#households — Public Fediverse posts

Smith economics 101: “Rent seeking” [1]

“The last benefit of a housing slump is to remind people that houses are a poor long-term #investment. For decades governments have told #households to treat their homes as saving vehicles, and in many countries lavished them with #tax breaks.

A house has virtues as an #AssetIinvestors can count on a premium on account of its illiquidity and it gives ordinary mortals access to financial leverage (setting aside the wild world of retail options trading).

Yet treating your house as a financial asset violates some basic tenets of investing, which becomes apparent when prices fall. It is undiversified (unless you are a serial landlord), related risks are hard to hedge (insurance gets you only so far) and returns are highly correlated with your future income (a downturn could bring down both your wages and the value of your property). Plus the more a family’s finances are tied up in a home, the greater the nimby temptation to block development, which could dilute its value.”

The gist of the article, you cannot increase & decrease #housing at the same time because the money invested is propped up by #government #intervention and thus investment becomes inefficient.

[1] Smith, ‘Wealth Of Nations”, ‘Of the rent of land’, “division of incomes into profit, wage, and economic rent” <https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_11#226>

Smith economics 101: “Rent seeking” [1]

“The last benefit of a housing slump is to remind people that houses are a poor long-term #investment. For decades governments have told #households to treat their homes as saving vehicles, and in many countries lavished them with #tax breaks.

A house has virtues as an #AssetIinvestors can count on a premium on account of its illiquidity and it gives ordinary mortals access to financial leverage (setting aside the wild world of retail options trading).

Yet treating your house as a financial asset violates some basic tenets of investing, which becomes apparent when prices fall. It is undiversified (unless you are a serial landlord), related risks are hard to hedge (insurance gets you only so far) and returns are highly correlated with your future income (a downturn could bring down both your wages and the value of your property). Plus the more a family’s finances are tied up in a home, the greater the nimby temptation to block development, which could dilute its value.”

The gist of the article, you cannot increase & decrease #housing at the same time because the money invested is propped up by #government #intervention and thus investment becomes inefficient.

[1] Smith, ‘Wealth Of Nations”, ‘Of the rent of land’, “division of incomes into profit, wage, and economic rent” <https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_11#226>

Smith economics 101: “Rent seeking” [1]

“The last benefit of a housing slump is to remind people that houses are a poor long-term #investment. For decades governments have told #households to treat their homes as saving vehicles, and in many countries lavished them with #tax breaks.

A house has virtues as an #AssetIinvestors can count on a premium on account of its illiquidity and it gives ordinary mortals access to financial leverage (setting aside the wild world of retail options trading).

Yet treating your house as a financial asset violates some basic tenets of investing, which becomes apparent when prices fall. It is undiversified (unless you are a serial landlord), related risks are hard to hedge (insurance gets you only so far) and returns are highly correlated with your future income (a downturn could bring down both your wages and the value of your property). Plus the more a family’s finances are tied up in a home, the greater the nimby temptation to block development, which could dilute its value.”

The gist of the article, you cannot increase & decrease #housing at the same time because the money invested is propped up by #government #intervention and thus investment becomes inefficient.

[1] Smith, ‘Wealth Of Nations”, ‘Of the rent of land’, “division of incomes into profit, wage, and economic rent” <https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_11#226>

Smith economics 101: “Rent seeking” [1]

“The last benefit of a housing slump is to remind people that houses are a poor long-term #investment. For decades governments have told #households to treat their homes as saving vehicles, and in many countries lavished them with #tax breaks.

A house has virtues as an #AssetIinvestors can count on a premium on account of its illiquidity and it gives ordinary mortals access to financial leverage (setting aside the wild world of retail options trading).

Yet treating your house as a financial asset violates some basic tenets of investing, which becomes apparent when prices fall. It is undiversified (unless you are a serial landlord), related risks are hard to hedge (insurance gets you only so far) and returns are highly correlated with your future income (a downturn could bring down both your wages and the value of your property). Plus the more a family’s finances are tied up in a home, the greater the nimby temptation to block development, which could dilute its value.”

The gist of the article, you cannot increase & decrease #housing at the same time because the money invested is propped up by #government #intervention and thus investment becomes inefficient.

[1] Smith, ‘Wealth Of Nations”, ‘Of the rent of land’, “division of incomes into profit, wage, and economic rent” <https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_11#226>