of people per property. That in turn determined how big the water, sewer, power line were, as well as streets and parking. Double the number of people and you need to double the size of pipes, and double the number of transformers. The most expensive and disruptive way to do that is in an existing subdivision.
I hope that provides a little more clarity. I'm not an all or nothing type of person, and you never really get anywhere by demanding perfection. Again, humans are complex social animals and you have to work with that, not against it.
Instead of complex tax schemes which will inevitably have unintended consequences and be open to gaming, the answer is simple, although not easy: there needs to be a major increase in housing supply. And what's frustrating is that the same people who claim to care more for the poor are usually the ones that fight hardest to prevent new housing from being built.
I agree. There needs to be an increase in housing supply, not by building more housing, but by reducing the number of illegal aliens that are putting pressure on existing housing inventory, especially apartment units. If we can free up more apartment units for senior homeowners to move into, that could help with the supply of single-family homes. This would be a win-win for everybody. Seniors can move into housing that is more manageable and affordable, and young families can buy homes to suit their family’s needs, at reasonable cost. My comment is not intended to be anti-LEGAL immigration, I’m simply saying that we cannot expect affordable housing to be available If we are inundated, in short order, with over 20 million people with inadequate housing supply to accommodate them and existing citizen residents. I believe there was a recent Commonplace article about the pressure on affordable housing supply due to immigration.
It's not either/or, but removing illegal aliens is not going to be sufficient to free up sufficient housing inventory to meet demand, particularly in "hot" areas that people want to live in. It's been shown over and over again that the real reason for high housing prices is due to government policies that restrict supply.
I agree with you, freeing up housing currently occupied by illegal aliens may not provide sufficient supply, but it can help, along with providing tax relief and other fiscal policies (i.e., less government spending to keep more taxpayer money in the pockets and bank accounts of the taxpayer) to help make homeownership more attainable. Building more housing in areas that lack the infrastructure to support it, such as what is happening in many areas of the country, and loosening zoning restrictions in rural areas to accommodate high-density and/or low income housing is not the answer to providing more 'affordable' housing. Let's be honest, these measures only serve to change the political demographics in certain areas to skew more liberal. Rather, revitalizing urban areas, infill in vacant parcels in cities, etc., along with law enforcement policies that make living in these areas a more attractive option for individuals, families and investors is the solution. And to dispel the possible notion that my thoughts are racially insensitive and biased -- I am a 'person of color' -- daughter of parents who emigrated LEGALLY from Jamaica, W.I. to the U.S. in the 1950s -- who happens to live with my husband in a rural area of the country and wants to keep it that way, just so you know. I appreciate and welcome the convo.
I also don't love like the idea of disincentivizing older people from staying in their long-term homes. But I'd feel better about that position if those homes weren't so oversized in the first place.
Here's what I'd like to see: way more two- and three-unit houses. When you're a young married couple in your 20s, you live in the small suite and rent out the big one. When you're a little more established and raising a family in your 30-40s, you live in the big one and rent out the small one. When you're doing well in your 50s-60s, you let your young married kids live in the small one for peanuts. When you're empty-nesters in your 70s, you move back into the small one and rent out the big one to pay for retirement...or sell it to your kid's growing family and have them rent the small one to you for peanuts.
I too don’t like the idea of disincentivizing senior homeownership, especially since we, as a country, have yet to provide good (humane) options for senior care outside of the home. I’d rather kill myself than move into a senior living and long-term care facility these days.
This is one more reason to encourage multi-family housing.
Probably the only real way to provide good senior care outside the home is - as with medicare - through massive government funding. Much like daycare, there's no way to provide good senior care for cheap. The economics just don't work out.
But a policy that incentivizes multiple generations to live on the same property (while also giving them separate spaces on that property) is a good way to ensure that they'll never need senior care outside the home. And that they won't need to pay ever-higher taxes to fund everyone else's senior care outside the home.
The Feds are constitutionally prohibited from direct taxes (except income) so this would have to be 50 states and who knows how many local governments. A number of states have constitutional limits on property tax so it is a non-starter there. Getting away from technical to equity issues, many boomers have already downsized and such a tax increase would hit them as well and upset their financial planning for retirement. And where exactly are they supposed to go until prices come down and housing stocks go up. Ice floes? Seems like a terrible idea. Much better idea is to build up the housing stock and not the way the Abundance people want to do it. Old people would have to be crazy to move into cities.
The Feds do control the capital gains tax. Providing long-time owners with exemptions to capital gains when the property is sold to individuals (vs corporate buyers) could incentivize those sales. There used to be an exemption from capital gains when the proceeds of a house sale were reinvested in a new house. It helped families use their home equity to move up to bigger houses as the family grew. A return to that tax regime might encourage elders to move on to smaller houses or apartments as it would allow them to downsize and keep all of the equity they have built up over the years to help finance their retirement.
Until 2015, the median age of first-time buyers was between 29 and 31. That median buyer could have (and probably should have) paid it off by 61.
The youngest Boomers today are 61.
Frankly, anybody who owned a house in 2010 (unless they were a first-time buyer between 2005-08) has massive unprecedented windfall equity gains. The chart tells the whole story. The statistical data shows that these are not outliers.
Do you have statistical data showing that most older Boomers live with other Boomers who aren't their spouse? And that those older Boomers wouldn't benefit from extra revenue from a second rental suite?
Most people who buy a house at 29 are not living in that same house at 61. Buying a new house involves getting a different mortgage, and then the clock starts over. Around 40-42% of Boomers have a paid off house. About 38-40% have a mortgage.
Around 20% of Boomers rent. This number includes over 50% of women and about 33% of people living in large metros.
The median Boomer home equity, which excludes money still owed on any mortgage, is around 250,000. Keep in mind this value is after 30 years of inflation and does not account for 30 years of maintenance costs. Most Boomers do not live in places like New York or Silicon Valley.
For most Boomers, home equity is the largest part of their net worth. In general, no, the recent price appreciation of existing homes has not been a “huge” windfall, because the home value is just not that high even after recent appreciation, and because they are using the home to live in.
It is important not to mix prices of new homes vs 30+ year old paid off homes. The latter are typically significantly smaller and cheaper.
I have no idea what chart you are referencing.
About 24% of Boomers are caretakers for a parent. Over 70% have at least one living parent.
About 20% of Boomers have a child living at home, often including that child’s family.
A decent percentage of Boomers have plans to use a spare bedroom for a hired caretaker if such becomes necessary. Almost 10% of seniors over 90 have such arrangements.
An even larger percentage have family or friends come and stay during times of need, such as after surgery or illness.
It is also fairly common for one member of an elderly couple to require a separate bed / bedroom if they become quite ill, for example following major cancer surgery or if they go into hospice. Having a bedroom for a hospital bed is better than stashing them in the dining room or family room. This need has occurred with more than one of my friends and family members, BTW.
Managing a separate rental is a huge headache that is more than most seniors would want to take on. Most younger people don’t want to be landlords either. It’s a PITA and not something I would have wanted my elderly parents dealing with.
In other words, Boomers typically are either using or have plans for the bedrooms you think are “unused”, and most are not equipped to be landlords.
How about restructuring capital gains tax for senior homeowners, so they don’t have to feel like they have to stay in their homes until death to avoid paying exhorbitant taxes for selling their home that has increased significantly in value since they bought it?
You don't pay capital gains on your primary residence is you've lived there for at least two years. The bigger problems are regulation and zoning laws often in place to protect the schools and keep the criminal riff raff out. You can also add that the seniors and the young home buyer would be competing for the same smaller starter homes and condos.
I would also add that big investors haven't tended to go after single family homes, there's not much money in it. So again this is more a case of over regulation to the point that bigger investors can't invest in the multifamily complexes they would prefer. Those have all been bid up to the point where there is very little return on investment.
Yes, you don’t generally have to pay capital gains on your primary residence if you’ve lived in the house for at least two of the five years before you sell your property, but if your profit exceeds exclusion of $250,000 for single taxpayers up to $500,000 for married couples filing jointly, the excess is subject to capital gains. My sister was caught in this situation when she sold her home in Brooklyn, which she bought for next to nothing in the early 70s and by the time she sold it, she was on the hook for substantial capital gains. If you know anything about Brooklyn, New York properties, you know how much homes, particularly in previously depressed areas of the borough, increased substantially in value due to gentrification.
Interesting idea. Perhaps the taxable value of those capital gains could be put off until death. (But seeing as how most Americans hate inheritance taxes too, I doubt that would be a political winner.)
Is Commonplace a serious place for serious ideas? Based on this author’s piece and thinking I’d say not. No politician of any stripe is going to cross retirees, they vote in droves unlike the authors cohort, five years out of college.
I like fresh ideas and this is surely one of them. However, it would keep me from buying that small, second home in the mountains I always dreamed of for my retirement years. Instead, I’d look to buy that retreat in another country, where cost would also be significantly cheaper. I wonder … if a significant percentage of people did the same, to what extent would that help or hurt Declan’s proposal.
"Trump indicated in his Davos remarks that he understands this predicament well, and that the prospect of picking losers is one reason he has been slow to act on housing."
Or maybe he understands that the losers would be the people in his general demographic (if perhaps not his income bracket).
Could we just, so to speak, retire the term "Boomer," which in its very sound carries an insulting tone. And, sure, force people out of their lifetime homes, where they feel comfortable and safe, where every step, every uneven floorboard, every kink in a kitchen appliance....is known. Where the garden has been tended and nurtured for thirty-five years, where they are longtime friends with their neighbors, who keep an eye on them, where their church is not far away......sure...do it. I'll tell my grandparents about your proposal.
This is just wrong. Fix the rules that restrict new construction as best you can. But charging higher property taxes for older residents because you don’t think they “need” such a large house is wrong.
I appreciate the thought experiment, but the idea of taxing seniors out of their larger-than-necessary houses sounds both impractical and politically infeasible.
Could you just add a homestead exemption for having a dependent on your taxes, but keep the rate comparatively low? I like the idea of nudging older folks into downsizing rather than quadrupling their property taxes…
I can see from many of the comments here that even if people vote for Trump, they still love Reagan's tax policies. Which is probably why Trump's only first-term achievement was a Reagan-style tax cut.
Choosing either Biden or Trump to pin the affordability crisis on misses the point about power. Post 1980, we stopped enforcing anti-trust laws. So.... an orgy of mergers consolidated power in the hands of fewer folks, there's less competition and profit margins have increased (while worker share of total GDP has shrunk). Wealth flowed upward. People are pissed. Housing is just part of the reason why.
Declan is 27, and it really shows here.
Property taxes should generally be borne by those who own property for investment purposes, and as the easiest taxes to levy, I would favor significantly higher rates and a corresponding rise in the homeowner exemption (let's say, any home up to 150% of the median price in a given MSA is tax free to an owner occupant.) Mr. Leary has a point there. This combination would skew the tax burden toward investors and away from families, for whom their property is not an investment but a home.
However, his added complication of children living at home is hard to enforce and just plain dumb. Using tax policy to force empty nesters out of their 4 bedroom homes could only be justified if there were some constraint on the number of 4 bedroom homes. There is not.
If you want to make homes more affordable for families, relax zoning laws and environmental requirements so you can build more of them. Everyone who has ever been involved in real estate development (as I have) knows this. Forcing grandma to move out of her home of 30 years is just plain wrong. Only someone in their 20's could think that's a good idea.
He wants to smash and grab. Not earn.
Build cheap houses. Small, less than 1,000 square feet, on a postage stamp lot. With no building codes. Under $100,000 so someone on the median income which is about $45K now, can buy it. Easy peasy.
Running water, sewer, electricity, a heating system. It doesn't take much.
Our governor passed a law allowing Accessory Dwelling Units everywhere. So potentially every house can become two. Building code is still a pain, and permit departments, but there are more places to live.
Also deport. Rents here are way down. 10% in the metro area. There are ways other than taxes. What I'd like to know is a way to make second home less attractive. They sit empty or the primary residence does. One way or another with a second home you got an empty house.
I served on the as a local planning commissioner for 10 years. This is the solution.
Suburban houses are expensive because we've decided everyone deserves to have a fire sprinkler system, a rack of solar panels, R-50 insulation, 15 foot street setbacks, etc... on a lot that the builder paid $100,000 extra for just to mitigate a couple of hawks and an big oak tree being removed.
Simple homes. No code standards beyond actual safety. Streamlined enviro processes. No CEQA (in CA). That solves half your supply problem.
You're forgetting that a lot of what we're doing on zoning is done to protect the schools. So half the solution is moving to voucher programs for schools.
I agree on principle but education policy is a separate issue.
If you want to understand why everything just keeps breaking down, then you have to realize that we keep trying to ignore the ways things are connected. Both the things that shouldn't be connected and the things that should.
You can't fix housing as long as it remains connected to schools. We the middle class won't sacrifice our kids either as pawns for the unions or as guinea pigs to be used in someone else's social experiments. You also can't fix education as long as the majority of the schools are government run, either. I say that as someone who's wife is a teacher. Until they can kick a few kids out each year, the parents of the disruptive kids will keep making excuses and blaming the schools.
Going further, the whole reason the international rules based order is collapsing is that we keep pretending that we can disconnect trade from mutual defense and shared values. So we reward the national security threat and corruption that is Mexico with more factories. Then when is comes to Canada, which keeps losing its industrial base to countries like Mexico, we demand they spend more on defense so they can keep helping us protect the foreign supply chains feeding those foreign factories.
It actually gets worse when you turn to Europe. France is our best ally in many ways, but they have also piled themselves in debt and watched as their industrial base has been hollowed out. Germany is a lousy ally in more ways then one, yet we give them both the same low tariffs. Meanwhile Ireland who is not an ally, gets dozens of American company's European headquarters thanks to their low taxes. Low taxes Ireland can offer since they spend only 0.25% on defense.
So I don't care what we're trying to fix, as long as we keep trying to ignore the connections between things, we will just keep failing.
I agree about the connections, but saying everything is connected makes it easy for political leaders to do nothing. And there are lots of things that could improve education or housing without having to touch anything else.
My wife teaches 3rd grade too. You're 100% correct about the 5-10% of the kids that cause 90% of the problems. But that's not hard to solve even within the govt school framework. Make education a privilege instead of a right: you are entitled to send your kid to school as long as your kid doesn't seriously disrupt the classroom. Every charter operates that way; why not govt run schools too?
Housing policy suffers from a similar problem: a belief that every home should meet a minimum (and rather expensive) standard. We used to have boarding houses, hostels, SROs... but since middle-class+ people found them substandard or demeaning, we did away with those legislatively. Unfortunately, those same middle-class+ legislators didn't arrange to build any equally low-priced replacements.
Fixing these things requires us to change our assumptions: about school; about what's important in a home. But it can be done. I live in CA and am completely appalled at our homeless problems, 80% of which is self-inflicted, the combination of poor involuntary mental health treatment and lack of affordable housing.
You probably could build a building this cheap. The road out in front of each building plus the sewer and electric is going to be 30-40k, but maybe you could get a 'tiny home' in therefore $30k and still have a profit margin as a developer.
However, this system will also make future development difficult because a developer who wants to increase density will need to buy up all the tiny lots.
A better solution might be to rezone single family residential areas to multifamily where the residential building values are stagnant. Then we get the same density increases and price as the small lots, but still retain the larger lot size for large development projects.
What state are you referring to?
For some reason your comment isn't showing up but to answer your question about using zoning to protect schools, you can use minimum lot sizes, minimum square footage, and the granddaddy of them all bans on multifamily. On the building code side, requirements for two car garages, bans on carports, and requirements for fire suppression rather then just fire alarms.
Some of the local town near me use all of those. One that hasn't has a single fire related fatality for over 15 years updated their codes. It adds about 10K to the construction costs which translates into about $12k on the purchase price plus interest on the loan, and more maintenance during the life of the house.
A lot of this started back in the 70s because of white flight. No good to pull up stakes and move out to the sticks if the blacks could just rent a cheap apartment and get into your school district. Turns out, keeps those low rent whites out as well. Now if you're black and can afford a $750k house, you will probably blend in fine.
Different states have different laws. Florida never got so nasty against condos in part because every district is county wide. Even then, they have gotten a bit aggressive since the elementary schools usually wound up exempt from bussing and crime is also an issue.
What that used to mean near me, is if you live in south Dallas, and you get a raise, one that would allow you to comfortably get your kids in a better school when combined with a state voucher, instead you have to push the edges of going bankrupt to move to the northern suburbs with all our zoning restrictions. Texas just passed a universal voucher program so we will see how that does.
Thanks for the explanation. What an unfortunate use of zoning. It should never be weaponized that way.
Careful most people get history wrong. Either because they just find it boring or because they try to ignore human nature. Back in the 70s the leaders of America tried to treat people like widgets. This ignores that we are complex social creatures. Race was only one factor and had they allowed desegregation to run it's natural course, things would not have gotten as bad as they did when they decided to pursue forced integration. That approach ignored the role schools had in creating communities as well as the fact that we naturally segregate by class and beliefs.
Then you had a concurrent issue of changing attitudes to crime. That led to increasingly trying to blame society rather then the criminal for their actions. Add the two together and you triggered both the fight and flight responses. Whole communities fled, reformed out in the suburbs and started building up barricades to keep the barbarians out. In the process, it set housing on a path that would lead to today's affordability crisis.
Ironically, once again too many of our "leaders" are trying to treat us like widgets in their social experiments. The ham handed attempts by first Obama and then Biden to shove the whole woke agenda down our throats via federal controls over public schools has done more to move Texas to adopting universal vouchers then all the much better and well reasoned arguments. This in turn should over time curb the hostility towards more affordable housing.
So I guess the moral of the story is, "Thank god for historically ignorant people".
So the vouchers are essential, in addition to increasing the supply but, the vouchers break the link between where you live and the quality of education you receive thus curbing the hostility to more housing.
If I’ve got that right, are there any losers in this scenario?
And if I hear a politician proposing increasing supply but not advocating for vouchers, should I head for the door?
Three things, first any policy change produces winner and losers. One of the biggest problems is that the current winners usually know they are winning and will fight tooth and nail to stop any changes. Meanwhile the current losers don't know they are losing or even may believe they are winning. An example would be that teacher's unions are winning but that doesn't mean the teachers are winning. The company that supplies the milk is winning but that doesn't mean the taxpayers or students are winning. Summer babies are losing but then relatively few people know how big and persistent a problem that is, so they don't know their kid is losing.
That said and in fairness, there is another model that would break housing from education. You can force the schools and districts to compete against each other. You do this by making the state more in charge of the funding, force the districts to allow students to transfer at will, and make the funding follow the students. I'm not a fan but it has been successful in places like Sweden.
Finally, staking an all or nothing position in politics is usually a bad idea. I don't know what the attitudes are in your state toward school vouchers are, but I wouldn't pass up an opportunity to rein in housing prices just because it didn't give me everything I wanted. That said, anyone pushing more subsidies for middle class housing, yes run for the door. All that will do is generate more waste and fraud. Literally, they same communities that are already making houses more expensive will just add more regulations that suck up the subsidies.
Beyond that, all policies matter. Texas just changed the law so that local governments have to allow multifamily to be built in areas zoned light commercial. This should work well. California on the other hand, changed the law so that existing single family properties can add up to 3 more housing units. This will go poorly.
The reason California's new law will be bad, is because when you develop a subdivision, it's based on X number of people per property. That in turn determined how big the water, sewer, power line were, as well as streets and parking. Double the number of people and you need to double the size of pipes, and double the number of transformers. The most expensive and disruptive way to do that is in an existing subdivision.
I hope that provides a little more clarity. I'm not an all or nothing type of person, and you never really get anywhere by demanding perfection. Again, humans are complex social animals and you have to work with that, not against it.
Instead of complex tax schemes which will inevitably have unintended consequences and be open to gaming, the answer is simple, although not easy: there needs to be a major increase in housing supply. And what's frustrating is that the same people who claim to care more for the poor are usually the ones that fight hardest to prevent new housing from being built.
I agree. There needs to be an increase in housing supply, not by building more housing, but by reducing the number of illegal aliens that are putting pressure on existing housing inventory, especially apartment units. If we can free up more apartment units for senior homeowners to move into, that could help with the supply of single-family homes. This would be a win-win for everybody. Seniors can move into housing that is more manageable and affordable, and young families can buy homes to suit their family’s needs, at reasonable cost. My comment is not intended to be anti-LEGAL immigration, I’m simply saying that we cannot expect affordable housing to be available If we are inundated, in short order, with over 20 million people with inadequate housing supply to accommodate them and existing citizen residents. I believe there was a recent Commonplace article about the pressure on affordable housing supply due to immigration.
It's not either/or, but removing illegal aliens is not going to be sufficient to free up sufficient housing inventory to meet demand, particularly in "hot" areas that people want to live in. It's been shown over and over again that the real reason for high housing prices is due to government policies that restrict supply.
Read https://www.commonplace.org/p/peter-copeland-the-housing-burden
I agree with you, freeing up housing currently occupied by illegal aliens may not provide sufficient supply, but it can help, along with providing tax relief and other fiscal policies (i.e., less government spending to keep more taxpayer money in the pockets and bank accounts of the taxpayer) to help make homeownership more attainable. Building more housing in areas that lack the infrastructure to support it, such as what is happening in many areas of the country, and loosening zoning restrictions in rural areas to accommodate high-density and/or low income housing is not the answer to providing more 'affordable' housing. Let's be honest, these measures only serve to change the political demographics in certain areas to skew more liberal. Rather, revitalizing urban areas, infill in vacant parcels in cities, etc., along with law enforcement policies that make living in these areas a more attractive option for individuals, families and investors is the solution. And to dispel the possible notion that my thoughts are racially insensitive and biased -- I am a 'person of color' -- daughter of parents who emigrated LEGALLY from Jamaica, W.I. to the U.S. in the 1950s -- who happens to live with my husband in a rural area of the country and wants to keep it that way, just so you know. I appreciate and welcome the convo.
Well they want to grab for themselves and shut the others out.
I also don't love like the idea of disincentivizing older people from staying in their long-term homes. But I'd feel better about that position if those homes weren't so oversized in the first place.
Here's what I'd like to see: way more two- and three-unit houses. When you're a young married couple in your 20s, you live in the small suite and rent out the big one. When you're a little more established and raising a family in your 30-40s, you live in the big one and rent out the small one. When you're doing well in your 50s-60s, you let your young married kids live in the small one for peanuts. When you're empty-nesters in your 70s, you move back into the small one and rent out the big one to pay for retirement...or sell it to your kid's growing family and have them rent the small one to you for peanuts.
I too don’t like the idea of disincentivizing senior homeownership, especially since we, as a country, have yet to provide good (humane) options for senior care outside of the home. I’d rather kill myself than move into a senior living and long-term care facility these days.
This is one more reason to encourage multi-family housing.
Probably the only real way to provide good senior care outside the home is - as with medicare - through massive government funding. Much like daycare, there's no way to provide good senior care for cheap. The economics just don't work out.
But a policy that incentivizes multiple generations to live on the same property (while also giving them separate spaces on that property) is a good way to ensure that they'll never need senior care outside the home. And that they won't need to pay ever-higher taxes to fund everyone else's senior care outside the home.
That completely ignores that many older seniors don’t have family to live with.
Seniors often share houses when that happens, a common arrangement this totally ignores.
“raise property taxes—by a lot”
No! Wrong!
How did this nonsense get through editing?
Why is this garbage in my inbox?
Agreed Kurt!
Why do I suspect the author is sponsored by Blackstone?
The Feds are constitutionally prohibited from direct taxes (except income) so this would have to be 50 states and who knows how many local governments. A number of states have constitutional limits on property tax so it is a non-starter there. Getting away from technical to equity issues, many boomers have already downsized and such a tax increase would hit them as well and upset their financial planning for retirement. And where exactly are they supposed to go until prices come down and housing stocks go up. Ice floes? Seems like a terrible idea. Much better idea is to build up the housing stock and not the way the Abundance people want to do it. Old people would have to be crazy to move into cities.
The Feds do control the capital gains tax. Providing long-time owners with exemptions to capital gains when the property is sold to individuals (vs corporate buyers) could incentivize those sales. There used to be an exemption from capital gains when the proceeds of a house sale were reinvested in a new house. It helped families use their home equity to move up to bigger houses as the family grew. A return to that tax regime might encourage elders to move on to smaller houses or apartments as it would allow them to downsize and keep all of the equity they have built up over the years to help finance their retirement.
And this is the problem. The states, competing against each other, can always race to the bottom.
As for the equity issues, if the Boomers have downsized after the massive and unprecedented equity gains of the past 15 years, they have nothing to complain about. It is an unearned windfall. Every single conversation on housing should begin with this chart: https://www.reddit.com/r/REBubble/comments/se2sd9/for_those_whove_never_seen_it_us_real_house_price/#lightbox
Most Boomers do not own a house free and clear. And most of those did not see huge windfalls.
You are treating outliers as the norm.
Until 2015, the median age of first-time buyers was between 29 and 31. That median buyer could have (and probably should have) paid it off by 61.
The youngest Boomers today are 61.
Frankly, anybody who owned a house in 2010 (unless they were a first-time buyer between 2005-08) has massive unprecedented windfall equity gains. The chart tells the whole story. The statistical data shows that these are not outliers.
Do you have statistical data showing that most older Boomers live with other Boomers who aren't their spouse? And that those older Boomers wouldn't benefit from extra revenue from a second rental suite?
Most people who buy a house at 29 are not living in that same house at 61. Buying a new house involves getting a different mortgage, and then the clock starts over. Around 40-42% of Boomers have a paid off house. About 38-40% have a mortgage.
Around 20% of Boomers rent. This number includes over 50% of women and about 33% of people living in large metros.
The median Boomer home equity, which excludes money still owed on any mortgage, is around 250,000. Keep in mind this value is after 30 years of inflation and does not account for 30 years of maintenance costs. Most Boomers do not live in places like New York or Silicon Valley.
For most Boomers, home equity is the largest part of their net worth. In general, no, the recent price appreciation of existing homes has not been a “huge” windfall, because the home value is just not that high even after recent appreciation, and because they are using the home to live in.
It is important not to mix prices of new homes vs 30+ year old paid off homes. The latter are typically significantly smaller and cheaper.
I have no idea what chart you are referencing.
About 24% of Boomers are caretakers for a parent. Over 70% have at least one living parent.
About 20% of Boomers have a child living at home, often including that child’s family.
About 70% of Boomers are willing to live with a roommate, per the AARP. Moving in with a roommate is a VERY common fallback plan for Boomers if a spouse dies. See https://www.washingtonpost.com/business/2022/02/25/baby-boomers-move-in-retirement/
A decent percentage of Boomers have plans to use a spare bedroom for a hired caretaker if such becomes necessary. Almost 10% of seniors over 90 have such arrangements.
An even larger percentage have family or friends come and stay during times of need, such as after surgery or illness.
It is also fairly common for one member of an elderly couple to require a separate bed / bedroom if they become quite ill, for example following major cancer surgery or if they go into hospice. Having a bedroom for a hospital bed is better than stashing them in the dining room or family room. This need has occurred with more than one of my friends and family members, BTW.
Managing a separate rental is a huge headache that is more than most seniors would want to take on. Most younger people don’t want to be landlords either. It’s a PITA and not something I would have wanted my elderly parents dealing with.
In other words, Boomers typically are either using or have plans for the bedrooms you think are “unused”, and most are not equipped to be landlords.
How about restructuring capital gains tax for senior homeowners, so they don’t have to feel like they have to stay in their homes until death to avoid paying exhorbitant taxes for selling their home that has increased significantly in value since they bought it?
You don't pay capital gains on your primary residence is you've lived there for at least two years. The bigger problems are regulation and zoning laws often in place to protect the schools and keep the criminal riff raff out. You can also add that the seniors and the young home buyer would be competing for the same smaller starter homes and condos.
I would also add that big investors haven't tended to go after single family homes, there's not much money in it. So again this is more a case of over regulation to the point that bigger investors can't invest in the multifamily complexes they would prefer. Those have all been bid up to the point where there is very little return on investment.
Yes, you don’t generally have to pay capital gains on your primary residence if you’ve lived in the house for at least two of the five years before you sell your property, but if your profit exceeds exclusion of $250,000 for single taxpayers up to $500,000 for married couples filing jointly, the excess is subject to capital gains. My sister was caught in this situation when she sold her home in Brooklyn, which she bought for next to nothing in the early 70s and by the time she sold it, she was on the hook for substantial capital gains. If you know anything about Brooklyn, New York properties, you know how much homes, particularly in previously depressed areas of the borough, increased substantially in value due to gentrification.
Seniors generally do not stay in homes to avoid paying taxes.
Interesting idea. Perhaps the taxable value of those capital gains could be put off until death. (But seeing as how most Americans hate inheritance taxes too, I doubt that would be a political winner.)
Is Commonplace a serious place for serious ideas? Based on this author’s piece and thinking I’d say not. No politician of any stripe is going to cross retirees, they vote in droves unlike the authors cohort, five years out of college.
I like fresh ideas and this is surely one of them. However, it would keep me from buying that small, second home in the mountains I always dreamed of for my retirement years. Instead, I’d look to buy that retreat in another country, where cost would also be significantly cheaper. I wonder … if a significant percentage of people did the same, to what extent would that help or hurt Declan’s proposal.
"Trump indicated in his Davos remarks that he understands this predicament well, and that the prospect of picking losers is one reason he has been slow to act on housing."
Or maybe he understands that the losers would be the people in his general demographic (if perhaps not his income bracket).
And the ones who vote.
I'll take the category "things that are never going to happen" for $200, Alex.
Could we just, so to speak, retire the term "Boomer," which in its very sound carries an insulting tone. And, sure, force people out of their lifetime homes, where they feel comfortable and safe, where every step, every uneven floorboard, every kink in a kitchen appliance....is known. Where the garden has been tended and nurtured for thirty-five years, where they are longtime friends with their neighbors, who keep an eye on them, where their church is not far away......sure...do it. I'll tell my grandparents about your proposal.
Every day, another bad idea from Commonplace.
This is just wrong. Fix the rules that restrict new construction as best you can. But charging higher property taxes for older residents because you don’t think they “need” such a large house is wrong.
I appreciate the thought experiment, but the idea of taxing seniors out of their larger-than-necessary houses sounds both impractical and politically infeasible.
Could you just add a homestead exemption for having a dependent on your taxes, but keep the rate comparatively low? I like the idea of nudging older folks into downsizing rather than quadrupling their property taxes…
I can see from many of the comments here that even if people vote for Trump, they still love Reagan's tax policies. Which is probably why Trump's only first-term achievement was a Reagan-style tax cut.
Choosing either Biden or Trump to pin the affordability crisis on misses the point about power. Post 1980, we stopped enforcing anti-trust laws. So.... an orgy of mergers consolidated power in the hands of fewer folks, there's less competition and profit margins have increased (while worker share of total GDP has shrunk). Wealth flowed upward. People are pissed. Housing is just part of the reason why.