Please vote in this poll using the sidebar.
Is it the government's job to incentivize home ownership?
- Yes (11%, 17 Votes)
- No (89%, 140 Votes)
Total Voters: 156
This poll will be active and displayed on the sidebar through 07.11.2009.
Poll: Is it the government’s job to incentivize home ownership?
By The Tim on July 5th, 2009 at 12:05 AM · 50 Comments
This poll will be active and displayed on the sidebar through 07.11.2009.
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- Poll: What characteristic of a home is most important to you?
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Kary L. Krismer » Jul 5, 2009 at 8:37 am
There should be a “sometimes” choice.
I think the major reason we’re in the problems we’re in is certain people got the idea that a lot more people should own homes, and those who didn’t necessarily agree with that line of thinking went along for the ride to make money. But the fact is there are a lot of people that for whatever reason (income, ability, intelligence, physical skills, housekeeping/maintenance habits, etc.) should not own a home. It’s much better that such people rent rather than push them into ownership of a home that will deteriorate in condition and possibly eventually be foreclosed.
That said, I don’t have a problem with what the government is doing today to make financing cheaper and prevent foreclosures. Markets over-react and doing things to allow a “soft landing” is good, IMHO.
patient » Jul 5, 2009 at 10:18 am
RE: Kary L. Krismer @ 1 – I winder if you still think is a good idea when the bill for bank bailouts, crashing FHA mortgages etc, etc will have to be paid for. I.e will you happily pay say ajnother 5% in income tax for the measures you mention? These things are not for free.
BillE » Jul 5, 2009 at 11:22 am
No. And it’s not their job to help people buy new cars with a “cash for clunker” program either. People are able to buy what they’re able to buy. If the government steps in and pushes more sales then it’s just gonna tip over later when demand falls off.
Dmitry » Jul 5, 2009 at 12:51 pm
The problem is that US economy is consumer driven, it won’t recover unless consumer can buy. And the consumer is currently broke. The only easy way to give him money for free is to raise his equity by any means. That’s why goverment is doing this.
Softwarengineer » Jul 5, 2009 at 2:25 pm
YES BILLIE AND PATIENT
We’re broke.
We have original contracts for Medicare/Medicaid and Social Security to pay for all ready and Medicare is slated bankrupt in 5 or so years [maybe IMO sooner, if the depression worsens].
Obama’s $787B stimulus is only 5% spent to date….why is that? IMO the treasury rate borrowing may be topped out and they’re not telling us or we’d panic, it would sure explain an “emergency stimulus” still not spent, about 6 months after it was rushed through approval [in error, I'd say].
So there is no money for distressed homeowners, Paulson already gave the banksters $800B last year and they’ve cash canned it for old bad debt collateral, stock dividends and bonuses.
One Eyed Man » Jul 5, 2009 at 2:40 pm
41 to ZERO. Apparently this is a simple question and everyone is in agreement that the government shouldn’t incentivize home ownership. There. That was easy wasn’t it.
The idea of pride of ownership and having a stake in the community is once again reserved for those who can qualify in the private market place. Don’t worry about the neighborhood, renters treat property just like it was there own. And they like the stability of having to move because the landlord wants to raise the rent or sell. It gives them the incentive to invest in the community.
No more 8K first time buyer credit. Easy enough.
No more Fannie and Freddie. Now all loans are the same as a jumbo, but so what. Let the market take care of it right?
Oh yeah, and no more FHA and VA. After all, if they can’t save the money they need to get financing they really can’t afford a home. Of course you might have to pay military people more, but again, that’s a market issue and they can work it out.
You better do away with FDIC insurance too because it gives people an incentive to leave large sums in banks that make home loans with a lot of that those extra deposits.
And no more mortgage interest deduction. Ouch, if you have a big mortgage. You should have taken that into account when you took out the loan. And of course it will cost you a little on the resale price.
What about investment interest on rentals owned by an LLC or corp? Clearly if it’s occupied by the owner of the LLC or corp, or a related party the interest shouldn’t be deductable? Better take away their interest deduction or you’re just making work for weasel tax lawyers who set up investment vehicles to get around the no mortgage interest deduction rule you just enacted. But why should you favor real estate investors who own rentals? Why should they have a better deal than owner occupied housing? You can argue that it’s an income tax, but no one made them borrow money to buy property. Why should the investor get a better deal than owner occupied? Now you’re using tax treatment to incentivize renting.
And what about the fire department. Should they get revenue from sources other than property tax? If so, it incentivizes property ownership including home ownership.
What about Homestead law. This has more to do with creditor rights and similar issues than anything else. It probably incentivizes home ownership, especially in states like Texas and Florida that allow huge homesteads, so get rid of it and try to figure out how to protect widows and orphans and families in bankruptcy with some new legislation if you’re a bleeding heart who gives a sh_t about that kind of stuff.
And what about Fair Housing and other social issues? I think if you take away all the government programs that deal with housing you’ve gutted a lot of the mechanisms through which these laws are applied. But if it incentivizes home ownership it has to go. I doubt that there would be any social unrest caused by the new found right of bigots to pursue whatever agenda they might have.
And what about the Federal Reserve System? If they influence long term interest rates to move lower, aren’t they incentivizing home ownership? Congratulations, you just made Sniglet’s day by doing away with the Federal Reserve system. Good luck with that new financial system you’ve decided to devise and implement. No problem there.
I’m sure glad that off the top of my head I can’t think of anything else that might be considered a government incentive for home ownership. For a second I though there might be some unintended consequences and we’d have to think about it a little and maybe debate some of the issues before deciding to sh_t can everything. Maybe getting rid of all the government activities that incentivize home ownership would be more disconcerting for me if I weren’t a closet anarchist with authority issues.
Softwarengineer » Jul 5, 2009 at 2:57 pm
RE: One Eyed Man @ 6 –
WELL SAID
We all blame guys like Madoff for the crime of toxic debt, but perhaps we’re all Madoffs in a way? LOL
Kary L. Krismer » Jul 5, 2009 at 4:42 pm
By patient @ 2:
Maybe, maybe they’ll be for profit. Or maybe they’ll be less expensive than if more banks crashed as a result of a market over-reaction.
dogwood » Jul 5, 2009 at 6:26 pm
From the poll results it’s clear that very few people think that the gov’t should incentivize home ownership, but isn’t that exactly what the mortgage tax break has always been about?
Yes, one can argue that it does a lot of good – creates a more stable society and increases the tax base, etc., – but the merits of it don’t change the fact that the government actively incentivizes home ownership. Just take away the tax break and see what it does to home prices…
The Tim » Jul 5, 2009 at 10:12 pm
I wonder if one of the three people who selected “yes” (so far) would be so kind as to point out to me specifically where this responsibility is enumerated in the Constitution. Thanks in advance.
Mark J Garey » Jul 5, 2009 at 10:52 pm
Tim… It’s in the preamble, “promote the general welfare”… This is why we use tax dollars (or future tax dollars in our case today…) to build schools, invest in business, technology, etc…
BTW, does anybody know where I can get a blank copy of MLS forms?
jon » Jul 5, 2009 at 11:02 pm
By The Tim @ 10:
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
Income tax is a big part of federal revenue, and they have to decide which deductions to allow and which ones not on some basis. There is always going to be disagreements over that.
The poll didn’t specify the US government, and the states have even broader constitutional authority, expect for what is reserved for the federal government. So there isn’t really constitutional basis to vote no the way the poll is phrased.
I voted no because the government has gone way past deductions and into, for example, requiring banks to meet racial quotas for housing. That was combined with the moral hazard created by taxpayer backing of the FMs, which led to security ratings becoming fraudulent.
Mark: The preamble is an explanation of why the people are establishing the constitution, it is not granting any power to any part of the government.
shawn » Jul 5, 2009 at 11:14 pm
RE: The Tim @ 10 – The Tim I did not vote yes, but if the people want the government to do this, and it is not breaking any laws, then that is what the constitution is for: to provide the ability of the will of the people to be met, as long as basic rights are not violated. That is the premise anyway, not saying that is what happens.
Mark J Garey » Jul 5, 2009 at 11:20 pm
Tim: Well, I voted yes… Maybe I don’t understand the word “incentivize”… My wife and I bought our first house 10 years ago using a FHA mortgage. Were we incentivized to buy the home? Years prior to my home purchase, I also received a PELL grant for college, was I incentivized to go to college?
Sniglet » Jul 5, 2009 at 11:22 pm
As Kary said, I think the responses would be somewhat different if there were other options to choose from. Very few people would say the government should “incentivize” house purchases, yet a great many people would agree that the government should intervene in the economy when there is the risk of a systemic collapse. Further, very few people believe that mortgage tax deductions,or GSEs/FHA/VA constitute government “incentivizing”.
Personally, I am against all forms of government interventions in real-estate (be it tax reductions, interest rates, etc). If the government wasn’t engaged in actively trying to subsidize home purchases, the actual costs of owning a home would come down (i.e. since there would be less easy money available to purchasers, which drive up prices).
There are plenty of countries in the world with home ownership rates that are comparable to the US that don’t have the benefit of GSEs or tax deductions, so the arguments that everyone would just become renters is nonsensicle (assuming that renting is such a terrible thing to begin with).
In any event, if less money chased real estate (i.e. if government incentives disappeared), we would ultimately see a much healthier over-all economy as savings would pour into areas of productive investment (unlike housing, which is completely unproductive).
jon » Jul 5, 2009 at 11:40 pm
By Sniglet @ 15:
People are motivated to work hard by being able to enjoy the rewards. If you provide greater rewards you will get more work. So I wouldn’t say that housing is completely unproductive. It just got wildly out of control.
One Eyed Man » Jul 6, 2009 at 12:29 am
RE: The Tim @ 10 –
The authority to incentivize home ownership is specifically enumerated in the Constitution in as many places as “Executive Privilege” and a “woman’s right to choose.” Both sides of the isle seem to be able to find evidence of implied rights and powers in the Constitution when it fits their purposes. Mark, jon and shawn all gave well reasoned answers to the issue of Contstitutional authority and I concur in their opinions.
The reference to “general Welfare” in the Preamble cited by Mark is also contained in Section 8 of Article I concerning the Legislative branch. Article I, Section 8 provides in part:
“Section 8. The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; ”
I think the right to provide for the general Welfare is sufficient to authorize legislation to “incentivize” home ownership if Congress deems it appropriate,
For the record, I didn’t vote in the poll so I don’t qualify as one of the gang of three whose opinion was requested.
Dave0 » Jul 6, 2009 at 6:27 am
I voted yes because as someone (I think Robert Shiller?) once said: “Real Estate is generally a bad investment for individuals, but good for society”. Homeowners are what create stable neighborhoods, homeowners get to know their neighbors, join community activist organizations, etc. because they know that they will be there for a long time and have a vested interest in keeping the neighborhood nice,. Renters (including myself) never put that much effort into these things because they could move at any time.
So yes, this gives the government a good reason to promote home ownership through incentives. That way it looks like a slightly better investment from a individual’s point of view, so that more home owners are created and neighborhoods become more stable.
Sniglet » Jul 6, 2009 at 6:33 am
Yes, housing is completely unproductive from an economic perspective. A house doesn’t generate any income, unlike a factory or business. Even rental properties are “unproductive” from an economic standpoint.
Thus, anything the government does wich encourages people to put more money into housing than they otherwise would on their own will necessarily result in reducing economic growth and prosperity (i.e. since there will be less money invested in “productive” enterprises). I’ll grant that we wouldn’t be any better off if people put money into drugs or consumer goods instead of purchasing homes, but incentivizing people to spend more on housing certainly doesn’t increase investment in productive economic activity.
One Eyed Man » Jul 6, 2009 at 6:45 am
RE: One Eyed Man @ 17 –
My sincerest apologies to the spelling police, that should have been aisle, not “isle.”;-)
And who’d a thunk it? All these years the guys with the signs at football games are just Constitutional scholars who got it right, It’s “Defence.”
Hyperbola » Jul 6, 2009 at 8:05 am
RE: Sniglet @ 19 –
I disagree. Housing produces value not in a manufacturing sense (once constructed) but as a service. Granted, the marginal value of housing as a service is quite low – a less expensive house/rental provides only marginally less shelter/storage/entertainment value than a more expensive one, but as a fulfillment of basic needs such as shelter, parking, storage of other goods, etc., housing is quite valuable.
If this basic fact were not true, why not just move out of wherever you are currently living and live on the street? Or, as a compromise, shack up with 10 of your closest friends in the same house/rental to lower the cost?
You live where you live because it is worth it to you (or, cynically, because it’s worth it to the spousal unit). It’s the same economic value proposition that makes any other kind of economic activity have value.
Kevin Lisota » Jul 6, 2009 at 8:05 am
Right or wrong, there is a fundamental belief in this country that home ownership is a good thing for society. Current stimulus measures aside, what about government incentives like the “mortgage interest deduction”? That is one of the best deals remaining to reduce your income taxes, and I can’t believe that people who answered “no” to this question would advocate doing away with it.
You can debate the current extra stimulus measures as appropriate or excessive, but the fact remains that our government heavily incentivizes home ownership, even in the best of times.
David Losh » Jul 6, 2009 at 8:05 am
RE: Sniglet @ 19 –
I’m surprised by your comment because you are the one who pointed out the banking sectors involvement in Real Estate. It was that realization that changed my views about Real Estate and the subsequent depreciation of the assets.
Mortgages have been a driving force in the securities markets, evidently. The loans, as they defaulted, caused ripples into every corner of the global financial markets, or so we think, I don’t really know. Those mortgages as they were generated, bought, sold, and traded, became a financial force.
In my opinion banks over involvement in Real Estate is the main problem that is being addressed by the government and banks are fighting to maintain market share in housing. The way things are going banks may own a large per centage of the countries housing units.
So the government is incentivizing the use of mortgages. They are doing nothing for home ownership.
The Tim » Jul 6, 2009 at 8:09 am
The mortgage interest deduction encourages perpetual debt, not ownership.
Kary L. Krismer » Jul 6, 2009 at 8:18 am
RE: The Tim @ 24 – That’s an interesting thought. I’m not sure when the interest deduction kicked in. Back in the 70s all interest was deductible, even on cars. Then maybe in the 80s they limited it to only houses. And that change did make it more likely that people would continually refinance their homes, because of the appeal of something being “tax deductible.”
Some people would flush money down a toilet if that was tax deductible. In business school my professor called such people doctors.
But back to your point, in the distant past people moved less and refinanced less. I’m not sure all of that is due to the deduction for home interest. But part of it probably is.
Racket » Jul 6, 2009 at 8:22 am
By The Tim @ 24:
Absolutely, but who are we not to take advantage of it. See it as a discount on your loan.
Kary L. Krismer » Jul 6, 2009 at 8:23 am
By Kevin Lisota @ 22:
That “fundamental belief” is what I was referring to in the first post here. And I’d say that belief is wrong–some people just should not own. But this country doesn’t tend to work that way. For example, most people are allowed to drive, even though they have low skills.
As to the interest deduction being one of the best deals to reduce your tax liability, I really have to disagree. Anything that only saves you 30% (at best) of what you pay isn’t really a good deal. It might affect what you’re willing to pay for a property, but you shouldn’t buy just for the tax deduction.
patient » Jul 6, 2009 at 8:52 am
Many of you are touching on a subject that can have a very different interpretation. I’m refering to the comments of housing as being productive and the incentive to go into debt.
The most difficult man to control is the free man. A very efficient way to gain control and keep a person inline with your directvies is to put him in debt. So, it makes sense for the government to want all their citiziens deep into debt to keep them occupied and chained to a lifelong “productive” life where they go to work and work day out and day in to be able to pay their debt, generate taxes and maximize their contribution to the society. A debt free man is a wild card and wild cards can be trouble makers who starts questioning and can’t be relied on to the same degree to generate a stable income etc,etc. I’m not sure if it’s a good think or not, as long as I have the choice to remainn free it might benefit me in the elong run if others take the bait…
I did vote “no” though since I think this is something the market do much better than the gov. and there is no reason that home ownership would be more expensive without the incentives since prices are now largely controlled of what people can pay as a result of funds + incentives. Remove inctentives and prices will be largely controlled by funds alone, i.e be lower.
Kevin Lisota » Jul 6, 2009 at 9:06 am
RE: Kary L. Krismer @ 27 – I would never advocate buying because of the mortgage interest deduction. However, are you saying that we should do away with it? If your family needs a house, why wouldn’t you want to reduce your taxes as an added benefit? I can think of no other similarly generous tax reducton benefit available to the “average joe”.
Kevin Lisota » Jul 6, 2009 at 9:16 am
RE: The Tim @ 24 – Given that houses cost a lot of money, the only path to homeownership is via long-term debt. The mortgage interest deduction effectively reduces the cost of that debt, so it does lower barriers to home ownership.
Is a 30-year payback a perpetual debt? If you are arguing that the mortgage interest deduction encourages refi activity to maintain the tax deduction, I disagree. I think perpetual debt on homes is a function of people’s “equity greed” to use money in their home to pay for cars, trips, education, etc.
Herman » Jul 6, 2009 at 9:17 am
By The Tim @ 24:
All the deduction did was cause a one-time increase in RE prices as it encouraged people to take on more debt. As I recall – I don’t have a reference. Removing the deduction would have the reverse effect.
Ira Sacharoff » Jul 6, 2009 at 9:33 am
One Eyed Man said “My sincerest apologies to the spelling police, that should have been aisle, not “isle.”;-)”
Unless you were referring to property on Bainbridge.
The government has an influence on interest rates. They are not always successful, but they’ve been trying to “incentivize” home buying by attempting to keep interest rates low.
I voted no, but in order for government to function, they need property taxes, which are paid by home owners.
To pave roads, have libraries, maintain parks, provide police, have people to ensure that unsafe structures are not being built, or that restaurants are not serving poison, or to have people serve on the plastic bag commission, property tax receipts are necessary.
And, historically, buying a home on a 30 year fixed contract has been seen a something of a forced savings account, where more principal is paid off the longer one owns the home ( although many homeowners can’t actually save any actual money), and the government should have an obligation to encourage saving, whether or not it’s specifically stated in the constitution.
Lastly, when did “incentivize” become a word? I hear it all the time, and I know it’s in the dictionary, but I think it’s one of those new words that wasn’t a real word, and just became accepted after being used incorrectly for years.
See, I’m not only the spelling police, I’m the grammar police too.
Kary L. Krismer » Jul 6, 2009 at 9:38 am
By Kevin Lisota @ 29:
I think there would be a big uproar if the deduction went away. I don’t see that happening. But on a conceptual level it’s hard to see why housing interest is deductible, but other interest not.
Kary L. Krismer » Jul 6, 2009 at 9:40 am
By Herman @ 31:
Well clearly. The government non-taxation of employer health insurance premiums has also caused medical expenses to go up.
Our government has probably during my entire lifetime liked to use the tax code to affect behavior.
Ira Sacharoff » Jul 6, 2009 at 9:44 am
RE: Mark J Garey @ 11 –
Mark,
I’m not sure of your intent here, and I might be wrong, but I think you can’t use an NWMLS form unless you’re a NWMLS member or subscriber ( such as an agent, broker, or appraiser).
There are online forms for free for real estate contracts that are not NWMLS forms, but are very similar.
But if you want to view blank NWMLS forms for information purposes, send me an email. I’ll hook you up.
Softwarengineer » Jul 6, 2009 at 9:57 am
RE: The Tim @ 10 –
HI TIM
LOL, the Constitution? That’s only to dictate laws for the original Middle Class?
The elite organised crime employers/CEOs can pick and choose which Constitutional Laws they’re under, as they illegally replace the old American tax base employees with lower wages.
The government does almost nothing about it too.
I’m for property tax decreases for the retirees; but none, I repeat none of it should go to their kids as inheritence. A county lean should be put on the house and the back property taxes [with interest] paid back after the retirees sell it or die. We have a local government tax shortfall, why should the kids get $400K gift homes on inheritence with reduced property tax payments, when the rest of us pay full price property tax?
Scotsman » Jul 6, 2009 at 10:23 am
RE: Herman @ 31 –
Bingo! We have a winner!
It’s cost shifting, plain and simple, that had a one-time benefit to the industry, now long gone. If it went away, home prices would fall, and the economy would be more efficient in the long term. Anything else is just political pandering to your favorite interest group.
Kary L. Krismer » Jul 6, 2009 at 10:33 am
RE: Scotsman @ 37 – I’m not sure why you say the benefit is “long gone.” People still buy houses for the tax benefit.
jon » Jul 6, 2009 at 10:36 am
The mortgage deduction is not just a one time benefit. It allows each owner to buy a bigger house than they would otherwise. Consider some development of rural land that has very low cost per acre. The value is initially just in the house. The deduction allows people who buy those to afford larger houses. Then as the area grows and the land becomes more valuable, the same applies to the land value.
jon » Jul 6, 2009 at 10:38 am
By Kary L. Krismer @ 38:
He is thinking that there is a fixed pool of houses and every one is just bidding on them.
One Eyed Man » Jul 6, 2009 at 10:40 am
By Ira Sacharoff @ 32:
Give me phonetic spelling or give me death. If it was good enough for the founding fathers, it’s good enough for me. It’s even practiced in the Constitution. ;-)
You’ll never take me alive.
FREEDOM!
Kary L. Krismer » Jul 6, 2009 at 11:06 am
BTW, I think you could argue that the home interest deduction benefits everyone, because the standard deduction is probably larger because of it. Countering that, however, the rates may be different because the SD is so high.
Scotsman » Jul 6, 2009 at 11:57 am
No, I’m thinking the prices of all homes increased one time, i.e. a demand curve shift, when the tax deduction came in. Yes, folks still get the tax benefit, but that benefit is negated or canceled through higher home prices.
It would be nice if you two knew what the hell you were talking about. Bye bye.
Kary L. Krismer » Jul 6, 2009 at 12:05 pm
RE: Scotsman @ 43 – Give me a break. You said “benefit to the industry.” If you want to change that to something else, fine. But I was responding to what you wrote. And the industry benefits from volume as well as price. As long as the price stays higher, that’s a benefit to the industry. As long as the volume stays higher, that’s a benefit to the industry.
It would be nice if you knew what the hell your wrote. Bye bye.
jon » Jul 6, 2009 at 12:10 pm
By Scotsman @ 43:
I have no idea when the mortgage interest tax deduction came about. Was it in the original income tax? Regardless, you are saying that the prices of all home increased at that time. What about houses that were built after that time? Their price is higher because people can afford to build larger houses. The higher price is a result of them being larger, not because of the deduction. The only connection is that more larger houses are built because more people can afford them.
Scotsman » Jul 6, 2009 at 12:21 pm
Follow along, Kary. There’s a difference between responding to the original post, #31, and responding to what you wrote after that. I give up.
Kary L. Krismer » Jul 6, 2009 at 12:22 pm
RE: jon @ 45 – The prices would have been higher for a number of reasons because of the deduction. The owners who benefited clearly would have been those who owned before and sold after the change in the law, assuming they didn’t sell right after the change. But I don’t think you can say that owners who bought after didn’t benefit too. Arguably anyone who sold in a rapidly rising market benefited because without the tax benefit the rise might not have been as fast or highly publicized.
Kary L. Krismer » Jul 6, 2009 at 12:24 pm
RE: Scotsman @ 46 – Wow, and you claimed I never admitt I’m wrong. Amazing. Well not really. I wouldn’t expect anything more of you.
Lake Hills Renter » Jul 6, 2009 at 2:34 pm
Re: discussion of rights and the Constitution
The Constitution does not grant rights to the population, it defines limits on the powers of the government. That is a very important difference, and negates arguments that “the Constitution doesn’t grant right X” to people. It tells the government what it can’t do, not the populace what it can do. Rights are granted by default, not by explicit inclusion.
Mike2 » Jul 6, 2009 at 6:07 pm
Dave0, despite being a renter, I know several of my neighbors. The couple next door have keys to our house, and we have keys to theirs.