When Too Much Housing is Bad for Our Health

Yves here. It’s intriguing that “our economic model is based too much on the housing market” is becoming a meme a mere six years after housing bubbles in most advanced economics were a major driver of the global financial crisis. Apparently, the fact that heroic efforts by the officialdom to restore the status quo ante via aggressive efforts to prop up the real estate prices (well, at least in the US, Spain and Ireland have gotten the Mellonite treatment instead) have instead produced zombie banks and a significantly-ZIRP-QE dependent housing recovery have finally led to some long overdue skepticism.

Of course, a big reason housing served as a driver of growth was not just the direct impact of homebuilding. Housing is the foundation of a consumer-oriented society. Bigger houses, after all, require owning more stuff to fill all that space. But the reason the housing-oriented economic model hasn’t been displaced is that numerous constituencies support it. There’s a large group of usual suspects: the “affordable housing” coalition (which ultimately produces less affordable housing by relying on financial subsidies, which raise asset prices), banks, realtors, homebuilders. But there’s also an even older political tradition of using housing as a vehicle for social engineering. Bush’s “ownership society” was that old wine in a new bottle. Right-wing and moderate political leaders felt homeownership was valuable because it would create stable communities and encourage conservative values. The fact that young people, who are finding it hard to secure stable, decently paid employment and buy houses, are polling decidedly left-wing on economic issues, says that the corprocrat’s neglect of the basic duty of capitalism, to generate employment, is going to bite them in the ass, although it may take another five to ten years for this generational shift to change political and economic priorities.

By Leith van Onselen, Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. You can follow him on Twitter at @leithvo. Cross posted from MacroBusiness

Over the past 24 hours, I have read a range of articles, both from Australian and abroad, arguing that the obsession with housing “investment” is sacrificing the economy’s potential by diverting too many scarce resources to what is, in the case of pre-existing housing at least, an unproductive investment.

John Carney, writing in Business Insider, encapsulates this view nicely, arguing that overinvestment in housing is thwarting innovation and technological advancement in the US, making it harder to grow living standards:

Let’s face it.

We are in something of an innovation rut…

What’s gone wrong? Much of the lack of innovation can probably be blamed on the malinvestment that resulted from the housing boom. It’s not just that too much funding got directed into housing—too much human capital got directed into housing and finance during the boom.

This is all too obvious on Wall Street these days. Most financial firms, stung by the tech bust and investor fears of tech companies, shrank their operations in this sector while pouring talent and funds into housing related sectors…

The result is that most financial firms lack the in-house expertise to invest in innovative business ventures on any meaningful scale…

What’s more, there was so much money to be made in derivatives and credit—largely arising from the underlying housing boom—that many of the smartest people got drawn into these areas rather than tech innovation. Basically, we got lots of questionable financial innovation instead of technological, medical, or environmental innovation…

In short, we can’t produce what we should be able to because we invested in the abilities to produce what we don’t need…

Is there a way out? Of course.  The bursting of the housing bubble created a great opportunity to set the economy back on course. Unfortunately, our government engaged what amounted to Shock-and-Awe war against the liquidation of past errors, locking up even more capital in the errant bubble businesses.

It’s a view shared by Zachary Karabell, also from the US, who asks whether the economy has become addicted to housing in order to drive growth. From Reuters:

Housing is widely perceived as a key ingredient to a healthy economy, and so the revival in the housing market has been heralded as a positive step for an American system that has been sluggish at best. Similar trends in the United Kingdom and parts of the EU are greeted as positives as well.

But is it? Housing is a key aspect of economic activity in most countries, but that doesn’t mean that we should welcome a return to housing as a perceived pillar of national strength. And we should be very wary of any return to an ethos that sees either home ownership or housing prices as a barometer of individual and collective success. Those attitudes very nearly imploded the modern financial system, and they could imperil it again.

Homes are places where you live. They are not — and should never have been — investment vehicles. Yes, homes may gain in value and augment one’s net worth, but the reason to own a home is that it can be a cost-effective way to obtain a place to live. The minute they are seen as investments, that reality gets perverted, with dangerous consequences…

What was most damaging about the housing boom and bubble of the 1990s and 2000s was that millions of middle-class families bought into the notion that homes should be the repository of their net worth and future wealth. Decisions about buying shifted away from pure calculus of need and acceptable costs and instead were increasingly based on the likelihood (or not) that their homes would increase in value.

It’s an easy path from that belief to outright speculation. The idea that homes are a primary investment is not only what drives real estate bubbles but also drives real estate crashes.

And finally, our own Adam Creighton has written a post today in The Australian arguing that the recent explosion of property investment in Australia is “bonkers”, diverting resources away from more productive activities:

Ordinary people are being priced out of the so-called “great Australian dream” by cashed-up older generations buying for themselves and their children…

Buying a quaint 19th-century terrace in Sydney or Melbourne might impress friends, but it doesn’t add to the nation’s productivity capacity one iota. Individuals invest by studying at university, or investing in a growing business; companies might buy equipment or build factories that enhance their productive capacity and future profitability.

Beyond any capital appreciation, the only tangible return from buying an established dwelling is the right not to have to pay rent – nothing more or less. And rents typically grow in keeping with average household income; they bear no relationship with the skill or effort of the owner as business profits do…

Australians developed an unhealthy obsession with housing in the 1980s which they are yet to shake. In the long run we can’t become more prosperous by buying each other’s houses at ever higher prices, however wealthy individuals might “feel”.

I obviously sympathise strongly with these views. A quick look at the Australian macro data suggests that the Australian economy has become over-invested in housing, with the total value of the housing stock now roughly three times the size of the economy, versus only two times the size of the economy in the mid-1990s and around 1.5 times the economy in the 1960s….

Like Frankenstein’s monster, it would appear that the financial sector, which once acted merely as an enabler of the productive economy, is now pulling its master’s strings, and arguably crowding-out more productive sectors in the process.

As noted yesterday, the likely decline in commodity prices and the terms-of-trade over the decade ahead is set to weigh heavily on Australian income growth, requiring a significant lift in productivity if Australia’s living standards are to continue growing at a pace to which we have become accustomed.

Diverting more of the nation’s financial capital and resources into housing, particularly pre-existing homes, is the wrong recipe to achieve such growth in productivity and living standards.

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  1. John F. Opie

    Absolutely correct. Housing should never be considered an investment unless it generates a cash flow: it is, at best, a speculative purchase.

    Without that cash flow, you are speculating that your selling price will exceed your purchasing price plus financing and maintenance costs.

    Now, buying a house because you want to live in it is a completely different story.

    The financial services and housing industries have done a fantastic job of selling their services and products as somehow integral to The American Dream, and politicians are as complicit as ever. If people were to actually factor in financing and maintenance costs, their idea of what they can afford would drastically change, rather than what most do, simply figure out what the largest mortgage is that they can carry with their monthly cash flow and find something for that price.

    Change that cash flow downwards and you get the mess people are in, having bought too much house with too much reliance of future cash flow improvements. Sort of like taking on corporate debt with the hope that your company will have grown so much before repayment accelerates that you can pay it out of a future cash flow that only has a limited chance of actually appearing.

    And yes, it is the fault of the financial services companies and the building industry: they’ve been beating this mantra for generations and it’s become one of the accepted milestones of achievement within US society.

    1. Cynthia

      Home ownership is way overrated. And contrary to the quasi-religious precepts of modern fiscal and housing policies, not everyone can or should ‘own’ their own home. Although this is Sacrilege to the Housing Industry (builders, banks, mortgage companies, title companies and realtors), more people need to rent. Or better yet, they should live in an extended family housing — like the rest of the planet.

      1. fresno dan

        I have a friend – married, no kids. Live in a huge house. Use the kitchen, family room, one bedroom with attached bath.
        Living room should be called non-living room (It is not even used at Christmas – totally wasted space)
        Dining room should be called non-Dining room (it is used once every four years when it is their turn to host Thanksgiving).
        Extra bedrooms should be called non-sleeping rooms. Guests? me once a year (I actually prefer sleeping on couches – really, I sleep on a couch at home)
        So, a lot of capital cost, lots of heating and cooling cost (though not as much heating and cooling as there should be because…it costs a small fortune to heat and cool so much space), lots of maintenance (big roof to get re-shingled, more painting, etc)
        Yes, about 1% per year. They’re lucky that they have been in it near 20 years otherwise maybe a big loss.
        Homeowner – maybe should be called non homeowner because the mortgage is still being paid for…

        But as bad as all that is, maybe the worse part is that it is part and parcel of the indoctrinated mind set of utility maximization – which would be fine if people would only really THINK about it. A counter top made out of rock is worth 10K??? Really? Slicing tomatoes on your stony countertop is going to give you 10K worth of pleasure?

  2. craazyman

    if the houses get big enough, they might launch the economy into a higher realm of financial consciousness.

    it’s weird to think some people live in grass huts or even tee-pees all their lives and never experience the thrill of a big house.

    how can that be? I wouldn’t call it utility preference function maximization because they never had the choice.. They grew up in a society that considered a tee pee to be just the way it was. and if they wanted to put the squaw in the house and get her pregnant they didn’t need a house.

    how did they express their utility function preferences? this is a profound mystery to science. it may have been feathers and face paint. You really had to get creative when you don’t have money to burn.

    1. Moneta

      It’s when you watch Mad Men that you realize how miserable one can be with or without money.

      It all comes down to the quality of your relationships. Something tells me Mother Teresa was well taken care of in her last days.

        1. Moneta

          I’m not saying that I’ll go the MT route but the show hit home, because one side of my family had that type of empty miserable upper class life.

    2. Eleanor

      I know this is going to sound boringly p.c., but “squaw” is not an acceptable term. You really shound avoid it.

      1. diptherio

        Agreed. According to anthropologist G.G. Weix, when I took her class years ago, that term would translate into English as something like “c – – tface”. Even worse than the incredibly insulting name of the Washington football squad or that damnable Cleveland baseball mascot. The word used to be all over Mont. geographical features (Sq— Peak, etc.) but has, thankfully, been replaced by less offensive names, at least officially (we kept “Bloody Dick Creek,” however).

        I don’t think it’s a matter of being PC so much as just being culturally sensitive…although sensitivity is not something we Americans are generally noted for…

        1. craazyboy

          Almost thought I was learning something new, but then I checked it in wiki. (haven’t checked the Urban Dictionary yet) The meaning of the word squaw is not as straight forward as you state here. In the beginning, when asked the Indian word for women, some Indian dude pointed at an Indian women and said “squaw”. It was up to us to spell it, of course. So if there was any mixup in communications, I would have to blame the early eastern Indian dude.


    3. craazyboy

      “how did they express their utility function preferences?”

      IQ test scoring:

      1) Injuns sold Manhattan to white people for $20 worth of glass beads, packed up teepees, moved west and screwed squaws.

      2) White people paid Manhattan $14 Trillion, Manhatten still owns houses and still screws everyone.

        1. craazyboy

          One of my best friends is a squaw. But she claims she’s half French from when France occupied Mexico, so I call her Mademoiselle.

          She calls me “dumb white man” for not selling Manhattan to any country that would agree to take it off our hands for $20 in glass beads.

          1. call em like I see em

            cute (drenched with vitriolic sarcasm @crazyman.)

            Oh because you have a “friend” who is allegedly of FIRST PERSON decent, and she is obviously confused about her royal ancestry,(as she is half french, so…that would make her 50% what tribe???)

            YOU have license to use derogatory terms as though you are down with the brown?

            What, let me guess. You were all sitting around a kegger, or some douchey party or otherwise consumer drunk idiot fest and she blurted out squaw this or that, so you figured “oh yeah. Its cool! :) ”

            I bet you run around inner city areas saying “yo, whuzzup my n***a to black people.”

            So, is it ok to call you a cracker ass douchebag? Thats what your overall intellectual contribution seems to indicate.

            1. craazyboy

              Actually, I met her at a “doncha hate white people party” and other than a bunch of graduate students and associate professors spending their student loans on beer, she was the only partial minority there, excepting Spanish royal half breeds, of course. Just can’t get away from them.

              I won’t say what we were doing when she told me the French story. Your brain would explode. But she looks French. She grew up on a reservation too, the one just south of the Apaches. Can’t remember the name of it. Kinda strange sounding name, like it’s Indian or something. Has two casinos too, but I think that part is fake.

              As far as me goes, sometimes I feel the urge to tell people I’m half Roman, but then sanity takes over. I don’t want to carry the baggage for killing Jesus Christ.

  3. kjboro

    Housing is Exhibit A of the larger phenomenon: the financialization of the economy …. the shift from an economy focused on, and measured through, asset values instead of jobs and income. And, in economies where consumer expenditures drive two-thirds or more of the overall, financialization and asset focus means substituting debt for income/jobs. Unplugging the link to the real economy — and, so, disconnecting actual innovation in favor of ‘financial innovation — is a feature not a bug. Housing is the largest component. But, as Yves/others point out here at NC, it sits along side student debt, auto debt, payday lending debt — in short anything and everything the banksters can use to entice consumers into using ‘stated’ future cash flows (however shaky and even ‘ninja’ fictional) into financing current expenditure while simultaneously using deregulation plus classic snake oil to fool investors (including institutional investors) and of course the broader public (via bought and paid for elected officials) into ‘buying’and/or bailing out the capital markets instruments on the other side of the deal.

    1. KnotRP

      Today’s Banker is not unlike a Heroin dealer….getting started is easy and no-cost, getting out will take everything
      you own, and that still may not be enough.

  4. Jim A

    Housing has become dominant at least partly because it is a manufacturing job that CAN’T be outsourced. Or at least it can only partly be outsourced, by importing things like electrical products and plumbing fixtures. It still involves paying a decent wage to people who don’t need a college degree to turn raw materials into a product worth more than the sum of the costs of the raw materials.

    1. KnotRP

      Clearly, we tried to have an economy based on “sheltering each other”….but when that topped out, there was nothing
      to pick up the slack, and the debt couldn’t be sustained
      by wage income, so now our economy is based on margin calls and warehousing shelter to control price.

  5. Garrett Pace

    This dovetails nicely with something I’ve pondered about our consumer society. All the goods we buy eventually make it to the garbage dump. It is in the interest of producers and manufacturers that the intervening period (where the good is in our possession) is as short as possible, so we’ll go out and buy another one.

    So we end up with overpriced junk, intended to easily break and need replacing.

    Disposable housing is just another step in this same process. Looking for a home in 2008, I had no interest in the newer ones – overbuilt, poor quality monstrosities with no yards and situated waaaay out in the boonies. It was clear to me that the buyers of these homes didn’t intend to live in them long – just long enough to make a mint by selling them.

    1. Schofield

      “Looking for a home in 2008, I had no interest in the newer ones – overbuilt, poor quality monstrosities with no yards and situated waaaay out in the boonies.”

      Curiously Smart TV’s and Internet purchase with home delivery and less rush-hour snarl-ups seem to make Boonies new towns and cities attractive to many.

      1. Garrett Pace

        Oh, definitely. If all you want to do is consume you’ll never have to leave your house.

        If you want to WORK, however – well, many employers are still resistant to the idea of home offices.

    2. rps

      It’s called Engineered Obsolescence Planning.

      Reminds me of FDR’s 1932 “Forgotten Man” Speech: “Every man and woman who gives any thought to the subject knows that if our factories run even 80 percent of capacity, they will turn out more products than we as a Nation can possibly use ourselves.”

  6. Moneta

    What drives me nuts is the complete disregard for reality.

    Here in Canada, they keep on building “executive” houses like they build in the US which is based on a 1950s ideal.

    I am in Canada, I need a mudroom; I don’t need 3 living rooms!

    Basements are built with no consideration of water levels, and windows are installed without consideration for the sunlight.

    I noticed that many houses built in the 50s still have the original windows. Houses in the 70s needed a window change after 30 years, 1980s after 20. I noticed that McMansions built 5-10 years ago are already getting the roof redone and windows changed.

    These are usually owned by gen-x and gen-y who have been pushed out in the burbs and forced into buying more cars. They will end up changing everything at the same time they are paying for their kids’ university and taking care of their ageing parents.

    And if you have no liquid assets, it is very hard to go against the trend.

    1. Moneta

      Policies are usually set to protect the incumbents, usually the older generation. This means the older group has benefitted from higher prices while the younger group gets pushed out farther into the boonies with bigger and lesser quality homes. Everything revolving around the car which depreciates to 0.

      Gen-X and Gen-Y could go against the trend and move in the city core but that usually involves buying a much older home (50-100 years) which usually need a lot of costly renos because they are often badly maintained since they have always cost too much for the owner. Taxes are also much higher.

      All my peers who have done so have bought for maybe 300-400K 10 years ago, have done 100-200K in renos and with a couple of kids have been forced into getting 2 cars ANYWAY… despite living in the city core! So their house might be valued at 800K but they still have 400K in mortgage debt if not more.

      Instead of seeing densification, we got the donut effect. Now what is happening is that investors/speculators are now buying them up and converting them into 6-12 room houses for students. Of course, they are doing it on the cheap and the residents are protesting.

      Densification should have happened a long time ago but incumbents always put rules to protect themselves and over time, these rules ALWAYS create distortions.

      My city friends always complain that they are subsidizing the burbs but I maintain that we are subsidizing them. They seem to forget that if all those now living in the burbs lived downtown they would not own a 2000 square foot home with 4000-6000 square foot of land in the city core.

    2. Chris Rogers


      Its a great shame that you Canadian’s could not have kept Mr. Carney in your country, instead of exporting him to the UK to head the Bank of England – which, with his appointment, has lost any claims it may have had to independence from the political process – he’s just a pawn to our renowned economics masters, Chancellor George Osborne – or should that be a disaster as far as the average Joe in the UK is concerned.

      Unlike the USA, the UK early on decided that property prices after the GFC had to be supported at all costs – mostly this was detrimental to the ‘real economy’ and those struggling to get on the property ladder.

      What we now have in the UK is a housing bubble, one fuelled by Carney at the BoE with his new forward guidance, and a Chancellor who seems to believe that those who cannot afford a 5-10% deposit on a home costing US$1 million are in need of government assistance – regrettably, the average wage in the UK is under US$45,000 per annum and you are only allowed to borrow at three times joint income – mortgages are now available for 40 years, and like the US, our graduates as of 2015 will be saddled with student loans debts similar to peers over the pond – not to be welcome.

      Still, our great thinker the Chancellor instructs us we don’t have a housing bubble, this despite the fact that nearly 50% of the UK population lives in and around London and its environs and London and its environs do have a housing bubble, one that creeps towards other areas as people are forced to move further afield to afford a home – although, not one valued at nearly US$1 million.

      I lament at all this BS and still the general population seems to buy into all the lies and huge debt – glad I’m poor, otherwise I too may have a mortgage my grandchildren would be left with as an inheritance, and my daughters only six presently.

      What games we play!!!!!!

      1. Moneta

        I see him as the awe in the “shock and awe” strategy.

        Why do I get the feeling the situation is so bad that the Brits needed a scapegoat and he knows it?

      2. Moneta

        If one adopts the concept of globalization then one must drop the concept of nationalism. They just don’t go together. Not all, but a large number in the upper circles don’t care if the average Joe is broke, especially if these elite work for a multi-national or a bank.

        In their minds, if 35 million Canadians are broke, who cares? They’ll just sell to the 6 billion in the emerging markets. And if the poor Canadians start bickering, they’ll move to a gated community or even better, an island… if they can only manage to get the US type golden parachutes! However, most live for the day and can’t think past 5 years, talking about their boats and wines.

      3. Ed S.


        Well, I’m not so sure about the US not supporting housing prices — I think it’s just taken a bit longer to get the support to be effective.

        In most areas, prices are up substantially (Case-Shiller 10 City is up nearly 12% since June 2012 – June 2013). Not hard to find pockets where selling prices are up 30-40% in 12 months.

        The idea of “housing as investment” is completely embedded in the popular mind. Housing starts (which DO drive economic activity) are at low levels — levels seen in the early 1960’s when the population was fully 1/2 of what it is today. But housing PRICES are back (up) — so we should be happy.

    1. Moneta

      The bailouts have made us believe that the crisis was just a blip and that we can go on without changing anything.

  7. MikeNY

    Another symptom of our government’s belief that if we just pump up asset prices high enough, we can wind back the clock to 2006 when all was well with the world.

    I guess the jobs required to afford these houses were supposed to come … from the housing industry itself!

    This is the Potemkin Recovery.

  8. Ron

    The idea that anything that limits new tech thereby reduces productivity and is therefore bad for the economy gets a great deal of play. Hard to find anyone against new growth so these arguments that focus there appeal on this issue seem a bit suspect.I don’t disagree that we overspend on housing but
    to say its having a large negative impact on jobs, technology and future economic growth is probably correct but; so what!
    Maybe human activity cannot be constantly focused around productivity gains.

    1. susan the other

      I think so too. Productivity is the Achilles heel of capitalism because it forces ever more destructive competition; enrichment of the “winners” and impoverishment of the “losers.” Productivity does not lift all boats. It is the main reason factories are outsourced to China. Productivity also becomes efficient, greedy, at using up natural resources at much faster pace. Innovation doesn’t necessarily have to be productive in this sense. It can be an advance in science or a better socio-economic system. I don’t like the conflation of the simplistic concepts of innovation and productivity – somebody needs to think through the evolution of this stuff.

    1. Ed S.


      There were just under 1 million National Association of Realtor (NAR) members in the US in 2012. Now not all members are active but there are roughly 130 million employed in the US — so 3/4 of 1% of employed people are engaged to sell houses.

  9. ron

    The primary argument against throwing capital and human resources into the existing housing market seems to focus on the idea that it limits what is spent on developing new technologies that might promote higher economic growth. The its bad because it hurts new growth or limits productivity or feeds the financial systems argument feels a bit worn and over used.

  10. Erik

    Another reason for our stall-out in innovation: Wall Street (primarily in the form of Sand Hill Road VCs) has co-opted the notion of “innovation” in a way that confines it to developing apps, social networks, and other limited-scope endeavors.

    The best and the brightest, if they decide to forego a career in finance, can be “innovative” and “disruptive”, and in a sphere that is still very comfortable and that can be very lucrative (if they partner, again with the right VCs and don’t bootstrap themselves instead). However what we get out of this is easier ways to order food and hail a taxi – nothing truly fundamental.

    As we sharpen solutions for problems at the margins – primarily problems that financially upward young people have, we’re not inventing anything really new and valuable. In fact, watching Facebook and now Twitter, it all seems like the whole “disputation / innovation” culture is designed to mimic the bubble-generating tech sector of the 90s and housing sector of the 00’s, write small. All the while distracting the best and brightest and making them think they are heroes.

    My generation’s Einstein’s are in finance. Its Steve Wozniaks are at Google and Facebook. Its Apollo engineers work in design at Apple. We get more of the same, with slight changes, not innovation.

  11. Banger

    The home, aside from the house, is one of the few places that remains a haven for human interaction. Public space has declined as a vital part of life. Children don’t play in the streets very much, people don’t socialize in common areas but stay home, watch TV or go into the virtual world because it is “safe”, manageable and sufficiently low-bandwidth to depress consciousness. The home is the ultimate “haven in a heartless world” where we hole up after a challenging encounter with public life.

    Houses are, on the whole, status indicators and status is always a critical factor in human society. People “buy up” because they want their house to reflect their values and live near people who are “better.” The housing industry, like the wedding industry in India (and increasingly here) thrive on status needs–for most people this is vitally important. People are not chiefly economic actors but will often do things that they cannot afford for status needs.

    Our problems are cultural. As long as we value homes as status symbols we are going to have a vigorous real-estate sector. I don’t believe values will drop (other than marginally) in the short- and medium-term as for the long-term–it’s too hard to gauge anything since we live in a period of constant and sometimes dramatic change.

  12. susan the other

    It wont be long before we have Housing for a Small Planet. Prefab, eco-friendly, sustainable footprint, quick to install houses. We could create a long lasting industry, beneficial to the environment, by carefully disassembling old houses, especially the poorly built ones of the last 3 deades, and reusing the materials in new, well designed ones. Keynes would like it.

    1. Ed S.

      the poorly built ones of the last 3 decades, and reusing the materials in new, well designed ones

      Looking at the way houses have been constructed in the last 30 years, I don’t think you could build a “well designed” house from bowed, green 2×4, drywall, particle board, and “engineered” joists.

      Nice idea — but today’s house isn’t comparable to one built in 1960.

  13. Reddy

    I have been in the US for 12 years now. I still rent. I am always looking for that really what is needed kinda house. Small and efficient. Even for a single family its hard to find a house which is not too oversized. I would like to know how long will this phenomenon will go. I guess as long as people don’t ask for it and keep buying what the sellers show. Is there a place where I can find a really small?house?

    Do big houses pay more taxes say hypothetically speaking
    1)Small house with a big yard —
    2)Big house with a small yard.

    Where am I paying more taxes?


    1. Jeremy Grimm

      In many areas the contractors apply a rule of thumb to determine what size house to build. The value/price of the house is set by a ratio of the house price to the property prcie — where property is high lot sizes are smaller and house size is bigger to maintain the ratio.

  14. zombie ken

    Bank of America
    gets a low income, minority under age 25 buyer for a mortgage in 2007, property is valued @ 80,000. Within 3 months, property value plummets to 65,000.

    Borrower wonders why one would pay for an item at a certain price when it is no longer worth that amount. Borrower also loses job.

    Borrower first enters payment plan with bank.

    Borrower eventually can not keep up and leaves. Borrower initially rents property, receives contribution from family. Then borrower gets wind that thousands of other people were also suckered into loans that were thousands of dollars more than actual value of property.

    Borrower gets pissed.

    Borrower has been bending over backwards to try to compensate what by all accounts looks like a shady deal.


    Borrower stops, vows to never pay another red cent to bank of america.

    Bank goes to government, gets bailout to cover the amount of loan and thousands like it from taxpayer. Bank also internally securitizes its amount via recon and bac divestment instrument.

    Bank also “forecloses” meaning files legal proceedings to repossess property.

    In the span of the next three years, from 2008-2010, bank commits a number at least perjurous activities threatening original borrower, missappropriating hamp modification funds, forging documents of title and ownership to state court.

    Bank maintains deceptive and cryptic communication with borrower, including allegations of excess monies due for charges that are not accounted for.

    Bank then sells AGAIN to outside investors in bundled and repackaged mortgage pools.

    A whole shit storm of media and social unrest ensues.

    Bank attempts to purchase government and intelligence communities, as well as militarize police, in its favor.

    (Lets include that BANK, is no where near as intelligent, practical, or wise as it perceives itself to be. Typical psychopath/sociopath, bank and schleps, are mostly ego maniacal-
    illusions of grandeur-
    con artists-

    able to induce mania, but inherently flawed in having a very by definition irrational nonsense “end game” scenario in mind. Its like a bad acid trip from a whole gaggle of yayas from yale, harvard, blag blah blah. Call it whatever you may, but what it ultimately is is a bunch of people who have a very very flawed cogntive ability to factor in multiple scenarios, think long term, and/or integrate any principles of sustainable rulership. Machiavelli in fact was influential, but also inevitable failed.) As did all other asinine people of only conquest.)

    I digress,

    Bank does a bunch of dumb shit. Gets government involved.

    Government, for whatever reason, (blackmail?)


    Bank finally sells loan for the fourth time to Ocwen.

    Bank has profited a multiple of four times.

    Original borrower has scraped by first on student loans, a meager minimum wage income, and unemployment.

    Borrower, with destroyed credit, cannot. even. get. an apartment.

    Talk about poverty.


    21st century.



    All these fucking assholes can die as far as im concerned.

    Unless the so called leadership aka government immediately redistributes the wealth to the people, and takes it from the overlords of black majic who have co-opted all decency in order to pay for their tacky trashy prostitutes and crap ass pea balled testosterone. they might as well just go straight to their graves and lie down.

    Anyone in interest of safety is in interest of justice, equality, and a restoration of americas dignity.

  15. TomDority

    Taxing land value and, using that tax to provide services is the best way to stabilize the inequitable system. Also, a high tax on economic activity that is destructive to the economy would cinch it. A free market is a market free of economic rent. The hollowing out of the cities was a direct result of taxation (an unjust revenue system) that favored speculation in real-estate – it de-taxed land and taxed productive work – it de-taxed unproductive work and taxed wealth creating work.
    All wealth requires labor in it’s production. Wealth does NOT equal money.

    Build a house (requires labor and material to produce) and you have created wealth. Sell an existing house for more than the carry cost and acquisition cost and you have profited at the communities expense, you have not created wealth but, have removed wealth from the pockets of those who have created it (the community).

    This huge transfer of money that occurs is not wealth – it is theft of the wealth that others have created.

    If I build the exact house in two locations – a wealth creating activity. One in, say Chicago, where the tax base has been subsumed by financialization and destruction of public services – And, another house where public services are strong (sewer, electric, transportation, co-location with decent employment, schools, parks etc,police and fire) {{non-existent in our neo-classical financial nightmare)). I would be able to build the houses for virtually the same price (material+labor+profit). THE ONLY DIFFERENCE IN WHAT I WOULD HAVE TO SELL THE HOUSE IS THE DIFFERENCE IN THE LAND VALUE I HAD TO PAY TO AQUIRE THE LAND. Do the math. Land value is created by the presents of people or community and services employment etc. around and to the land. It, therefore, should be the source of the tax base used to provide those services. Instead, the wealth creating aspect is taxed (labor and materials) and the non-wealth producing sector (speculation, wall,street gambling, complex financial products (worthless crap) and sitting on ones ass waiting for the rise in land value others have created to enrich one’s self.
    Remember, this is something practically everyone cheered and became drunk upon – virtually everyone became drunk with this neo-classical wet dream. So, I suppose, a majority of people have are hard time admitting their own hand in the tragedy. – I assume that’s why some much finger pointing goes on, so much scapegoating.

    The real issue and, the real cure is a just tax system designed free the market from economic rent seeking – or, at least limit it to a level that is not so destructive to the people, animals, life supporting capabilties of this planet.

    The only effective way to do that is through the power of taxation – the elites know this… it’s why they spend so much money on the propaganda, elections, think tanks, privatization of public works etc. etc. on a global basis. It’s obvious. It is also a protection of the neo-economic thinking that was developed by these same plutocrat’s for-bearers about 100 years ago.

  16. Elizabeth

    There is a shortage of affordable housing for the working poor, and those disabled…witness the invisible tendency for families to have to double and triple up. The problem is that the housing market is just that…a market, left to the devices of speculative capitalism. We need guaranteed housing for all, no matter the income, which could go a long way to taking housing out of speculation, and putting it in the hands of people who need it. If you analyze from a capitalist’s perspective, you get a capitalist’s solution: other sectors that actually produce something are being underdeveloped at this point. Yet housing for middle income and lower income folks is being ignored, at the expense of stable communities and lives that aren’t in constant crisis. Only a public housing program could deliver what’s needed, and rent control, if we’re really honest with ourselves. Housing, like food, water and energy, should never be commoditized and part of any speculative enterprises.

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