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0 pointsthereddaikon4y ago0 comments

As long as you can make sure they don't rot before people move in. There are pros and cons to both approaches and I have personally seen the downsides to not building enough housing. We also allow far too much speculation on residential real estate in the US for my liking. People's livelihoods shouldn't be traded commodities.

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4 comments · 1 top-level

whimsicalism4y ago· 3 in thread

You need speculation to send price signals to the housing producers. Speculation without any building is the problem.

Speculators blocking new building is also a problem.

vkou4y ago

Speculation is also a problem when you have to pay to play.

Everyone needs housing, but when owning a house means it has a speculative resale value, you have to pay that premium in order to buy one.

This has a few consequences:

1. Downpayments and mortgages grow, because you aren't just buying shelter, you are buying a financial instrument with a significant resale value.

2. Your financial well-being is now deeply entwined in the fate of the housing and mortgage market. Higher interest rates become horrible for you, as they depress housing prices, and put your home underwater. New construction is horrible to you, as it reduces the value of the speculative portion of your purchase. Likewise for the existence of affordable forms of housing, and renter-friendly legislature.

Speculation from the perspective of a developer is part of running a business. They shoulder a fair amount of financial risk when they choose to develop, and obviously want to hedge it. Speculation as a 'every homeowner in the country is also a speculator, whether they want to be one or not' leads to some questionable outcomes.

whimsicalism4y ago

1. you don't need to own your house as an asset to have housing

2. yes, people should be expected to pay the time discounted expected future value of the thing in order to own the thing. speculation is what prevents people from buying shitty houses for dirt cheap in areas that are ideal for apartment development and then refusing to move - that is a good thing.

2 -> Yes agreed, it is bad how it distorts the incentives and when the people on one side of the transaction (usually the homeowners) have all or most of the political power, that becomes a large problem.

The reality is that we have to have a mechanism to encourage people to sell their homes and move when more valuable uses become available (like moving in 30 people into an apartment building where there were previously

Speculation, in the United States, is that mechanism. There are probably alternatives (as a sketch: devolving eminent domain authority to local govt & non-profits -> obtain financing for compensating owners -> eminent domain-ify vacant lots/unused parking lots -> build housing -> sell housing -> pay back creditors; this would probably do a ton), but currently speculation & financialization is the best engine for resource allocation in the US.

seanmcdirmid4y ago

China also lacks a property tax so speculation is much more viable than in the west (where you have to pay property tax on a house if it is lived in or not).

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