
Housing Costs Reduce the Return to Education - kqr2
https://marginalrevolution.com/marginalrevolution/2018/07/housing-costs-reduce-return-education.html
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perilunar
To be clear, it's not house prices that are the problem—it's _land_ prices.

The problem and its solution were identified by Henry George in his book
_Progress and Poverty_ (1879).

Seriously, look him up. It's a shame that his work is not better known.

[https://en.wikipedia.org/wiki/Progress_and_Poverty](https://en.wikipedia.org/wiki/Progress_and_Poverty)

~~~
conanbatt
One of the best economic history books. I was convinced 100% on this argument
and have never found anyone able to criticize it ,other than "it wont be as
good as he claims".

Funny thing: Henry George is complaining about poverty and homelessness in
California in 1895.

Funny thing 2: Land Value Tax is recognized as a great tax both by right/left
win economists (Kruger, Milton Friedman, etc).

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SilasX
Paul Birch [1] posted a long critique, preserved here:

[http://buildengineer.com/www.paulbirch.net/CritiqueOfGeorgis...](http://buildengineer.com/www.paulbirch.net/CritiqueOfGeorgism.html)

Key points are in section 7-8. Key paragraphs:

>The form of land-use towards which the single tax pushes us is one in which
the countryside is randomly dotted with perpendicular towers (tapering wastes
land), 200 metre or so on a side, 2000 metre or so high, each tower a complete
small town of 50,000 or so, inclusive of apartments, shops, offices, services
and factories, but paying no more tax than a single suburban house. The
internal economy of those towers will have some similarities to Type III
market Georgism, but with the crucial distinction that no one who wishes to
cease renting a unit when the current lease expires has any further liability;
finding a new tenant is the responsibility of the tower owner. Most of the
surrounding countryside will be abandoned or common land and thus effectively
exempt from taxation.

>That doesn't mean that existing towns would just disappear — there is too
much already invested in them — though dereliction would tend to set in over
much of the urban area over the course of a century or so as abandoned
properties reverted to common ownership. ...

>The problem here is that although buildings and other on-site improvements
are supposed to remain purely private property, there is no easy way a
landholder can remove his property without destroying it if he is outbid in
the annual auction. A competing bidder might therefore risk paying
considerably over the odds in the reasonable expectation of getting free use
of the buildings until the following year, when the original owner may end up
paying the market rental on the full property value, not merely the site
value, in order to guarantee access to his own property. A sufficiently cheeky
tenant could even demand rent from the property owner for allowing the
property to remain on the tenant's rented land!

[1] of the British Interplanetary society; found just now that he passed in
2012.

~~~
conanbatt
Took a fast read at the article. Its a pity he is so angry at Georgism in his
writing, and dismissive, but nevertheless he presents a case worth hearing.

The indifference vote thing is a fantastic idea, so now I know I'm a Geo-
Libertarian.

A fatal flaw in this essay is that it mentions LVT as a single tax. It is a
bit unfair because originally, when Henry george proposed it, total public
spending was very low (under 10%), not the 35% of GDP that it is today. LVT
can account for 5-10% of GDP, and thus in our modern times it is only
applicable as a local tax.

The second issue is that it talks about the disadvantages of taxing this way,
or the consequences, of which there always are some, but he does not weigh it
with property taxes (which exist today), or sales taxes. There are no perfect
taxes, its just the "least bad tax".

Granted that a state like california already has an issue with property taxes
themselves as they are not collected how they should be.

Nevertheless, its the best piece I found yet against LVT.

~~~
SilasX
Good points, all. It is important to keep in mind the difference between the
Georgist position that:

1) "LVT is a positive good and governments should try to collect the entire
site value of every property."

vs the more moderate one that:

2) "LVT is the least bad tax and much preferable to taxing positive economic
activity like labor, investment, and exchanges."

I think Birch makes a good point that LVT, like all other taxes, will cause
horrible distortions _once it 's high enough_. I agree that it's hard to
dispute 2), but that's a long way from the 1) promoted in _Progress and
Poverty_.

His other good point, I think, was that you don't actually want to tax the
site value, but the site value's _net_ contribution from the other sites (i.e.
subtract off the positive externalities the site throws onto others), which in
practice is hard to calculate, since you only observe O(n) values (land and
structure prices) but need to observe a data point for every pair of
properties, O(n^2), to calculate the net improvement.

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rayj
Yes housing is not in accorandce with the construction costs. Essentially you
have inflated bureaucracy and artificial supply constraints & zoning (NIMBY)
trying to keep the housing prices up.

Houses are just fine in Boise, ID or Albany, NY but so much cheaper than the
coasts. This is really frustrating, and I don't see a politicly workable
solution. So spend 50% on rent or move to Idaho...

None of this is even considering that we may be able to substantially lower
construction costs with prefabricated/3d printed homes/economies of scale.

~~~
AmVess
Boise is the fastest growing city in the US, with attendant increase in
housing cost. Prices aren't completely crazy yet, but my house is worth 65%
more than what I paid for it, and is increasing by the year at too large of a
rate.

This was a good place to move to, now not so much.

~~~
thrav
I had a feeling it was just a matter of time before Boise set a course to
become the next Austin. One visit 5-6 years ago for a few days to interview at
a tech company, and I thought, “Huh, Boise is pretty damn cool.”

~~~
SamReidHughes
In winter, you'll think, "Boise is pretty damn cold."

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enraged_camel
Boise gets down to around mid-20s (F) in the winter, which isn't that cold.
Humidity is also pretty low, so it tends to feel quite crisp.

~~~
seanmcdirmid
Isn't Boise going to be similar to SLC in climate? I mean, no huge lake, but
it seems like everything else is very similar.

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deathhand
Rent seeking behavior creates greater economic inequality and all the host of
problems that come with it. The government should curtail these behaviors in
laws and taxes unless we want another occupy movement or worse.

~~~
majos
> unless we want another occupy movement or worse

It seems like the current administration would be just fine with another
Occupy movement. I mean, were they even a real problem for Obama, who had to
at least make gestures of support in their direction?

Unless Occupy II is spearheaded by Trump supporters, which looks...unlikely.

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EZ-E
Most people need to live in a handful of big cities to find a decent paying
job. Companies also stay there because they want to have access to a large
talent pool. Meanwhile there is a ton of space un rural areas where in
majority, only older people are left.

What would be a good solution? Massive construction? Incentives to move
companies in more rural areas? I for one would love to have a high paying tech
job in rural areas in my country, I dislike crowds but there are no companies
there, all young people growing up here just migrate in drove to cities.

~~~
nerfhammer
> What would be a good solution?

Stop strangling cities by artificially limiting the housing supply there.
Cities have always been the fundamental driver of human civilization.

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AzzieElbab
I wouldn't know how to begin building an argument against this. Constantly
rising housing costs is a pure wealth transfer which also doubles as fake
saving mechanism in case of buying

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jpmattia
The article neglects to mention: We are coming off of the lowest interest rate
environment in around 400 years. As interest rates normalize, many interest-
rate dependent markets are in for normalization as well.

~~~
3pt14159
I've been saying this for years. Keynesian economics is largely correct, but
underestimated asset bubbles from irrational consumers. We either need high
land taxes with a redistributive basic income or we need to do away with
infinite ownership at time of sale.

~~~
conanbatt
First, I would strongly advice against putting a policy due to an effect that
there is no consensus on its causes. Is housing expensive because of low
interest rates, because of QE, because of the advance of NIMBYSM? etc

Second, taxes are much easier to add than to remove: a tax thought and applied
with mechanism will outlive its purpose, so if there is a downturn in house
prices the tax will become a burden.

Places like california also dont even charge the proper property taxes. Its
most likely that increasing tax pressure in a state like CA will be increasing
income taxes, which end up maybe hurting landlords by harming their prey.

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mabynogy
The problem isn't housing. The problem is the realestate market. There is no
competition because the merchandises don't move. Prices goes up to infinite.

[https://en.wikipedia.org/wiki/Maurice_Allais](https://en.wikipedia.org/wiki/Maurice_Allais)

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zip1234
Perhaps the headline is a bit sensationalist? Housing does appear to be a
problem in the bay area though.

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vinceguidry
Owning property is an extremely democratic pathway to financial independence.
And it's only gotten more and more democratic as the financial world evolves.
Yes it sucks to spend the first 5 or so years of your years in an unaffordable
city getting established in an industry. But it's not the worst lot in the
world. You can meet your spouse there and then start a family out where it's
cheap. Won't be long before everyone's working from home.

Not a bad life.

~~~
k__
Why?

To me it seems like the exact opposite of democracy.

Wouldn't it be more democratic to let the state own it so every citizen can
have a vote over this rather limited resource?

~~~
AzzieElbab
This seems opposite to my understanding of democracy. Also, in my experience,
state distributed housing lifted misery and corruption to some astounding
levels

~~~
k__
And now we have cities that get too expensive for the people that were born
there...

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anonuser123456
When the value proposition no longer makes sense; move?

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k__
The question is, should "the value proposition", in terms of finances, be the
criteria?

Should the people who are rich be the only ones who can decide where to live?

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dbspin
This 'article' adds little to the debate, merely restating the reductive idea
that constraints on supply (rather than a host of factors from massive foreign
investment, to wage stagnancy) is the sole explanation for the US housing
crisis. It's unworthy of hacker news frankly.

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JaceLightning
Time to ban immigration.

" Together immigrants and their U.S. born children account for roughly 75
percent of annual population increase in the U.S. In absolute terms, that’s an
additional 2.25 million people each year. "

[https://www.fairus.org/issue/population-
environment/populati...](https://www.fairus.org/issue/population-
environment/population-growth)

~~~
dingo_bat
Immigration needs to be based on merit of the immigrant and need of the
country, not as a form of charity. It's hard to believe that USA needs 2.25
million people extra every year. I wonder why the law in this regard cannot be
simplified. You are allowed to immigrate to the US if:

\- you will earn more than $100k.

\- you have a STEM MS/PhD from an institute of repute.

\- you clear a set of security checks.

That should take care of most of the problems related to immigration.

~~~
jadedhacker
Freedom of movement is a human right full stop.

~~~
dingo_bat
I think you're being a bit unreasonable. Are you really suggesting that
anybody in the world who wants to walk into the USA should be allowed to? It
seems like that nullifies the existence of the nation itself. Why have a
border? Why have a military to protect that border?

Also, the freedom of movement is not a blanket statement. It does not, for
instance, grant me permission to move into your house.

~~~
aninhumer
>Are you really suggesting that anybody in the world who wants to walk into
the USA should be allowed to?

Maybe block known criminals and bad actors, but otherwise yes. If your
argument as to why we should exclude people is based on the idea that it would
make standards of living worse for people here, that's a) probably not true
and b) only makes sense if you think the wellbeing of the people here is more
important the wellbeing of people elsewhere.

>It seems like that nullifies the existence of the nation itself. Why have a
border?

Not really, there'd still be a government and a system of laws that apply
within the border.

But beyond that, why specifically do you think it would be bad to nullify the
existence of a nation?

>Why have a military to protect that border?

In as far as a military is necessary, it is to protect against other
militaries, not non-violent civilians entering the country.

