Nope! First of all, it's come from no one's pockets until you sell. Until then it's just a hypothetical, theoretical gain on paper.
Second of all, when you do sell it, the money will come from the pockets of your willing buyer :-)
Edit: if you still want to feel bad about something, let it be this: that the rise in your home's value represents wealth that has been created "by the community" in the sense that it's only because of many variables of the surrounding community that the land has become more desirable and therefore more expensive; and your ability to capture all of that increase via your untaxed monopoly on the ground rent creates a deadweight loss for the broader economy.
But that's why we created the universal land value tax and used it to replace all other taxes! (Hello from the year 2078!)
I am struggling to find the right words to express how wrong your view is to me. Housing is a basic human need like food and clothing. How can you in good conscience celebrate making a tremendous profits exploiting the fact that people cannot afford a basic need?
Then surely I have failed to convey it!
In any case, my edited point about "deadweight loss" is perfectly consonant with the parent poster's feeling of guilt, and with what I presume is your feeling of disgust; it is in fact the economic term of art for that at which you intuitively recoil.
(Although you're kind of equating a very, very expensive home, in the overall scheme of things, with the minimum requirements of decency, if you really think that he's exploiting someone's inability to afford housing, but w/e.)
Now let's get into the controversial stuff...
> Housing is a basic human need like food and clothing.
Agreed. But it's also an asset, because someone has to build and maintain it and have exclusive use of (at least parts of) it, and being a basic need doesn't automatically create a right to something (for obvious reasons) so that asset is gonna trade hands voluntarily like any other. Its price will fluctuate, sorry.
Now, NIMBYs using government fiat to drive down housing supply in their market is an annoyingly common failure mode of local democracy, maybe that's all you're upset about.
You glimpse the problem at the end, only to dismiss it. Your glimpse is when you say:
> Now, NIMBYs using government fiat to drive down housing supply in their market is an annoyingly common failure mode of local democracy, maybe that's all you're upset about.
The triangle that you're looking at is that NIMBYs lead to lack of construction, lead to undersupply of housing, which is a direct cost of both high housing costs and high homeless populations. The profit that I have as a homeowner comes from somewhere. Where it comes from is artificial scarcity that causes renters to struggle, and over 170,000 Californians to be unhoused.
Looking at that without guilt, is like New Englanders whose families made a fortune investing in the triangle trade, congratulating themselves on not having been those evil slave owners. Sorry, but it is tied together. You cannot both profit from the crime, and disclaim a portion of responsibility for it at the same time.
What are those obvious reasons?
Yes, food, but I don't see many arguments for bringing down the price of caviar.
IOW, making an argument against high property prices in highly desirable areas is not the same as making an argument for low cost housing.
It doesn't really matter how dense you make housing in highly desirable areas, there'll always be more people who want to live there than houses available.
The solution is more remote working and much faster public transport.
Tax breaks on businesses for each remote worker will be cheaper than building more slums, it will be quicker (demand is affected almost immediately) and it needs no political campaigning against the local NIMBY residents.
Instead of trying to guilt trip people about the paper value increase in their property, just remove that paper value increase altogether.
(I'm not sure how you would solve the slow public transportation problem. Where I am we have 160km/hour trains, but the door-to-door travel time using these trains to travel 20km is still about twice the time it takes to drive)
A land area with a 40 mile radius and the population density of Manhattan would contain the entire population of the United States.
> Instead of trying to guilt trip people about the paper value increase in their property, just remove that paper value increase altogether.
The only way to do this is to build more housing. You can't fix it with mass transit because the existing housing is low density and mass transit requires high density.
That's a good point you make - even at the extremes of high-density living, high density still doesn't solve affordability!
People can neither walk nor bike 80 miles, and public transport over 80 miles with multiple stops takes hours, so you can reasonably expect that prices would be considerably higher in the center (40 miles to everywhere) where it is more desirable, and people can neither walk nor bike 40 miles for commuting. Public transport infrastructure for a 40 mile journey also makes commuting infeasible.
The problem of not being able to afford living close to where you need to be is still there, even in the hypothetical pathological case.
If it can't solve the problem in the ideal case, it can't solve the problem in any case.
If someone discovers their vintage car is worth more than they paid for it as teenager should they feel guilty over this?
Do you feel guilty when you eat food because someone somewhere isn't?
I'm completely missing your point.
If I buy property in a developing area because I think it's cool, and I live there for years and am part of the community and watch it grow around me, and years later decide to sell - I took an early risk, don't I deserve to recognize the rewards from that risk?
If it was a bad risk and the area went to hell, and I lost money - is that ok?
But making money isn't?
Should home builders not be allowed to make money because housing is a basic human need?
Should we not be allowed to build luxury homes that cost more because we could have built multiple cheaper ones with the same money?
What should the rules be, in your opinion?
In your mind, how much of the increase in value of housing is due to “early risk” paying off in a valuable community vs an increase in overall demand without an increase in supply?
When the nation sees the housing supply increase slower than the population, that’s not a risky investment. It’s musical chairs where you pay to win.
I'm asking because it really doesn't seem like you have much experience with it based on your comments.
Housing prices go through bubble-burst cycles regularly.
National trends are interesting, vaguely, but local markets are everything, and fluctuate wildly based on many factors.
We get into serious trouble when we have external forces skew the market, like in 2008.
Covid years + essentially free loans (nearly zero interest) are another example.
It caused a bubble that's going to cause a lot of pain as the market corrects.
I'll be part of the solution - I'll buy properties (most likely next year) that are in distress, rehab them, and then sell them later.
According to you, though, that's somehow wrong. I should just let foreclosures happen, let houses rot empty - because profit is wrong?
If you don’t win the lottery you can always buy resale which is close to $1M for a 2 bedroom place.
Oh and it’s a 99 year lease. After 99 years you give it back to the government and get $0.
When the people who "generate wealth" are doing so by dictating prices, that seems a bit sketchy to me.
The ironic thing is that housing scarcity often ends up making a place much less desirable -- even for the entrenched homeowners who cause the scarcity problem.
Homeowners with this much gain based on artificial supply constraints should definitely feel bad.
It doesn’t matter when you sell because now you’re floating on the water. As the tide rises, so do you.
If they sell that house, and then buy something new at a similar market rate, their property taxes will balloon overnight, because the assessments "reset" to the purchase price when the property changes hands.
The only way this works out great is if, after selling this house, they move to a new area (possibly new state) with lower cost-of-living, and possibly a more sane property tax regime.
(Not sure the person way upthread is in California, but someone lower down mentioned Prop 13, so I thought I'd bring this up.)
Say you bougt a house for 200K many years ago. Your neighbor bought the slightly larger house next door for 275K back then. Your house is worth 1M now. Can you move?
Sure, you can sell your house at a nice profit (and pay taxes on that!!). The neighbors house is worth maybe 1.2M now. So you can't really afford to move.
Housing gains on paper are not income and you can't cash in on it unless you move out to a much cheaper area. Otherwise whatever gains you had on paper also apply to the nearby houses, so you can't afford them.
If you can't afford less than $1k per month you could just sell your $1 million house.
Those numbers aren't being dramatic. You need a $1.2 million house to pay $1k a month in property taxes.
That is technically true, but not really true. The basic tax rate is indeed 1%, but counties and cities are free to add any kind of fees they want (AFAIK there is no limit) to your property tax so in practice you're paying way more than 1% in CA.
It comes from their pockets when they pay rent. Meanwhile you, as a property owner, receive thousands of dollars a month in imputed rent by owning a place to live.
You also have the ability to spend the money without selling the property by borrowing against the equity, as many people do.
> Second of all, when you do sell it, the money will come from the pockets of your willing buyer
People "willingly" subscribe to Comcast. Not because they prefer doing business with Comcast or believe themselves to be getting a fair deal.
> if you still want to feel bad about something, let it be this:
The people celebrating the increase in housing costs because they own housing should feel bad about it. Especially the ones who caused it by lobbying for zoning restrictions.
> But that's why we created the universal land value tax and used it to replace all other taxes! (Hello from the year 2078!)
This doesn't actually fix housing shortages created by restrictive zoning -- which you could conceivably still have with a land value tax and a government that keeps the restrictive zoning to maximize land values and therefore tax revenue. (Land is worth a lot more if you need it proportionally to build housing instead of just buying one piece of land to build an arbitrarily large amount of housing by building an arbitrarily tall building.)
Assuming that property tax has been tracking the current market value of the house then yes.
But in California prop 13 means that isn't the case
In August 2023, home prices in California were up 4.8% compared to last year, selling for a median price of $792,900. On average, the number of homes sold was down 14.0% year over year and there were 25,115 homes sold in August this year, down 29,214 homes sold in August last year.
https://cdn.nar.realtor//sites/default/files/documents/ehs-0...
A couple hundred thousand is the price of land, not a home. If it is a home, it’s a teardown.
Capital gains don't necessarily apply everywhere. In eg Australia your owner occupied house is exempt. And in eg Singapore we don't have capital gains on any asset at all.
A house is both a home and an investment for most people. That's just a description of what's happening. However you could say that a house _should_ not be an investment.
Less than a quarter of Americans own their own homes. [0]
[0] - https://www.forbes.com/sites/johnwake/2023/03/31/us-has-3rd-...
