Interests

Homelessness & The Great Housing Blunder

In my experience, The Economist has an uncanny way of providing 'forward intelligence' on major coming shifts in markets and policy globally.

Past topics have included their 2005 call of the coming global property bust and more recently the decline of liberal democracies worldwide. The Economist seems to be 'ahead of the curve' and sometimes I almost don't want to see their next issue and find out what they presage.

'The Horrible Housing Blunder' points out the enormous, ultimately foolish and unsustainable government policies — brought to the tax-payers by vested lobby groups like construction, banking, media/advertising, real estate, and furnishing/appliance manufacturers. Many powerful entities with their snouts in the trough, abetted by their compliant governmental agents. Housing is THE SINGLE LARGEST ASSET CLASS IN THE WORLD.

Not all countries have suicidal housing policies like America's, however — witness Germany and Switzerland and several other countries where renting and other more capital-efficient solutions are used to great effect. In such countries, there exists a more balanced and mutually beneficial relationship between landlord and tenant.

In those countries, housing is looked at more like 'a utility, a need and essential aspect of life' — not an ego-extension asset class to be inflated and used by the fortunate, lucky, or inheritors as their 'piggy bank,' abetted by governmental policies which disadvantage non-homeowners. Being a renter carries no stigma and is appreciated for how time-efficient and risk-, maintenance-, and surprise-free a form of housing it can actually be — if renter's rights are balanced with those of the landlords.

My takeaway from this special report is that I would — over a multi-year horizon — expect to see countries getting rid of cartels such as exist in our current 6% real estate sales industry (whereas Ireland and England have fees in the 2–3% range); also the huge tax-payer burden of subsidies for housing mortgage borrowing interest deductions and other perks for the banking and related industries. Let's face it, the majority of Americans are actually only 'renting from the banks' with very few ever getting out of that form of debt.

The ultimate goal will be to substantially lower the cost of housing as a percentage of GDP and, more importantly, for the average household's monthly/annual costs. Such policy change can be an important element in reducing the scourge of homelessness which affluent and poor areas alike have witnessed in America in recent years.

Naturally there will be winners and losers. Elimination of the $500K capital gains exemption will go a long way to taking the inflationary wind out of housing's seemingly ever-escalating sale prices in the USA. It will take much of the incentive out of the multi-home owner segment.

Such policy change will gradually deflate the unconscionable bubble in global housing costs. The planet needs its non-limitless capital to be used more purposefully and efficiently on things which actually benefit the natural world and our species — investments which improve the quality of lives, not just one group's personal balance sheets.

It may take a while, but ultimately many now homeless may be able to obtain shelter more proportional to their income — is that such a radical goal?

Interests

Homelessness & The Great Housing Blunder

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