Should we be legislating to protect American home ownership?

When I've posed this question in the past, it's had little participation and most of the participation seemed to indicate 'no, we shouldn't.'

But I think more people now understand the dangers of inflation, a renter economy and how property values relate to the overall economy.

Or perhaps in the past I merely presented the subject too complexly. I'll try to simplify.

First, some facts:
-Inflation is happening. Our money isn't worth what it used to be, and this trend is expected to continue.
-Residencial property values are skyrocketting. Less and less Americans can afford to buy a home, and must rent instead.
-Rents will always scale up to match wages, so raising wages will not help renters save money or buy a home.
-Rent controls cannot reduce the cost of housing without reducing the supply of housing, so rent controls cant fix this problem (unless we want a lot more homeless).
-Housing is the single greatest cost of living for the majority of Americans, and thus:
-Owning a home is the single best protection against economic instability for most Americans
-The rate of American home ownership has stagnated in the last decade since fedgov made it easier for investment firms to buy homes (and turn them into rentals) as a means to repair the economy from the last big recession, (its still technically increasing, but barely, and the rate of increase is dropping. Trends indicate it will soon reverse and begin decreasing as more homes are turned into rentals).

I hope I don't need to explain how all of this equates to a recipe for the bulk of American workers to get stuck in perpetual wage slavery.

The question is- what do we do about it?

It seems to me the only realistic option is to 'regulate' (yes, I hate that word, so I'm not making this suggestion lightly) residential property values. Since demand is not something we can realistically control, we are left with trying to increase supply and/or capping the price.

Increasing supply would simply require unlocking some (no, not national parks) of the 640 million acres currently owned by the federal government (for reference, the average size of a residencial lot in a neighborhood is 1/3 to 1/5 of an acre). 'Simply' is of course relative, since much of that land has no infrastructure, is not close to any major source of employment, and may not be particularly attractive to live on. But then again, many attractive and valuable homes today fit that very description decades ago. These are not barriers, just difficulties that we know how to overcome.

Capping the price is far more complicated. Obviously just saying 'you can't sell it for that much' isn't going to work for a lot of reasons. What really needs to happen is there needs to be a cap put on how quickly residential properties can increase in value. The simplist method to do this is with taxation. A tax on non-primary (investment) residences, (as well as a probably lower tax on rental properties since rentals will always be needed to some extent) that is low enough to preserve their viability as an investment for someone who has none, but high enough to discourage their viability as an investment in bulk.

To put in broader terms, access to home ownership should effectively be protected and managed as a utility, but with emphasis placed on recognizing the dynamic that it must still be allowed to be a profitable investment (as opposed to a 'right) or it loses all of its purpose.

Trends suggest that if we do nothing, the alternative is just for the few wealthy elite to eventually own everything, which is the death of freedom, self determination and America.

 

If a house costs $300,000 and you give everyone a $300,000 loan to buy a house all of a sudden that house is now $1,200,000.

We have done this to ourselves, houses aren't worth millions, our dollars are worth **** all.

 

That's definitely part of the problem. But the investment firms buying up to 25% of the houses for sale are often paying above asking price. This suggests a deliberate attempt to inflate home prices to leverage more people out of the buying market and lock them into the renting market. Given that most of these investment firms also invest in businesses, we're approaching a situation where employers (or, at least their majority shareholders) can effectively collect all the wages back from their employees by simply increasing their rent.

And of course its all a situation of our own making. We deserve the govt we create, thus we deserve the govt that enables the corporations to slowly turn America into a wage-slave state. But what can we do to stop deserving this?

...also, thx for being the first of 25 people to respond. I guess maybe no one actually cares anyway.

 

have you ever been to a "get rich in real estate" class, like maybe trump university?

the idea is to buy homes with no money down and rent them for cash flow while accumulating a capitalist empire. inflation, for the landlord, is great because rents can rise and more equity can be collateralized for greater accumulation. if even a small percent of the practitioners of this method (chinese and former soviet nationals do this a lot, here, because of instability in their native countries) actually succeed, well, we get to 2021.

i flipped a few houses and condos myself during the savings and loan crash, but the 2008 sell offs were limited to "qualified bidders," pretty much billionaire developers and investment corporations.

at any rate, inflation is like any other economic situation. "bulls make money. bears make money. pigs get slaughtered"

 

Yes, thats also part of the problem. What do you think of my proposed solution? and/or do you have a solution to propose?

 

demand can be regulated. every country in the world restricts ownership of real property to citizens of that country. i bought a home near manila, but the title was held by my phillipine mistress (who enjoys the property to this day. ) (my wife don't like it, so unlike mcarthur, i shall not return. )

i think you would be shocked by the number of american homes owned by chinese nationals.

 

that sounds more to me like limiting supply, not regulating demand. how do you think that could improve our situation?

 

I don't think it makes much sense to look at inflation without looking at changes in compensation. These kinds of things you're raising as problems have always been true, namely that we've had inflation. What's new is inflation outpacing compensation, but that's something new for the pandemic. Since such inflation can easily be tied to covid related issues, I think we can address the root cause rather than going such a large step further as you suggest.

Separately though, I would be open to a nominal property tax surcharge of only about a fifth on the property tax of homes which aren't being used as a primary residence (so for clarity: if the annual property taxes due are $2000, then there would be a surcharge of $400). However my concern that once this door is opened it'll be pushed further gives me too much concern to support even a small such tax at this point.

Just want to in particular highlight this bit of puffery - this is obviously so far gone from the truth. I assume you're being hyperbolic, but man - this is more hyperbolic than when people said, "if we pass Obamacare we'll be re-enacting slavery!"

 

we could stop foreigners from buying homes here

 

"-Rents will always scale up to match wages, so raising wages will not help renters save money or buy a home."

Underpaying people has never helped society, wages have to go up to match inflation

rising wages and inflation combined, does help those with mortgages

 

Build more homes.
Regulate the supply, not the demand, which can't be regulated.

 

There is no easy answer. I don't think even your suggested tax is really going to do anything. It might put those with rentals and are just using it to pay bills and live a comfortable life style out of those rentals. But that is assuming that they don't just increase the rent to take care of the extra tax. But it definitely won't do anything for those people that buy up houses to rent out by the "dozens" so to speak.

Now, put simply there is only a finite amount of land. Even if you were to release ALL possible available federal land to the public to buy up eventually it will be all bought up and then what?

Lets put it this way. In the Continental USA there is 2.7 billion acres. Of that the Federal government manages only 640 million acres, or about 28% of the 2.7 billion. Of that the National Park Service manages 79.9 million acres. Since you didn't want to dip into the National Parks that leaves 560.1 million acres left. The DoD controls 8.8 million acres. I'm assuming you don't want that messed with also as that is a part of our military defense needs. That leaves 551.3 million acres. Much of what the Forest Service and Fish and Wildlife handles is mountainous country, lakes, river areas. Between the two that totals up to 282.1 million acres. I'm assuming you don't want those messed with also for obvious reasons. That leaves 269.2 million acres left. Of that the Bureau of Land Management controls 244.4 million acres. I don't know who controls the rest of the land, roughly 24.8 million acres. Not that it matters as that won't make up for anything in the end. Here's my sources:

LINK: Federal Land Ownership: Overview and Data (fas.org)
LINK: Public Land Statistics 2019 (blm.gov)

So, really only 244.4 million acres of that 640 million acres could safely, probably, be sold for private use. Assuming its all livable land. Additionally that 244.4 is probably THE MOST that we want to free up. Anyways, that won't last long before its bought up. Remember, 2.06 billion acres is already bought up by private entities. The only way to make that actually useful for what you are wanting is to make sure that it is all zoned as residential. But that is actually not feasible. As you say much of it is undeveloped land. In order to develop it it's going to have to be zoned for commercial and industrial also. We're talking whole new towns being built and the economy to make them last. That means that at least 183.3 million acres of that 244.4 million acres has to be devoted to commercial, manufacturing and office areas (both of which take up more than 1.5 acres unless you're JUST talking about mom and pop...again, not feasible). That leaves 61.1 million acres for residential. You're probably wondering how I got those numbers. I figured 3/4 of the land will be made up of commercial, manufacturing, and office space. Now you could go half I suppose. But that still only leaves 122.2 million acres of residential space.

For the rest I'd suggest considering what is in this LINK: Here’s How America Uses Its Land (bloomberg.com)

Considering all of the above, (and in the link), There really isn't much land for residential use left in the US. Crops, pastures, roads, railways, cemeteries, commercial use, etc etc...they all add up. So really your idea of releasing federal land is only a stop gap. And again, that is assuming that ALL 244.4 million acres is usable. We both know that it isn't. I would be surprised if 1 million acres of it all is actually usable residential land. At .5 acres per home, that's only about 2 million new homes. At best.

 

And this could be done somewhat more readily by lessening the regulations on home building, particularly those which have to with manufactured (also called prefabricated) housing. When I was younger (and dinosaurs roamed the Earth) prefabricated housing was seen as the coming thing. That's not happened, and my understanding is that this is mainly due to the predominance of stick built home-builders on local government's zoning boards. This could be looked into. Also, as was mentioned, the government should not own as much land as they do

 

Most of the problem is size. In the 1950's the home I grew up in was 900 square feet and sat on an 1/8 of an acre of land had 3 bedrooms and 1 bath and came without a washer and dryer. Though the hook up for same were present. Now that same home is 2500 square feet, 3 baths and three bedrooms. The next most important cost driver is in creases in minimum which has driven cost for l other labor higher though only union jobs are coming even close to keeping up with the increase in minimum wage. And private sector union labor is now at an all time low.

 

@modernpaladin @Kal'Stang

Interesting discussion.

I think of my own home. It is modest in size, modernized, remodeled , well cared for, and in a nice quiet and safe neighborhood. I bought it in 1984. It would now sell for 8 times what I bought it for.

I realize that people making the minimum wage cannot afford to buy a home. But just to compare and contrast home cost vs wages, I googled and found that the minimum wage has risen by a factor of 4 in my area since 1984. So home price has risen X8, wages X4.

And yet I could sell my house on Day 1 of having it for sale, and I could expect a bidding war over it. The reason for this, besides the desirable area, is that there simply are not enough houses available to meet the demand. We just went through this with my widowed mother in law. Her modest home was put up for sale for the market price. It was shown over one weekend and sold for 25K over the asking price.

So it seems to me that we need more houses, and we need more small, modest houses.

So what if we use zoning laws to help accomplish this? What if we had laws that said that houses in a new subdivision had to be owner occupied, and X percentage of them have to be 1000 square feet or less, and X percent had to be 1200 square feet or less, and so on? The idea being to create an adequate supply of affordable starter homes for young people.

And these corporations that are buying up all those residential homes? What if we passed laws that said that the rent had to be counted as a down payment after a time, and the renter would always have the option to buy?

So let’s say a corporation buys a small house for $200K. They rent it to a couple for 5 years for $2000/month. In 5 years the house has a market value of $300K. The couple has paid $120K in rent. 300 - 120 = 180. So if the couple can qualify for a 180K home loan, the corporation must sell it to them for 180K. And so now the couple is a bonafide home owner with a $180K mortgage on a $300K house, and they didn’t have to have an initial down payment. They just had to pay the rent. The corporation made $100K between their initial purchase and sale to the couple 5 years later.

Now I realize that all these numbers may or may not apply, depending on the area and a number of factors. Let’s not get hung up on the numbers I presented. They are only meant to propose a general framework of a concept. The idea is to make it more possible for younger people to actually get started with home ownership.

Thoughts?

 

What if our country passed a law that ONLY USA citizens could buy real estate here? That would eliminate wealthy foreigners from buying up property that could be purchased by middle and working class Americans.
I've heard that some countries already have this law.
Or is this too extreme?

 

Sounds like forced selling of property to me? Don't think it would pass a Constitutional check.

That said, there may be a way to encourage rent to own property without forcing people to sell.

 

Well lookie here. Something we can both agree on. I've thought this for a long time. Getting such passed though would probably be insurmountable.

 

I believe this is a common sense approach. Our citizens should have priority over wealthy foreigners. I agree with you about how difficult it is for young people to buy a house nowadays.

 

We should view legislation as a non starter. When government meddles with the economy rarely does anything good happen. Your best bet is to convince people to start voting for people who will force government to live within its means. House prices didn't cause inflation, government did.

 

Price controls on residential real estate is a horrible idea.
If you are concerned with investment firms buying up houses - this could be subjected to anti-trust laws.
Case closed.

 

I don’t want to get off in the weeds here. I doubt that either of us are constitutional lawyers, but ...

My non-scholarly opinion is that if a corporation agrees to these terms set forth in local land use laws, that IS due process of law. And secondly, I don’t think an arrangement like this would constitute “depriving” them of their property in the way the Founders meant. It’s a mutually agreed upon business arrangement. I think “depriving” implies a non-consensual taking of property.

Rent-to-own is not really a new concept. I’ve heard of it being used for furniture for example. Both the seller and the buyer agree to the terms. The corporation would not be forced to buy property and then do rent-to-own. If they didn’t want to do rent-to-own, no one would be forcing them to buy the property in the first place.

Let’s not argue about that. Do you think the idea would help get more people into their own homes?

What about zoning laws and building regulations that mandated more small owner-occupied homes?

My house is a good example of what happens when there aren’t enough houses available. My house should be a starter house for a young couple. It’s perfect for that. But it’s market value is through the roof. How a younger couple can afford to buy their first home .... I don’t know.

 

but if you gave away 300k houses as they were built, the house price would fall as more and more houses would be built

supply shortage causes prices to rise, that is true

but also as more owned homes, less would need to rent, thus rent would go back down too

 

corporations have become mini governments

 

I will whole heartedly agree with this. Homes built now are 'family' homes, and the buyers are now convinced they need two sinks in the master bathroom. Actually, it needs to be an ensuite!

We need to have neighborhoods with all sizes and types of homes, rather than these cookie cutter two storied models.