There’s a proposal to build a railroad in France, but the porters in one area argue for a gap in the line, because that will make them and (allegedly) everyone else in the area wealthier. So why not extend that logic to the entire route? Then everyone would win! Hence the “negative railroad,” which is made up entirely of gaps.
This essay should be more well-known. It would be great if Matt and writers like him could use "negative railroad" as a shorthand for various bad political ideas.
It reminds me of when I lived (as a renter in an apartment building) for two years in Upstate New York. I lived close enough to walk to tons of places, but it was rather treacherous because the roads were wide and heavily traveled, and the sidewalk was in patches - there would be a sidewalk for a short stretch, then it would disappear, then start again later. When I aksed why the town had such a stupid setup, I was told that at the time many of the houses were built, new homeowners could choose whether they wanted a sidewalk in front of their house for a small extra fee.
Excellent article! Port automation and the longshoremen unions immediately come to mind.
Also the famous thesis of Economics in One Lesson: The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
When the original BART was built in the Bay Area, it was designed to circle the Bay. San Jose objected because “people would leave our city and go work elsewhere”. Now decades later, we are spending billions trying connect that gap.
The sweet spot for housing is home values rising in nominal terms but falling in real terms. That way, no one goes underwater on their mortgage, but homes remain relatively affordable. This is, however, a very narrow target, so I am unsure what policies would actually bring it about.
I suspect the answer lies on the financing side. We could perhaps offer insanely good terms to builders who are working on densification projects as long as their local markets remained in this narrow range.
There's a case to be made for some kind of preferential financing vehicle for homebuilders operating in in-fill markets; the positive externalities are high and current financing generally overstates their risks and doesn't allow them to scale well.
I don't think it should be micromanaged to the extent you describe; the nature of construction is such that it's very difficult to build enough over any significant time span to drive prices down in nominal terms. Assuming major land use liberalization, about the best we could hope is that over a decade or so we'll bring price increases down to below inflation, hold that for a time while we experience catch-up growth in supply, and that after we've made up the gap, prices will thereafter march in line with regional wage growth.
>> nature of construction is such that it's very difficult to build enough over any significant time span to drive prices down in nominal terms
But right there, you’re misquoting my proposal.
The window is between negative real price growth and positive nominal price growth. DUH negative nominal price growth is a political nonstarter, but that’s why we need the window, because positive real price growth cannot continue forever.
Yes, my point is that we should have such government-backed financing for developers, but don't need to target it or modulate the flow in the manner you describe, because the natural floor of development is pretty close to "prices are flat in nominal terms" already.
Just create a National Homebuilder's Financing Corporation and call it a day.
That’s kinda my point tho, but perhaps I didn’t elaborate enough:
First, you get rid of the zoning so that almost every project is a densification project.
Then, you open a spigot so that most of those projects can get financed at terms somewhere inside of the “real-nominal” window.
Obviously the macroeconomy will shift in uncontrolled ways beyond these limits, but that’s OK: the window is just the target for these specific projects. The goal is not to fix the ENTIRE market, it’s to anchor a segment of it so that the rest of the market follows it closely.
Also, the financing then becomes a spigot. If not enough housing is being built and housing inflation exceeds the upper bound of the window — the real term price — then we open the spigot. If too much is being built and housing inflation dips below steady nominal increase, then we close the spigot.
I don't think it's that narrow a target to hit, and the key is supply. The recent crazy gains in home prices are both not good and not necessary for homeowner happiness. It would take a huge up surge in supply to actually make prices go down, a surge that's probably not even possible. Most homeowners would be happy so long as their value keeps up with inflation. What people never want to see themselves "losing" money when they sell their house.
My last home, in a nice upper middle class midwestern suburb, barely kept up with inflation from 2002 when I purchased up through about 2018 or so, and my neighbors weren't expressing any outrage or discomfort because of it.
I agree, but I don't think policy makers need to target this. They just need to let people build, and the market over time will naturally settle somewhere around there. Developers won't want to build if there isn't enough demand.
If there is demand, and developers are allowed to build they will, and that will constrain price appreciation.
Some markets don’t settle, but instead enter boom-bust regimes. That’s what happened with railroad service and led to the interstate commerce commission regulating rates, and same with taxis leading to the medallion system.
I want to push back on framing housing as a financial asset though. The real benefit to owning your home is having a place to live that no longer carries a monthly payment. Same for owning a car, owning your clothes, owning your appliances... The world has transitioned to monthly payments for EVERYTHING, but a smarter approach is to focus on owning the things you need and then just not spending much money every month.
You still need to pay property taxes and insurance along with dealing with maintenance though (which is a huge pain compared to renting with a landlord with reputable maintenance staff on call), plus most people take 30 years to pay off the mortgage and sell before they even pay it off. Housing with no ongoing costs is impossible because it’s a physical good that inherently depreciates and incurs those costs.
In many places those tax & insurance costs are quite low though. Yes there are some maintenance costs as well, but the point remains that with home ownership you have substantially lowered your monthly costs.
That's not always because of renting vs owning though. Usually people who decide to buy a house go farther away from the urban core to do so, and the reason they're paying less is because they're living on less valuable land. There's nothing wrong with making that tradeoff, as long as you're doing it consciously. But if you look at fairly equivalent homes - an apartment vs a condo of the same size on the same block - the numbers often end up much closer.
What percentage of that is your house? What are you insurance payments like?
My point is that property taxes and insurance are generally low where housing values are lower. Perhaps there are exceptions, and if so I'd like to know where they are.
There are some cities that rely more on other taxes, so their property taxes are lower for a given market value. Philly is one of them, at least for the nonce.
It's starting to see assessments creep up, and is so far just taking the additional revenue, but at some point it will probably move to set revenues and allow millage to fluctuate as values change like many communities do.
And yes, owning anything doesn’t make it cost-free.
Having a landlord with a reputable maintenance is far from guaranteed. Lots of people don’t want to be dependent on others for that or have to deal with a lease that might not be renewed, forcing a move. Owning also allows you to modify a home to suit your needs.
Not that renting is bad, it’s just different and serves different needs.
IMO, not having to move every few years is a bigger psychological benefit than the financial aspect. There are a lot of costs associated with homeownership even after paying off the mortgage.
Yea, I want to be able to fiddle, to tweak things to make life easier, to remodel as I want, to feel no concern when my nutjob kids knock a hole in a wall because drywall patches are easy and I have a spreadsheet of every color of paint, SKU of tile, brand of flooring, etc... that I've ever used.
IMO a real value is security and freedom. Tenants get kicked out for all sorts of random reasons, and they can’t renovate or even repair the home as they please.
The financials are attractive in large part due to subsidies Matt mentioned, but even if those went away I think most people would still aspire to be homeowners.
If the real benefit is no longer carrying a monthly payment that remains true even if your home value doesn’t skyrocket, so why are people so obsessed with property values and/or appreciation of their home value? Even progressive politicians use the frame of “wealth building” around homeownership all the time - it’s a huge part of the narrative around housing for better or worse.
If you're in a place like Boston you know some people who bought a house for like 150k thirty years ago with 30k down and sold it for 1.5 million recently to downsize or move to South Carolina or whatever.
But, I think people over index on those stories as well as simple loss aversion once Zillow tells you your house is worth $x dollars people feel bad if it goes down.
The key there is you have to move away from your home in order to really realize the gains. I'm in california, and in places where home prices shot up, the 100% gain in your investment will buy you basically the same house with a much higher tax bill.
One of the big actually wealth-building features of buying a home is that the mortgage contract effectively forces you to save more than you would choose to otherwise. It would be better wealth building to put the same amount into a diversified equity fund, but few people do that.
Perhaps most people go into homeownership thinking of a house primarily as a place to live and over time they come to think of it as a financial asset they have to jealously protect. I know I have, and I don’t want to. But given how much my future economic security is now tied to this this house, it would be foolish of me not to.
are they obsessed? I don't know those people. I know a lot of people who own their homes and don't really think much about what they might be worth. I do think people are surprised when a nearby house sells for an unexpected price! That's interesting, true. But once you have a home, I find you tend to just think of it as a place to live.
yes i know. Not disagreeing with that (or saying it's irrational in any way). I'm pushing back against the idea that people mostly value not having monthly payments rather than valuing their home value going up.
I think people like the idea that monthly mortgage payments will eventually end, and some people prioritize that to pay off a mortgage early. But I think for most people the advantage is price stability. Unlike rents, a typical mortgage will stay the same over time.
On paper maybe, though I keep seeming to need to replace the roof one year, repipe the house another, and I still haven't got my insulated garage. There's advantages to renting; the real benefit is having a greater amount of control over your environment. Just because the monthly cost isn't a rent bill, it's still there.
Now one thing you can do is leverage your equity to pay for improvements and major maintenance if you really need to, but that's not the same as having a significantly appreciating asset.
yeah, every year we have at least $5,000 we need to put int our single family home, and some years it is closer to $40,000. I currently have about $20,000 in repairs I need to do sooner than later and I'm not sure where the money will come from. and then something will break and all of a sudden you've spent $2,500 on plumbing or a new garage door or a new appliance.
??? but of course it DOES carry monthly payments, the mortgage. AND you are liable to unpredictble costs. Our n-year old boiler sprng a leak and had to be replaced RIGHT NOW. Depending on your liquidity and skill at managing a tiny housing corporation and the responsivelness of the hypthetical landlord altrnative, you may be better off owning a depreciating asset/appreciating asset combination. But maybe not.
“I want to push back on framing housing as a financial asset though”
I recently read an essay that agreed with your idea and said, in part, “American policy toward saving, investment, and homeownership is kind of misguided.”
Why is it a benefit specifically to put your money into ownership of durable goods and housing to avoid monthly payments, rather than doing something else sensible with that same money?
a) To prepare for income drops, including retirement but also potentially spells of unemployment
b) Lower total expenses over time. This is perhaps more obvious with cars, where it is clearly more costly to lease indefinitely versus owning a vehicle and driving until the end of its usable life. But it applies to many other things as well.
c) The things you own, you can potentially pass down to your children. I actually grew up around a lot of people who were pretty broke, but would own pretty large rural farms. Very common to just have an adult child drop a trailer onto a corner of the property and TADA they have a place to live.
Also I am curious what this "something else sensible" you envision might be.
Taking your money and putting it in other financial products does just as good a job preparing you for income drops. It's better in many ways, actually, since it's both much easier to access and less correlated with other important things in your life than home equity. Additionally financial assets can also be passed on to your children.
Also, it's true that paying for the service of having someone else ultimately responsible for maintenance costs some money but home ownership takes lots of work and expense as well.
The S&P 500 is pretty correlated with unemployment levels! I agree that many, many Americans are over-allocated to owner-occupied real estate and it’s (as we see) a real policy problem, but “people own stocks so we can’t let stocks go down” can be a problem too, and would likely be a bigger problem if half of current homeowners rented and put money into the S&P instead.
Yeah, having lived through some bad stock market crashes, it is the WORST time to need to access that money. You become a forced seller in a down market - yuck.
Because the mortgage terms lock you in to making this investment every month, whereas otherwise you’d have the freedom to not do it some months, and most people would take that freedom more than they should.
One is stability. You’re paying the same in mortgage every month. When renting, the cost can go up or down, depending on the market. In my area, which has grown a lot since we moved here and bought a house, renting an equivalent home today would be $1k more per month than our current mortgage.
Obviously, things can go in the opposite direction if rents fall.
I do not think this is correct. The major risk in keeping your home is that you lose your job and have to move somewhere else to get a new one, because you need a job. Owning a home, even if you own it outright, does not fix this unless you are already retirement age (in which case the worry you expressed doesn't matter either). And if you lose your job, there's a significant chance that it's because of some bad thing happening to your town specifically which reduces the value of your home. Major drops in the stock market are in fact also correlated with drops in home prices (see 2008).
Isn’t a major byproduct of the design of home owning and mortgage in the US that the average person will never have better financial leverage than when they buy their house and put a mortgage on it. And some people still get to deduct some mortgage interest.
Well, I would counter that the 30-year mortgage is actually a pretty crappy financial product. For the first ten years you are mostly giving the bank interest payments and not building equity. I think THIS might be why people feel they "need" prices to go up on their homes, because the only equity they build is from price appreciation. But if we got rid of these crappy long mortgages and financed over 15 years by default, prices would be lower and everything would get better...
Or one could say that in the first ten years you're paying subsidized rent, since the interest is potentially deductible and later you're building equity which you'll benefit from if housing prices increase.
So, end of the day, it's still a much better financial tool than renting if you can pull it off.
Not exactly. They like that they can buy a higher-priced house by stretching the payments over a longer term. But when everyone does that same trick against a limited housing supply, all we have done is bid up the price of houses.
Some people would probably get even longer mortgages to buy nicer houses, if they could! But the 30-year mortgage is not a natural product - it exists only with hefty government intervention through Fannie/Freddie.
"But the 30-year mortgage is not a natural product - it exists only with hefty government intervention through Fannie/Freddie."
The worldwide average is between 20-30 years. And when it is shorter than that, it typically requires generational support to achieve the required down payment.
All of those mortgages ex-US are adjustable rate though. What Miles meant to say is that the 30 year *fixed rate* mortgage only exists with hefty government intervention
Right but a bank gives you $X00,000 value of house to live in, in advance! Its pretty hard to buy a livable house for $50K but for $500K you can get a nice place that you otherwise wouldn't be able to afford to rent.
The standard deduction was much lower in those days. So you deducted your interest, but most people weren't better off and it biased the tax code toward larger mortgages which is unhelpful.
Before the 30 year mortgage, home loans were done as 10-year interest-only payments with a balloon payment to pay it all off at the end.
People do not generally make enough money to be able to do that on a 10 year basis — the value of a house even back then just far outstripped people’s income. And even if you DO responsibly save the entire payment over that 10 year period, you’re just ONE major inconvenience or repair away from missing the big one.
This is the market that banks came up with on their own. It did not work well. That’s why the 30 year mortgage was invented.
You’re doing WAY too much “assuming a can opener” and not living in the realistic world where no one has $300k just sitting around to instantly pay for a house in cash.
You've gone from A to Z and skipped lots of choices along the way. The 15-year self-amortizing mortgage is a fine product in my opinion.
Of course I do not expect many people to have the lump sum for a house available. But there's a balance, because home prices appear to rise based on the monthly payments people are willing to pay, and sadly longer term loans have made people willing to give up much more of their lives to interest payments for the banks.
>> because home prices appear to rise based on the monthly payments people are willing to pay
You’re going to have to elaborate on this theory of yours.
>> The 15-year self-amortizing mortgage is a fine product in my opinion.
While it’s true that longer loan terms have inflated total interest paid, the plain fact is that YOU have no way to get us from A to Z: There’s no reasonable path from 30 year mortgages on already-insanely-inflated housing prices to 15 year mortgages WITHOUT resorting to a whole bunch of deleveraging that you didn’t even gesture or hint at in your comment.
To the first part, you see house prices move as interest rates move - low rates lead to higher prices, and this is exactly the behavior you expect if the monthly payment is the constraint for most buyers. I believe this is well-understood in the real estate market.
On the second: It's true I don't have a path down from the 30-year mortgage, but that does not mean I have to like the product. I encourage people to accelerate their payments and chip away at that principal as much as possible.
For the first part, OK, I guess the way you phrased it was confusing at first.
But also, I’d point out that THAT phenomenon is pretty historically invariant regardless of housing supply or preexisting price level. Which means that for any given price level, you can only press the “have people pay off their houses faster and pay less total” button ONCE. After that, you still have to close the 10-20M unit gap.
Not to mention, shorter terms inherently means higher payments. Even if the low rates are raising sale prices by 10-15% and you knock that 10-15% off by biasing against those rates, you still have a general market where the supply shortage means real AND nominal prices are inflating, vs using supply to get us to the point where real price inflation is negative but nominal price inflation is positive, which is basically the only politically feasible regime for deleveraging from decades of NIMBY insanity.
RE the second one, that’s just generally good advice, and yeah plenty of people don’t follow it, but also again, any legal effort to fix it is a button you can only press once.
The root problem is still that houses are too expensive — P/I ratios are now basically 4-7x vs historically <3x.
"The root problem is still that houses are too expensive" - I think we can go deeper!
The houses are too expensive because
1) We need more supply in high demand areas. But fundamentally this is a SUPPLY problem, and we can go to the known YIMBY solutions.
2) With supply constrained, longer terms and lower rates simply increase the debt buyers can take on, creating a windfall for existing owners. Since buyers are just competing with each other, helping them increase their spending just doesn't help. This is why I am opposed to so many simple-minded schemes to "help buyers". You cannot help everyone without creating more supply.
No. Shorter terms absolutely do not mean higher rates. Quite the opposite.
Just check mortgage rates if you don't believe me. Or compare the yield on any short-term debt to that on long-term debt of equal quality. Try Treasuries.
I think the above is unfair, but I think it's also well within most people's capacity to infinitely rationalize away anything that they support which hurts their kids, so the fact that they love them means much less than we might hope.
“I love my kids, I’m just preserving the neighborhood they grew up in against those evil developers and all the TRANSPLANTS they’re building apartments for. Nothing I ever do FOR MY KIDS could be wrong; I raised them myself and I KNOW how to parent my own damn kids.”
I... disagree. This is demonstrably not the case, otherwise more folks in my parents' cohort would, you know, move.
I suspect that a greater number of older people would express this as, "I want my grandkids to live close to me."
I know a fair number of people in my own age cohort whose parents are angry at them for raising their grandchildren where life, work, and other needs have taken them, instead of "moving back home."
Hard agree. My in-laws always lament(ed) how little they saw their grandkids, but weren't willing to inconvenience themselves much at all to make it happen.
For us to go to them was four airplane tickets and a big chunk of scarce vacation. They were retired, with no schedule, and could easily afford First Class seats.
Lol one set of my grandparents moved from Iowa to Arizona full time pretty shortly after they became grandparents. Now my aunt snowbirds down there for 3 months of the year. My dad's planning on moving to Florida when he gets too old for the cold.
When I was growing up, whenever any local ballot initiative that would benefit kids would come up (about schools, playgrounds, etc.), it was always retirees who would join together to kill it. I remember seeing a bunch of old people even protesting outside the local high school to fight against a modest tax increase to help improve the school.
After reading the yelp reviews for restaurants in my grandma's retirement community, nothing will earn you a 1 star review faster than modestly raising the price of anything.
The price for a sandwich and coffee went from $12 to $14 since the LAST TIME I came here two years ago!!! The coffee came with cream and sugar on the side EVEN THOUGH I didn't ask for it!! I sent it back and the girl looked confused!! WHATS CONFUSING ABOUT A BLACK COFFEE!?!? We waited 35 minutes for our food!! Do NOT go to the Denny's off I-19!! BAD service and HIGH prices!! NO WAY!! One star!
Many of them think that their kids are insane for forgoing children and refusing to “drive til they qualify”. They see it as turning away from the natural order of things, a form of secular apostasy to the suburban car-dependent lifestyle.
I do hope that the understandable but misguided progressive impulse to favor the exact opposite of everything Trump proposes will lead them to view housing scarcity as indelibly besmirched by Trump’s fascism and embrace housing abundance in all its forms.
It's very, very jarring to hear people who in other contexts are dogmatic shills for (some version of) capitalism suddenly turn into Stalinists when it comes to housing construction and regulation. The number one thing that convinces me that abundos have this issue right is that they actually have a consistent and factually-supported story about everything and even if I disagree with that story at the margins in some areas, I can therefore have some confidence that they are engaging in good-faith analysis (particularly ones who are themselves willing to concede issues with their approach when warranted).
Supply constriction of something is only a good idea when society as a whole benefits from that thing being constricted (say, crime).
> suddenly turn into Stalinists when it comes to housing construction and regulation
This helps them get along with the actual leftists who want more "affordable housing" but if and only if no one, anywhere, could possibly make any profit off of building it (and therefore, it never happens).
This all makes sense, of course. But if you're Trump, the calculation is more simple - there will be unhappy voters in 26 or 28 if home sales are sluggish and people who want to sell can't at the price they expected, and maybe as President he can do something to juice home sales in that short window.
But he can't realistically expect to implement federal policies that noticeably make housing more affordable on that time scale.
So it's a no-brainer for him to pick the easier and more-likely-to-succeed-in-the-short-term strategy: ask, What Would Peron Do? (Or Chavez, etc), and do that. That's Trump's economic policy in a nutshell.
I totally understand and agree with the gist of this piece, but my thoughts are that some people, like our President, simply do not care about creating a wealthy society. Sure, Trump and his ilk love wealth, but not necessarily a wealthy society, where wealth is common and widespread.
I believe they would much prefer to live in an overall poorer society than the US, like Russia, where the wealth is concentrated at the top class of elites, while the rest of the country scrounges for firewood.
To be a billionaire in a first world country is to be a very rich man. But to be a billionaire in a second (or third) world country is to be akin to a king or an emperor.
This logic helps lend some kind of coherence to Trump's worldview.
Yeah, this is touching on something I've mentioned before that I would like to see Matt address in detail: for the vast majority of human history, elites quite literally perceived little to no benefit to "growing the pie" of the economy -- their focus was almost entirely on how much they, personally, could drain from the general population without regard to what effects that had on the overall economy. In the late Middle Ages to Renaissance, however, you have a significant change in Europe (and in particular western Europe),* where elites by and large stepped back from actively murdering their own national economies and contented themselves with getting a smaller slice of a larger pie. This is, IMHO, one of the most important transitions in human history, but I feel like it's largely ignored or taken for granted, and it seems like it would be important to understand not just for promoting economic development in the Third World, but to also more urgently now try to fix things in an eventual post-Trump era.
*: I will stress that I'm not saying that there may not have been similar things that happened at various points in time in China, India, and the Middle East, but (i) I'm much less familiar overall with those examples and (ii) to the extent such changes happened in those places, it appears that there was substantial backsliding later in at least China under the Qing and the Middle East under the Ottomans. (The situation in India is more ambiguous, I think, because the major Indian states had already been subjugated or heavily influenced by European colonial powers before 1800.)
I don't know much about that time period other than what I've read in Francis Fukuyama's Origins of Political Order but my initial guess would be that the change you identify was due to the rise in power of the Catholic Church which not only created a kind of pan-European identity that faded away somewhat after the rise of Protestantism and nationalism but also acted as a supranational check. In a way it was an proto-EU + proto-UN rolled into one.
But I agree it would be interesting to see a fuller explanation.
Walter Scheidel's The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century kind of touches on the topic but also kind of not exactly the same as what you're talking about. (Elite wealth extraction attitudes isn't exactly the same as inequality per se.)
The Qing actually had a very weird (for the time period) commitment to curtailing revenues and staying out of the management of the economy to the point where it crippled public works and their military.
They probably developed this commitment because of their semi-nomadic origins and as a reaction against the totalizing, militarizing instincts of the Ming, which in turn were a reaction to the perceived failure of the mercantile/market orientation of the Song prior to the Jurchen and Mongol invasions.
Obviously the Ming instincts were no better from the standpoint of private economic development, but the Qing effectively starved themselves to the point where internal improvements were impossible, the frontiers indefensible (except the NW, where they maintained good relations with many of China's former threats via marriage and bribery), and the state withered and died when its tax farmers took too much.
But for the vast majority of this global elite, the rule of law is their most powerful ally. I think you'd be a moron and a half to prefer being a billionaire in a second/third world country to a billionaire in a first world country, and to illustrate this, I hold up as an example all the billionaires that Xi or Putin has murdered or thrown in prison for made-up treason charges, etc, for arbitrary reasons, or all the Russian billionaires whose assets were all frozen everywhere in the fallout of the Ukraine war.
Basically unless you actually control a standing army or government, it sucks to be at the whim of an authoritarian system vs. one governed by the rule of law.
And will take everything you have at the drop of hat and leave you to die in prison of a communicable disease if you aren’t pushed out of a window first
But it also means YOU know and do favors for the President!
Not a lot of wealthy Americans can claim the same. As a rich person your status is higher in a poorer country. For these guys power and status are everything.
Think about it this way:
In America an oligarch can go to Epstein's Island, fuck some 12 year olds and get found out and possibly imprisoned a decade later.
In Russia an oligarch can fuck 12 year olds or whatever he wants to do with impunity. No one gets caught. No one goes to jail. Sure, some guys get raditation poisoning or thrown out a window, but just don't bite the hand.
I think "just don't bite the hand" is a lot harder than you think. Putin for example is famously paranoid. How many of the people he's had killed were actually opposing him, versus maybe or someday they will? And don't forget, all the other power players in the country are also competing with you for power, and probably willing to privately accuse you of disloyalty to Putin? And of course, there's the scenario where however loyal you are, Putin has a nephew or cousin who wants your position...
But for whatever reason, people STILL want to work for Putin!
You don't have to convince me working for a dictator or pursuing power at all costs is a bad idea. But for some others they still think it is a good idea, despite all evidence to the contrary.
Yeah, I think the people who do it live there, and can't replicate their wealth elsewhere. Or if they can, like the rich Russians who move to London, they get out. I totally agree that rich people in the west who act like they would be better under Putin (or Xi) are idiots.
In household terms, housing is closer to a law or medical license than to a hammer or car, because equity often dominates portfolios.
If medical licenses become easier to obtain, health care becomes cheaper and there are large welfare gains. However, doctors’ salaries would clearly fall. This is why doctors form organizations like the AMA that restrict the supply of medical licenses and residencies. The larger the asset, the more households will weigh distributional losses against social gains.
Houses are less valuable than medical licenses, but there are far more homeowners than doctors. That’s why this is a hard problem.
Could YIMBYism be more popular if framed as a quality issue and not strictly an affordability one? Who wants to live in the shoddy decrepit 100-year-old housing that makes up a majority of the sub-$1m housing stock in a lot of our major cities when we could be building fancy new construction with all the modern comforts and amenities?
California is the worst for this. Rental units have horrible appliances from 1980 and zero insulation, just so that they can save on costs and discount the rent from $4,200 to $4,000 / mo. Every $300,000 structure sitting on $900,000 of land is a policy failure.
This is my intuition, too. I live in Rhode Island which is full of old, dilapidated, over-priced houses. The lower end of the housing market is paying too much to rent a floor in a duplex or triplex which hasn't been renovated since the 70s - there are hardly any apartment buildings, let alone modern ones. For landlords and tenants both, building up to date apartment buildings would be a huge benefit. And these two groups make up a lot of the electorate.
Unfortunately you can’t build new housing with mature trees. And many of the other things that are good about 100-year-old neighborhoods (narrow streets, sidewalks, less prominent garages, rear alleyways, smaller setbacks, etc) are not legal, economical, or fashionable anymore.
Saw Bowman promotes a “street votes” mechanism that allows homeowners to democratically capture the value of their land by up zoning[1]. I am not aware of Matt’s commenting on it.
Matt’s column today is a nifty thought exercise. I wish it grappled directly with the specifics of assembling a coalition for change, as street votes does.
"I wish it grappled directly with the specifics of assembling a coalition for change, as street votes does."
Strongly agree; I'd like to see a lot more of this in general in SB and similar places. Last week I went to a conference at GMU on the 100th anniversary of the Euclid decision and status of zoning. It was a fascinating discussion untethered by the left-right frame straightjacket*. Ilya Somin of the law school, in particular, had some interesting things to say about state-level strategies.
It made me more optimistic than I've felt in a while, about land use and life in general.
* (by which I mean left and right as they play out in the "discourse;" while GMU is obviously aligned with conservative thought, the issues discussed, including racist outcomes of zoning as well as supply constraints, were very much in line with the kinds of conversations we have here)
I’m not sure what cities you are talking about. I most every place I go the older neighborhoods are much more expensive and the cheaper housing is new construction in the burbs, or housing that’s located in undesirable areas. Usually the old neighborhoods are in very desirable areas.
I think that out of the housing considered by the upper middle class that is true. But most cities have run down old neighborhoods where poor minorities live.
New housing in nice urban neighborhoods is the most expensive of all. People are willing to pay more and live in worse quality housing to be in a nicer urban neighborhood but that doesn’t mean lives wouldn’t be better if we could “have it all” with good new housing in nice urban neighborhoods.
There’s no spare land in urban areas so the only way to ”have it all” is to densify. So these urban areas would need to replace single family homes not with newer and fancier single family homes, but with condos or apartments. Problem is a lot of people prefer single family homes even if they aren’t fancy new construction.
If anyone has ever been to Rishon Lezion in Israel, they would know that it’s a city whose housing stock is dominated by 5 to 7 story apartment buildings. But just a couple generations ago they were villas (single family homes).
Developers essentially gave homeowners a deal. Let them demolish your home and build an apartment building, and you’ll get a penthouse unit bigger than your home, and often a second apartment as well that you can own as an investment property, all with modern amenities. You can see a few hold outs of villas that still exist, but the vast majority of plots have become mid rise apartments buildings. And many of those old middle class homeowners have become millionaires.
In the US in most single family neighborhoods, we completely ban this. Not only because of height restrictions, but also because single-stairwell apartment buildings are banned, and a million other regulations. The economics may not work out in all places, but sometimes my feeling is “just let people become rich, so that we can develop new housing”.
I mean the old man in UP is the hero of the story. And of course the story does its best to portray the developers with every evil archetype in the book.
But in reality the old man is some guy who refuses to sell his old, beaten down house for a king's ransom. And while it is cool that he has the right to hate money... it's weird that we are holding up this person who hates money so much as the platonic ideal.
(And before someone accuses me of heartlessness, yes, I get the nostalgia of this place he was so happy with his wife in, and people should be able to say "this thing brings me great joy and is more valuable to me than the money". But, uh, have you met people that lost their spouses? They usually HATE living in the house because the memories are haunting, not comforting. And the old man does look pretty miserable at the beginning of the film, I'm just saying.)
I have no qualms with people who don’t want to hand over their property to developers. But I’m against broad bans (or effective bans) on people who want to do so
Trump is a real estate developer who lives to use others' money so is laserlike focused on low interest rates. He doesn't actually care about individual homeowner's equity other than as additional rationale for his desperate desire for cheap $$$. Homeowners themselves don't oppose nearby growth because of impact on equity. Most of us like where we live and don't want change. And growth results in unpredictable change.
What is driving me nuts in my super progressive California town with a high concentration of elderly folks who bought their houses in the 80s and 90s is that they are paying minimal property taxes thanks to prop 13 and vehemently oppose any new taxes or construction, and have the time to make a fuss about it at city hall. There is a ballot measure that would add less than $100 to their property taxes and they are freaking out about it - bruh, you are paying $1,000 a year in property taxes and your neighbor is paying $10,000. You can afford $100 bucks to make infrastructure improvements.
The issue here is that the average homeowner has learned the wrong financial lesson from the value going up. It’s not that housing is a great investment because your 500,000 house is worth 800,000 10 years later. That return is rarely better than the S&P. The issue is that housing allows people to invest with leverage. With 80 percent financing, you have a 300,000 return on the initial 100,000 investment. For very good reasons, no bank is underwriting a similar investment in stocks. But the wealth accumulation effect from housing is real and not otherwise available to a typical homeowner.
Good point. But try living inside that S&P investment while you see the investment go up.
The other point is that most people, seeing their investment skyrocketing, would probably sell after their investment doubled and thus reap less value (or in fact panic sell during some temporary bust). It's a lot harder to sell a house to reap the increased value given that you have to pack up and move, leave your neighborhood, schools and all that so you'll be inclined to stay during the run up. Which in turn means that investing in your house to gain financial benefits is also a lousy investment for exactly the same reason because it's so illiquid, so maybe I should just shut up now.
Right, but because of leverage (I.e a mortgage), the theoretical owner of my house only had 100,000 to invest. When that person sells, their 100k is now 400, a higher ROR than the tripling in the S&P you point out, notwithstanding the incredible growth of the S&P. Welcome to the world of leveraged returns!
"[M]y guess is that these concerns about protecting homeowners’ equity are about 100 times more influential in the real world than stuff that gets more play in the media."
This whole article is based on this premise, but economists have tried to test for it and it turns out the empirical evidence for the homevoter hypothesis is super equivocal. Which makes sense, right? NIMBYism happens even in super blue communities like the Bay Area where old-fashioned hippie liberals are happy to vote for higher taxes on themselves etc. People are happy to vote against their economic self-interest all the time.
I'm not saying the equity story doesn't play some real part in NIMBYism, but I really do think it's a bit of a red herring to focus on it. And I personally suspect that part of why it gets invoked by NIMBYs is because that's a much more legitimate-sounding, less embarrassing excuse than things like aesthetics and a general discomfort with change. But if you look at behavior rather than discourse, it's super unclear whether NIMBYs really take actions that increase their home values.
For some blue voters, they are very against change and vaguely pro-nature. I’ve seen posters fighting an apartment building that complain about cutting down several trees. It’s much more about traffic, noise, parking. Change is bad and more people are bad.
I've seen people worry about "those people" moving into town. It's funny to me because I've only really experienced rich yuppies living in apartments and poor people living in exurban single family homes. The logic of apartments = poor people seems like a relic of a bygone era.
I was with you until that last word. Bad? I don't know. Selfish? Sure. But isn't everyone selfish? Aren't YIMBYs who want to pay lower rents selfish? Matt's argument is that increased housing increases overall growth, benefiting (usually) everyone. But that's a weak argument to use with people who have some justifiable fear that they would pay some cost for that general growth, like more traffic, undesirable changes in their neighborhood. That doesn't mean they get to win, but it does mean that the kind of argument Matt offers isn't going to win them over.
Well said. Most NIMBYs I hear do mention property values (without considering that replacing your SFH with an apartment building would greatly increase that value once you sell). But it's vastly more about traffic, neighborhood character and the like. If you like where you live, you really don't want it to change.
I think it's primarily fear of change, property values are one of about a dozen rational sounding reasons people pull out when they are pressed, but it all seems to stem from some overall unease about the fact that things used to be one way and someone is suggesting they should now be another way
I get pissed every time a townhouse in my community sells for an insane price and I know I will get screwed on property taxes the next year.
I just bought 3 years ago and assuming I don't list my job I'm not leaving anytime soon. Why would I want prices to go up?
House value going up is literally only a good thing the one year in your life when you are selling, and even then everything else went up to so you don't have profit unless you move to a way cheaper place.
It's very weird for people to be obsessed with home value (which just costs you money in taxes for decades) so that you get a nicer payday when you die/become senile and move to a nursing home.
Ha. Philly is definitely just taking more revenue but it also increases the homestead exemption when values get too out of hand, and services are improving, and it's taking real estate tax revenue and using it to phase out other, more distorting taxes entirely.
Scarcity as a route to wealth reminds me of Bastiat’s classic essay about the “negative railroad: https://www.libertarianism.org/publications/essays/negative-railroad
There’s a proposal to build a railroad in France, but the porters in one area argue for a gap in the line, because that will make them and (allegedly) everyone else in the area wealthier. So why not extend that logic to the entire route? Then everyone would win! Hence the “negative railroad,” which is made up entirely of gaps.
This essay should be more well-known. It would be great if Matt and writers like him could use "negative railroad" as a shorthand for various bad political ideas.
Matt actually wrote about a real-life "negative railroad" here several years ago, although he didn't use the term (I pointed it out in the comments):
https://www.slowboring.com/p/good-trains
https://www.slowboring.com/p/good-trains/comment/2250495
I have never heard of this. Thanks for posting!
It reminds me of when I lived (as a renter in an apartment building) for two years in Upstate New York. I lived close enough to walk to tons of places, but it was rather treacherous because the roads were wide and heavily traveled, and the sidewalk was in patches - there would be a sidewalk for a short stretch, then it would disappear, then start again later. When I aksed why the town had such a stupid setup, I was told that at the time many of the houses were built, new homeowners could choose whether they wanted a sidewalk in front of their house for a small extra fee.
Excellent article! Port automation and the longshoremen unions immediately come to mind.
Also the famous thesis of Economics in One Lesson: The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
See Breezewood PA
a circle of hell
I've literally referenced that as a comparison when folks in PA have been angry at automation or somesuch.
Gives new meaning to the phrase “God of the gaps”. 🤣
When the original BART was built in the Bay Area, it was designed to circle the Bay. San Jose objected because “people would leave our city and go work elsewhere”. Now decades later, we are spending billions trying connect that gap.
The sweet spot for housing is home values rising in nominal terms but falling in real terms. That way, no one goes underwater on their mortgage, but homes remain relatively affordable. This is, however, a very narrow target, so I am unsure what policies would actually bring it about.
I suspect the answer lies on the financing side. We could perhaps offer insanely good terms to builders who are working on densification projects as long as their local markets remained in this narrow range.
There's a case to be made for some kind of preferential financing vehicle for homebuilders operating in in-fill markets; the positive externalities are high and current financing generally overstates their risks and doesn't allow them to scale well.
I don't think it should be micromanaged to the extent you describe; the nature of construction is such that it's very difficult to build enough over any significant time span to drive prices down in nominal terms. Assuming major land use liberalization, about the best we could hope is that over a decade or so we'll bring price increases down to below inflation, hold that for a time while we experience catch-up growth in supply, and that after we've made up the gap, prices will thereafter march in line with regional wage growth.
Agreed, developers will stop building if there isn't enough demand.
>> nature of construction is such that it's very difficult to build enough over any significant time span to drive prices down in nominal terms
But right there, you’re misquoting my proposal.
The window is between negative real price growth and positive nominal price growth. DUH negative nominal price growth is a political nonstarter, but that’s why we need the window, because positive real price growth cannot continue forever.
Yes, my point is that we should have such government-backed financing for developers, but don't need to target it or modulate the flow in the manner you describe, because the natural floor of development is pretty close to "prices are flat in nominal terms" already.
Just create a National Homebuilder's Financing Corporation and call it a day.
I’m very suspicious that we are very good at manipulating the market outside of the pricing mechanism besides crude controls like zoning.
That’s kinda my point tho, but perhaps I didn’t elaborate enough:
First, you get rid of the zoning so that almost every project is a densification project.
Then, you open a spigot so that most of those projects can get financed at terms somewhere inside of the “real-nominal” window.
Obviously the macroeconomy will shift in uncontrolled ways beyond these limits, but that’s OK: the window is just the target for these specific projects. The goal is not to fix the ENTIRE market, it’s to anchor a segment of it so that the rest of the market follows it closely.
Also, the financing then becomes a spigot. If not enough housing is being built and housing inflation exceeds the upper bound of the window — the real term price — then we open the spigot. If too much is being built and housing inflation dips below steady nominal increase, then we close the spigot.
Better yet, just put the Fed in charge of it.
Might work. Very contingent on relaxing zoning.
High inflation?
That has its own problems, of course, but it widens the gap between real and nominal.
It would have to be insanely high inflation.
I don't think it's that narrow a target to hit, and the key is supply. The recent crazy gains in home prices are both not good and not necessary for homeowner happiness. It would take a huge up surge in supply to actually make prices go down, a surge that's probably not even possible. Most homeowners would be happy so long as their value keeps up with inflation. What people never want to see themselves "losing" money when they sell their house.
My last home, in a nice upper middle class midwestern suburb, barely kept up with inflation from 2002 when I purchased up through about 2018 or so, and my neighbors weren't expressing any outrage or discomfort because of it.
I agree, but I don't think policy makers need to target this. They just need to let people build, and the market over time will naturally settle somewhere around there. Developers won't want to build if there isn't enough demand.
If there is demand, and developers are allowed to build they will, and that will constrain price appreciation.
Some markets don’t settle, but instead enter boom-bust regimes. That’s what happened with railroad service and led to the interstate commerce commission regulating rates, and same with taxis leading to the medallion system.
I hear what you are saying here, but this sounds a lot like government planning and high regulation.
I want to push back on framing housing as a financial asset though. The real benefit to owning your home is having a place to live that no longer carries a monthly payment. Same for owning a car, owning your clothes, owning your appliances... The world has transitioned to monthly payments for EVERYTHING, but a smarter approach is to focus on owning the things you need and then just not spending much money every month.
You still need to pay property taxes and insurance along with dealing with maintenance though (which is a huge pain compared to renting with a landlord with reputable maintenance staff on call), plus most people take 30 years to pay off the mortgage and sell before they even pay it off. Housing with no ongoing costs is impossible because it’s a physical good that inherently depreciates and incurs those costs.
In many places those tax & insurance costs are quite low though. Yes there are some maintenance costs as well, but the point remains that with home ownership you have substantially lowered your monthly costs.
That's not always because of renting vs owning though. Usually people who decide to buy a house go farther away from the urban core to do so, and the reason they're paying less is because they're living on less valuable land. There's nothing wrong with making that tradeoff, as long as you're doing it consciously. But if you look at fairly equivalent homes - an apartment vs a condo of the same size on the same block - the numbers often end up much closer.
Literally for the same house, your monthly out of pocket is lower AFTER you own the whole thing free and clear. That's what i am trying to say.
"In many places those tax & insurance costs are quite low though."
Where are these places?
I oregon i pay about $2,500 a year in prop taxes
What percentage of that is your house? What are you insurance payments like?
My point is that property taxes and insurance are generally low where housing values are lower. Perhaps there are exceptions, and if so I'd like to know where they are.
There are some cities that rely more on other taxes, so their property taxes are lower for a given market value. Philly is one of them, at least for the nonce.
It's starting to see assessments creep up, and is so far just taking the additional revenue, but at some point it will probably move to set revenues and allow millage to fluctuate as values change like many communities do.
I would assume the vast majority is the house, but I'm not really sure. I think insurance is another couple of hundred.
So out of a $2,500 or so mortgage payment, maybe $500 is insurance and taxes.
So you would be eliminating $2k a month in expenses living in a paid off home.
It doesn’t inherently depreciate.
And yes, owning anything doesn’t make it cost-free.
Having a landlord with a reputable maintenance is far from guaranteed. Lots of people don’t want to be dependent on others for that or have to deal with a lease that might not be renewed, forcing a move. Owning also allows you to modify a home to suit your needs.
Not that renting is bad, it’s just different and serves different needs.
There's a HUGE difference between a $2,500 mortgage payment
And only having to do a couple hundred dollars a month for property taxes and maybe some maintenance.
Trying to retire was a mortgage payment or having to pay rent is foolhardy
IMO, not having to move every few years is a bigger psychological benefit than the financial aspect. There are a lot of costs associated with homeownership even after paying off the mortgage.
Yea, I want to be able to fiddle, to tweak things to make life easier, to remodel as I want, to feel no concern when my nutjob kids knock a hole in a wall because drywall patches are easy and I have a spreadsheet of every color of paint, SKU of tile, brand of flooring, etc... that I've ever used.
...from a homeowner newbie, thanks for the spreadsheet idea.
Lol, I am... let us say... unnecessarily rigorous, but I have a spreadsheet with tabs for basically everything.
Breaker box and circuit layout
Personal property tracker for insurance
Appliance list with manual links
Paint/flooring/air filters SKU list by room
Modeling for any changes I intend to make to HVAC or insulation
Project planning and purchasing lists
Something to aspire to!
PS. I realized that I since I moved to the US, I have stayed in 8 different places across 4 states in 13 years before we bought our first home.
IMO a real value is security and freedom. Tenants get kicked out for all sorts of random reasons, and they can’t renovate or even repair the home as they please.
The financials are attractive in large part due to subsidies Matt mentioned, but even if those went away I think most people would still aspire to be homeowners.
If the real benefit is no longer carrying a monthly payment that remains true even if your home value doesn’t skyrocket, so why are people so obsessed with property values and/or appreciation of their home value? Even progressive politicians use the frame of “wealth building” around homeownership all the time - it’s a huge part of the narrative around housing for better or worse.
If you're in a place like Boston you know some people who bought a house for like 150k thirty years ago with 30k down and sold it for 1.5 million recently to downsize or move to South Carolina or whatever.
But, I think people over index on those stories as well as simple loss aversion once Zillow tells you your house is worth $x dollars people feel bad if it goes down.
The key there is you have to move away from your home in order to really realize the gains. I'm in california, and in places where home prices shot up, the 100% gain in your investment will buy you basically the same house with a much higher tax bill.
One of the big actually wealth-building features of buying a home is that the mortgage contract effectively forces you to save more than you would choose to otherwise. It would be better wealth building to put the same amount into a diversified equity fund, but few people do that.
Perhaps most people go into homeownership thinking of a house primarily as a place to live and over time they come to think of it as a financial asset they have to jealously protect. I know I have, and I don’t want to. But given how much my future economic security is now tied to this this house, it would be foolish of me not to.
i'm not blaming people for thinking like that- they are incentivized to do so by public policy!
are they obsessed? I don't know those people. I know a lot of people who own their homes and don't really think much about what they might be worth. I do think people are surprised when a nearby house sells for an unexpected price! That's interesting, true. But once you have a home, I find you tend to just think of it as a place to live.
I suppose your mileage may vary. This is not my experience
I'm sincerely curious. These are homeowners you know?
People are obsessed because equity is wealth. People want more wealth.
They are confusing inflation with wealth
yes i know. Not disagreeing with that (or saying it's irrational in any way). I'm pushing back against the idea that people mostly value not having monthly payments rather than valuing their home value going up.
I think people like the idea that monthly mortgage payments will eventually end, and some people prioritize that to pay off a mortgage early. But I think for most people the advantage is price stability. Unlike rents, a typical mortgage will stay the same over time.
On paper maybe, though I keep seeming to need to replace the roof one year, repipe the house another, and I still haven't got my insulated garage. There's advantages to renting; the real benefit is having a greater amount of control over your environment. Just because the monthly cost isn't a rent bill, it's still there.
Now one thing you can do is leverage your equity to pay for improvements and major maintenance if you really need to, but that's not the same as having a significantly appreciating asset.
yeah, every year we have at least $5,000 we need to put int our single family home, and some years it is closer to $40,000. I currently have about $20,000 in repairs I need to do sooner than later and I'm not sure where the money will come from. and then something will break and all of a sudden you've spent $2,500 on plumbing or a new garage door or a new appliance.
??? but of course it DOES carry monthly payments, the mortgage. AND you are liable to unpredictble costs. Our n-year old boiler sprng a leak and had to be replaced RIGHT NOW. Depending on your liquidity and skill at managing a tiny housing corporation and the responsivelness of the hypthetical landlord altrnative, you may be better off owning a depreciating asset/appreciating asset combination. But maybe not.
“I want to push back on framing housing as a financial asset though”
I recently read an essay that agreed with your idea and said, in part, “American policy toward saving, investment, and homeownership is kind of misguided.”
Why is it a benefit specifically to put your money into ownership of durable goods and housing to avoid monthly payments, rather than doing something else sensible with that same money?
a) To prepare for income drops, including retirement but also potentially spells of unemployment
b) Lower total expenses over time. This is perhaps more obvious with cars, where it is clearly more costly to lease indefinitely versus owning a vehicle and driving until the end of its usable life. But it applies to many other things as well.
c) The things you own, you can potentially pass down to your children. I actually grew up around a lot of people who were pretty broke, but would own pretty large rural farms. Very common to just have an adult child drop a trailer onto a corner of the property and TADA they have a place to live.
Also I am curious what this "something else sensible" you envision might be.
Taking your money and putting it in other financial products does just as good a job preparing you for income drops. It's better in many ways, actually, since it's both much easier to access and less correlated with other important things in your life than home equity. Additionally financial assets can also be passed on to your children.
Also, it's true that paying for the service of having someone else ultimately responsible for maintenance costs some money but home ownership takes lots of work and expense as well.
The S&P 500 is pretty correlated with unemployment levels! I agree that many, many Americans are over-allocated to owner-occupied real estate and it’s (as we see) a real policy problem, but “people own stocks so we can’t let stocks go down” can be a problem too, and would likely be a bigger problem if half of current homeowners rented and put money into the S&P instead.
Yeah, having lived through some bad stock market crashes, it is the WORST time to need to access that money. You become a forced seller in a down market - yuck.
The S&P 500 has become anticorrelated to unemployment since 2023.
Because the mortgage terms lock you in to making this investment every month, whereas otherwise you’d have the freedom to not do it some months, and most people would take that freedom more than they should.
One is stability. You’re paying the same in mortgage every month. When renting, the cost can go up or down, depending on the market. In my area, which has grown a lot since we moved here and bought a house, renting an equivalent home today would be $1k more per month than our current mortgage.
Obviously, things can go in the opposite direction if rents fall.
I do not think this is correct. The major risk in keeping your home is that you lose your job and have to move somewhere else to get a new one, because you need a job. Owning a home, even if you own it outright, does not fix this unless you are already retirement age (in which case the worry you expressed doesn't matter either). And if you lose your job, there's a significant chance that it's because of some bad thing happening to your town specifically which reduces the value of your home. Major drops in the stock market are in fact also correlated with drops in home prices (see 2008).
Isn’t a major byproduct of the design of home owning and mortgage in the US that the average person will never have better financial leverage than when they buy their house and put a mortgage on it. And some people still get to deduct some mortgage interest.
Well, I would counter that the 30-year mortgage is actually a pretty crappy financial product. For the first ten years you are mostly giving the bank interest payments and not building equity. I think THIS might be why people feel they "need" prices to go up on their homes, because the only equity they build is from price appreciation. But if we got rid of these crappy long mortgages and financed over 15 years by default, prices would be lower and everything would get better...
Or one could say that in the first ten years you're paying subsidized rent, since the interest is potentially deductible and later you're building equity which you'll benefit from if housing prices increase.
So, end of the day, it's still a much better financial tool than renting if you can pull it off.
"But if we got rid of these crappy long mortgages and financed over 15 years by default, prices would be lower and everything would get better..."
People can get shorter mortgages! They don't because they prefer the "crappy 30 year."
Not exactly. They like that they can buy a higher-priced house by stretching the payments over a longer term. But when everyone does that same trick against a limited housing supply, all we have done is bid up the price of houses.
Some people would probably get even longer mortgages to buy nicer houses, if they could! But the 30-year mortgage is not a natural product - it exists only with hefty government intervention through Fannie/Freddie.
"But the 30-year mortgage is not a natural product - it exists only with hefty government intervention through Fannie/Freddie."
The worldwide average is between 20-30 years. And when it is shorter than that, it typically requires generational support to achieve the required down payment.
All of those mortgages ex-US are adjustable rate though. What Miles meant to say is that the 30 year *fixed rate* mortgage only exists with hefty government intervention
Fixed rate like US 30s? Can you source that? It doesn't sound accurate to me.
My bank keeps advertising 40 year mortgages to me.
The ONE BILLION YEAR MORTGAGE.
A higher rate for a longer term?!? What could possibly go wrong? :)
Right but a bank gives you $X00,000 value of house to live in, in advance! Its pretty hard to buy a livable house for $50K but for $500K you can get a nice place that you otherwise wouldn't be able to afford to rent.
“For the first ten years you are mostly giving the bank interest payments “
That used to be tax deductible for everyone. What a deal.
The standard deduction was much lower in those days. So you deducted your interest, but most people weren't better off and it biased the tax code toward larger mortgages which is unhelpful.
It’s crazy how quickly we adjusted to feeling entitled to the huge standard deduction we now get, it’s not very old
This is insane and ahistorical.
Before the 30 year mortgage, home loans were done as 10-year interest-only payments with a balloon payment to pay it all off at the end.
People do not generally make enough money to be able to do that on a 10 year basis — the value of a house even back then just far outstripped people’s income. And even if you DO responsibly save the entire payment over that 10 year period, you’re just ONE major inconvenience or repair away from missing the big one.
This is the market that banks came up with on their own. It did not work well. That’s why the 30 year mortgage was invented.
You’re doing WAY too much “assuming a can opener” and not living in the realistic world where no one has $300k just sitting around to instantly pay for a house in cash.
You've gone from A to Z and skipped lots of choices along the way. The 15-year self-amortizing mortgage is a fine product in my opinion.
Of course I do not expect many people to have the lump sum for a house available. But there's a balance, because home prices appear to rise based on the monthly payments people are willing to pay, and sadly longer term loans have made people willing to give up much more of their lives to interest payments for the banks.
>> because home prices appear to rise based on the monthly payments people are willing to pay
You’re going to have to elaborate on this theory of yours.
>> The 15-year self-amortizing mortgage is a fine product in my opinion.
While it’s true that longer loan terms have inflated total interest paid, the plain fact is that YOU have no way to get us from A to Z: There’s no reasonable path from 30 year mortgages on already-insanely-inflated housing prices to 15 year mortgages WITHOUT resorting to a whole bunch of deleveraging that you didn’t even gesture or hint at in your comment.
To the first part, you see house prices move as interest rates move - low rates lead to higher prices, and this is exactly the behavior you expect if the monthly payment is the constraint for most buyers. I believe this is well-understood in the real estate market.
On the second: It's true I don't have a path down from the 30-year mortgage, but that does not mean I have to like the product. I encourage people to accelerate their payments and chip away at that principal as much as possible.
For the first part, OK, I guess the way you phrased it was confusing at first.
But also, I’d point out that THAT phenomenon is pretty historically invariant regardless of housing supply or preexisting price level. Which means that for any given price level, you can only press the “have people pay off their houses faster and pay less total” button ONCE. After that, you still have to close the 10-20M unit gap.
Not to mention, shorter terms inherently means higher payments. Even if the low rates are raising sale prices by 10-15% and you knock that 10-15% off by biasing against those rates, you still have a general market where the supply shortage means real AND nominal prices are inflating, vs using supply to get us to the point where real price inflation is negative but nominal price inflation is positive, which is basically the only politically feasible regime for deleveraging from decades of NIMBY insanity.
RE the second one, that’s just generally good advice, and yeah plenty of people don’t follow it, but also again, any legal effort to fix it is a button you can only press once.
The root problem is still that houses are too expensive — P/I ratios are now basically 4-7x vs historically <3x.
"The root problem is still that houses are too expensive" - I think we can go deeper!
The houses are too expensive because
1) We need more supply in high demand areas. But fundamentally this is a SUPPLY problem, and we can go to the known YIMBY solutions.
2) With supply constrained, longer terms and lower rates simply increase the debt buyers can take on, creating a windfall for existing owners. Since buyers are just competing with each other, helping them increase their spending just doesn't help. This is why I am opposed to so many simple-minded schemes to "help buyers". You cannot help everyone without creating more supply.
No. Shorter terms absolutely do not mean higher rates. Quite the opposite.
Just check mortgage rates if you don't believe me. Or compare the yield on any short-term debt to that on long-term debt of equal quality. Try Treasuries.
even if you have a mortgage you technically own your home.
"I want to push back on framing housing as a financial asset though. The real benefit to owning your home is <literally a financial reason>"
I'd say to people in their 60s, do you want your kids to have long commutes or short ones? Do you want your grandkids to live nearby or far away?
Many of them do not care. They’ve been told their whole life to care about themselves and that’s what they’re going to do.
Yes. We all know tons of people who hate their own kids and grandkids.
I think the above is unfair, but I think it's also well within most people's capacity to infinitely rationalize away anything that they support which hurts their kids, so the fact that they love them means much less than we might hope.
“I love my kids, I’m just preserving the neighborhood they grew up in against those evil developers and all the TRANSPLANTS they’re building apartments for. Nothing I ever do FOR MY KIDS could be wrong; I raised them myself and I KNOW how to parent my own damn kids.”
Everyone wants to live as close as possible to their grandkids.
I... disagree. This is demonstrably not the case, otherwise more folks in my parents' cohort would, you know, move.
I suspect that a greater number of older people would express this as, "I want my grandkids to live close to me."
I know a fair number of people in my own age cohort whose parents are angry at them for raising their grandchildren where life, work, and other needs have taken them, instead of "moving back home."
Hard agree. My in-laws always lament(ed) how little they saw their grandkids, but weren't willing to inconvenience themselves much at all to make it happen.
For us to go to them was four airplane tickets and a big chunk of scarce vacation. They were retired, with no schedule, and could easily afford First Class seats.
Florida exists. So does Arizona.
Lol one set of my grandparents moved from Iowa to Arizona full time pretty shortly after they became grandparents. Now my aunt snowbirds down there for 3 months of the year. My dad's planning on moving to Florida when he gets too old for the cold.
When I was growing up, whenever any local ballot initiative that would benefit kids would come up (about schools, playgrounds, etc.), it was always retirees who would join together to kill it. I remember seeing a bunch of old people even protesting outside the local high school to fight against a modest tax increase to help improve the school.
After reading the yelp reviews for restaurants in my grandma's retirement community, nothing will earn you a 1 star review faster than modestly raising the price of anything.
"I will not pay a haypenny more for such a substandard penny farthing!
1 Star
- Sent from my iPhone."
The price for a sandwich and coffee went from $12 to $14 since the LAST TIME I came here two years ago!!! The coffee came with cream and sugar on the side EVEN THOUGH I didn't ask for it!! I sent it back and the girl looked confused!! WHATS CONFUSING ABOUT A BLACK COFFEE!?!? We waited 35 minutes for our food!! Do NOT go to the Denny's off I-19!! BAD service and HIGH prices!! NO WAY!! One star!
- Sent from Linda's Moto 25G
Many of them think that their kids are insane for forgoing children and refusing to “drive til they qualify”. They see it as turning away from the natural order of things, a form of secular apostasy to the suburban car-dependent lifestyle.
To be fair for most of us who live in flyover states, coastal NIMBYism probably makes it more likely that our kids will stay around, lol…
TBH it’s mostly ensured that I can’t build up the kind of wealth and security that would allow me to take more risks to move back to the Midwest.
I do hope that the understandable but misguided progressive impulse to favor the exact opposite of everything Trump proposes will lead them to view housing scarcity as indelibly besmirched by Trump’s fascism and embrace housing abundance in all its forms.
My thoughts as well!
But my worry is the more populist side of the right has the opposite instinct and partisan conflict is usually bad for an issue.
It's very, very jarring to hear people who in other contexts are dogmatic shills for (some version of) capitalism suddenly turn into Stalinists when it comes to housing construction and regulation. The number one thing that convinces me that abundos have this issue right is that they actually have a consistent and factually-supported story about everything and even if I disagree with that story at the margins in some areas, I can therefore have some confidence that they are engaging in good-faith analysis (particularly ones who are themselves willing to concede issues with their approach when warranted).
Supply constriction of something is only a good idea when society as a whole benefits from that thing being constricted (say, crime).
> suddenly turn into Stalinists when it comes to housing construction and regulation
This helps them get along with the actual leftists who want more "affordable housing" but if and only if no one, anywhere, could possibly make any profit off of building it (and therefore, it never happens).
This all makes sense, of course. But if you're Trump, the calculation is more simple - there will be unhappy voters in 26 or 28 if home sales are sluggish and people who want to sell can't at the price they expected, and maybe as President he can do something to juice home sales in that short window.
But he can't realistically expect to implement federal policies that noticeably make housing more affordable on that time scale.
So it's a no-brainer for him to pick the easier and more-likely-to-succeed-in-the-short-term strategy: ask, What Would Peron Do? (Or Chavez, etc), and do that. That's Trump's economic policy in a nutshell.
I totally understand and agree with the gist of this piece, but my thoughts are that some people, like our President, simply do not care about creating a wealthy society. Sure, Trump and his ilk love wealth, but not necessarily a wealthy society, where wealth is common and widespread.
I believe they would much prefer to live in an overall poorer society than the US, like Russia, where the wealth is concentrated at the top class of elites, while the rest of the country scrounges for firewood.
To be a billionaire in a first world country is to be a very rich man. But to be a billionaire in a second (or third) world country is to be akin to a king or an emperor.
This logic helps lend some kind of coherence to Trump's worldview.
Yeah, this is touching on something I've mentioned before that I would like to see Matt address in detail: for the vast majority of human history, elites quite literally perceived little to no benefit to "growing the pie" of the economy -- their focus was almost entirely on how much they, personally, could drain from the general population without regard to what effects that had on the overall economy. In the late Middle Ages to Renaissance, however, you have a significant change in Europe (and in particular western Europe),* where elites by and large stepped back from actively murdering their own national economies and contented themselves with getting a smaller slice of a larger pie. This is, IMHO, one of the most important transitions in human history, but I feel like it's largely ignored or taken for granted, and it seems like it would be important to understand not just for promoting economic development in the Third World, but to also more urgently now try to fix things in an eventual post-Trump era.
*: I will stress that I'm not saying that there may not have been similar things that happened at various points in time in China, India, and the Middle East, but (i) I'm much less familiar overall with those examples and (ii) to the extent such changes happened in those places, it appears that there was substantial backsliding later in at least China under the Qing and the Middle East under the Ottomans. (The situation in India is more ambiguous, I think, because the major Indian states had already been subjugated or heavily influenced by European colonial powers before 1800.)
I don't know much about that time period other than what I've read in Francis Fukuyama's Origins of Political Order but my initial guess would be that the change you identify was due to the rise in power of the Catholic Church which not only created a kind of pan-European identity that faded away somewhat after the rise of Protestantism and nationalism but also acted as a supranational check. In a way it was an proto-EU + proto-UN rolled into one.
But I agree it would be interesting to see a fuller explanation.
Walter Scheidel's The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century kind of touches on the topic but also kind of not exactly the same as what you're talking about. (Elite wealth extraction attitudes isn't exactly the same as inequality per se.)
The Qing actually had a very weird (for the time period) commitment to curtailing revenues and staying out of the management of the economy to the point where it crippled public works and their military.
They probably developed this commitment because of their semi-nomadic origins and as a reaction against the totalizing, militarizing instincts of the Ming, which in turn were a reaction to the perceived failure of the mercantile/market orientation of the Song prior to the Jurchen and Mongol invasions.
Obviously the Ming instincts were no better from the standpoint of private economic development, but the Qing effectively starved themselves to the point where internal improvements were impossible, the frontiers indefensible (except the NW, where they maintained good relations with many of China's former threats via marriage and bribery), and the state withered and died when its tax farmers took too much.
But for the vast majority of this global elite, the rule of law is their most powerful ally. I think you'd be a moron and a half to prefer being a billionaire in a second/third world country to a billionaire in a first world country, and to illustrate this, I hold up as an example all the billionaires that Xi or Putin has murdered or thrown in prison for made-up treason charges, etc, for arbitrary reasons, or all the Russian billionaires whose assets were all frozen everywhere in the fallout of the Ukraine war.
Basically unless you actually control a standing army or government, it sucks to be at the whim of an authoritarian system vs. one governed by the rule of law.
Yeah, being a billionaire in Russia means Putin personally knows your name and phone number to call and demand things.
And will take everything you have at the drop of hat and leave you to die in prison of a communicable disease if you aren’t pushed out of a window first
But it also means YOU know and do favors for the President!
Not a lot of wealthy Americans can claim the same. As a rich person your status is higher in a poorer country. For these guys power and status are everything.
Think about it this way:
In America an oligarch can go to Epstein's Island, fuck some 12 year olds and get found out and possibly imprisoned a decade later.
In Russia an oligarch can fuck 12 year olds or whatever he wants to do with impunity. No one gets caught. No one goes to jail. Sure, some guys get raditation poisoning or thrown out a window, but just don't bite the hand.
I think "just don't bite the hand" is a lot harder than you think. Putin for example is famously paranoid. How many of the people he's had killed were actually opposing him, versus maybe or someday they will? And don't forget, all the other power players in the country are also competing with you for power, and probably willing to privately accuse you of disloyalty to Putin? And of course, there's the scenario where however loyal you are, Putin has a nephew or cousin who wants your position...
But for whatever reason, people STILL want to work for Putin!
You don't have to convince me working for a dictator or pursuing power at all costs is a bad idea. But for some others they still think it is a good idea, despite all evidence to the contrary.
Yeah, I think the people who do it live there, and can't replicate their wealth elsewhere. Or if they can, like the rich Russians who move to London, they get out. I totally agree that rich people in the west who act like they would be better under Putin (or Xi) are idiots.
But for some the lust for power overcomes the desire for safety.
In household terms, housing is closer to a law or medical license than to a hammer or car, because equity often dominates portfolios.
If medical licenses become easier to obtain, health care becomes cheaper and there are large welfare gains. However, doctors’ salaries would clearly fall. This is why doctors form organizations like the AMA that restrict the supply of medical licenses and residencies. The larger the asset, the more households will weigh distributional losses against social gains.
Houses are less valuable than medical licenses, but there are far more homeowners than doctors. That’s why this is a hard problem.
The AMA has been asking for more residencies for decades now.
And the liability environment means medical licenses will never be much easier to get.
Could YIMBYism be more popular if framed as a quality issue and not strictly an affordability one? Who wants to live in the shoddy decrepit 100-year-old housing that makes up a majority of the sub-$1m housing stock in a lot of our major cities when we could be building fancy new construction with all the modern comforts and amenities?
California is the worst for this. Rental units have horrible appliances from 1980 and zero insulation, just so that they can save on costs and discount the rent from $4,200 to $4,000 / mo. Every $300,000 structure sitting on $900,000 of land is a policy failure.
This is my intuition, too. I live in Rhode Island which is full of old, dilapidated, over-priced houses. The lower end of the housing market is paying too much to rent a floor in a duplex or triplex which hasn't been renovated since the 70s - there are hardly any apartment buildings, let alone modern ones. For landlords and tenants both, building up to date apartment buildings would be a huge benefit. And these two groups make up a lot of the electorate.
Unfortunately you can’t build new housing with mature trees. And many of the other things that are good about 100-year-old neighborhoods (narrow streets, sidewalks, less prominent garages, rear alleyways, smaller setbacks, etc) are not legal, economical, or fashionable anymore.
Of course you can build new housing with mature trees. There is no law against it.
Reusing salvaged timber from tear downs is also a thing.
Saw Bowman promotes a “street votes” mechanism that allows homeowners to democratically capture the value of their land by up zoning[1]. I am not aware of Matt’s commenting on it.
Matt’s column today is a nifty thought exercise. I wish it grappled directly with the specifics of assembling a coalition for change, as street votes does.
[1] https://www.sambowman.co/p/the-importance-of-alienability
"I wish it grappled directly with the specifics of assembling a coalition for change, as street votes does."
Strongly agree; I'd like to see a lot more of this in general in SB and similar places. Last week I went to a conference at GMU on the 100th anniversary of the Euclid decision and status of zoning. It was a fascinating discussion untethered by the left-right frame straightjacket*. Ilya Somin of the law school, in particular, had some interesting things to say about state-level strategies.
It made me more optimistic than I've felt in a while, about land use and life in general.
* (by which I mean left and right as they play out in the "discourse;" while GMU is obviously aligned with conservative thought, the issues discussed, including racist outcomes of zoning as well as supply constraints, were very much in line with the kinds of conversations we have here)
I’m not sure what cities you are talking about. I most every place I go the older neighborhoods are much more expensive and the cheaper housing is new construction in the burbs, or housing that’s located in undesirable areas. Usually the old neighborhoods are in very desirable areas.
I think that out of the housing considered by the upper middle class that is true. But most cities have run down old neighborhoods where poor minorities live.
New housing in nice urban neighborhoods is the most expensive of all. People are willing to pay more and live in worse quality housing to be in a nicer urban neighborhood but that doesn’t mean lives wouldn’t be better if we could “have it all” with good new housing in nice urban neighborhoods.
There’s no spare land in urban areas so the only way to ”have it all” is to densify. So these urban areas would need to replace single family homes not with newer and fancier single family homes, but with condos or apartments. Problem is a lot of people prefer single family homes even if they aren’t fancy new construction.
If anyone has ever been to Rishon Lezion in Israel, they would know that it’s a city whose housing stock is dominated by 5 to 7 story apartment buildings. But just a couple generations ago they were villas (single family homes).
Developers essentially gave homeowners a deal. Let them demolish your home and build an apartment building, and you’ll get a penthouse unit bigger than your home, and often a second apartment as well that you can own as an investment property, all with modern amenities. You can see a few hold outs of villas that still exist, but the vast majority of plots have become mid rise apartments buildings. And many of those old middle class homeowners have become millionaires.
In the US in most single family neighborhoods, we completely ban this. Not only because of height restrictions, but also because single-stairwell apartment buildings are banned, and a million other regulations. The economics may not work out in all places, but sometimes my feeling is “just let people become rich, so that we can develop new housing”.
I mean the old man in UP is the hero of the story. And of course the story does its best to portray the developers with every evil archetype in the book.
But in reality the old man is some guy who refuses to sell his old, beaten down house for a king's ransom. And while it is cool that he has the right to hate money... it's weird that we are holding up this person who hates money so much as the platonic ideal.
(And before someone accuses me of heartlessness, yes, I get the nostalgia of this place he was so happy with his wife in, and people should be able to say "this thing brings me great joy and is more valuable to me than the money". But, uh, have you met people that lost their spouses? They usually HATE living in the house because the memories are haunting, not comforting. And the old man does look pretty miserable at the beginning of the film, I'm just saying.)
I have no qualms with people who don’t want to hand over their property to developers. But I’m against broad bans (or effective bans) on people who want to do so
Trump is a real estate developer who lives to use others' money so is laserlike focused on low interest rates. He doesn't actually care about individual homeowner's equity other than as additional rationale for his desperate desire for cheap $$$. Homeowners themselves don't oppose nearby growth because of impact on equity. Most of us like where we live and don't want change. And growth results in unpredictable change.
What is driving me nuts in my super progressive California town with a high concentration of elderly folks who bought their houses in the 80s and 90s is that they are paying minimal property taxes thanks to prop 13 and vehemently oppose any new taxes or construction, and have the time to make a fuss about it at city hall. There is a ballot measure that would add less than $100 to their property taxes and they are freaking out about it - bruh, you are paying $1,000 a year in property taxes and your neighbor is paying $10,000. You can afford $100 bucks to make infrastructure improvements.
The issue here is that the average homeowner has learned the wrong financial lesson from the value going up. It’s not that housing is a great investment because your 500,000 house is worth 800,000 10 years later. That return is rarely better than the S&P. The issue is that housing allows people to invest with leverage. With 80 percent financing, you have a 300,000 return on the initial 100,000 investment. For very good reasons, no bank is underwriting a similar investment in stocks. But the wealth accumulation effect from housing is real and not otherwise available to a typical homeowner.
$500,000 in the S&P 10 years ago is now $1,787,345.87.
Good point. But try living inside that S&P investment while you see the investment go up.
The other point is that most people, seeing their investment skyrocketing, would probably sell after their investment doubled and thus reap less value (or in fact panic sell during some temporary bust). It's a lot harder to sell a house to reap the increased value given that you have to pack up and move, leave your neighborhood, schools and all that so you'll be inclined to stay during the run up. Which in turn means that investing in your house to gain financial benefits is also a lousy investment for exactly the same reason because it's so illiquid, so maybe I should just shut up now.
Right, people are idiots - you'll get no argument from me.
Right, but because of leverage (I.e a mortgage), the theoretical owner of my house only had 100,000 to invest. When that person sells, their 100k is now 400, a higher ROR than the tripling in the S&P you point out, notwithstanding the incredible growth of the S&P. Welcome to the world of leveraged returns!
Leverage only works if you sell well before the end of the mortgage. As you know every payment reduces your leverage.
Sounds like the average homeowner has learned the right financial lesson from the value going up.
"[M]y guess is that these concerns about protecting homeowners’ equity are about 100 times more influential in the real world than stuff that gets more play in the media."
This whole article is based on this premise, but economists have tried to test for it and it turns out the empirical evidence for the homevoter hypothesis is super equivocal. Which makes sense, right? NIMBYism happens even in super blue communities like the Bay Area where old-fashioned hippie liberals are happy to vote for higher taxes on themselves etc. People are happy to vote against their economic self-interest all the time.
I'm not saying the equity story doesn't play some real part in NIMBYism, but I really do think it's a bit of a red herring to focus on it. And I personally suspect that part of why it gets invoked by NIMBYs is because that's a much more legitimate-sounding, less embarrassing excuse than things like aesthetics and a general discomfort with change. But if you look at behavior rather than discourse, it's super unclear whether NIMBYs really take actions that increase their home values.
For some blue voters, they are very against change and vaguely pro-nature. I’ve seen posters fighting an apartment building that complain about cutting down several trees. It’s much more about traffic, noise, parking. Change is bad and more people are bad.
I've seen people worry about "those people" moving into town. It's funny to me because I've only really experienced rich yuppies living in apartments and poor people living in exurban single family homes. The logic of apartments = poor people seems like a relic of a bygone era.
I was with you until that last word. Bad? I don't know. Selfish? Sure. But isn't everyone selfish? Aren't YIMBYs who want to pay lower rents selfish? Matt's argument is that increased housing increases overall growth, benefiting (usually) everyone. But that's a weak argument to use with people who have some justifiable fear that they would pay some cost for that general growth, like more traffic, undesirable changes in their neighborhood. That doesn't mean they get to win, but it does mean that the kind of argument Matt offers isn't going to win them over.
Well said. Most NIMBYs I hear do mention property values (without considering that replacing your SFH with an apartment building would greatly increase that value once you sell). But it's vastly more about traffic, neighborhood character and the like. If you like where you live, you really don't want it to change.
I think it's primarily fear of change, property values are one of about a dozen rational sounding reasons people pull out when they are pressed, but it all seems to stem from some overall unease about the fact that things used to be one way and someone is suggesting they should now be another way
I get pissed every time a townhouse in my community sells for an insane price and I know I will get screwed on property taxes the next year.
I just bought 3 years ago and assuming I don't list my job I'm not leaving anytime soon. Why would I want prices to go up?
House value going up is literally only a good thing the one year in your life when you are selling, and even then everything else went up to so you don't have profit unless you move to a way cheaper place.
It's very weird for people to be obsessed with home value (which just costs you money in taxes for decades) so that you get a nicer payday when you die/become senile and move to a nursing home.
Most municipalities just tweak the millage as valuations change to hold revenues constant in real terms, or slightly growing.
Is yours just taking the windfall?
Lol yes. And just added a meals tax also. But couldn't figure out plowing and shoveling properly of course with all the money
Ha. Philly is definitely just taking more revenue but it also increases the homestead exemption when values get too out of hand, and services are improving, and it's taking real estate tax revenue and using it to phase out other, more distorting taxes entirely.
Your property tax rises aren't capped? I'm not saying it's the BEST policy, but it is very common precisely to address the concerns you have.
What? Isn't that only for old ladies in California lol
wait, there are people who don't live in California OR New York? :)
This. My state does not have a property tax cap.