Submitted by smurfyjenkins t3_y9veul in science
Dumb take. It's not a "hidden welfare state". Nothing is "hidden" and it's not "welfare". Countries intentionally incentivize home ownership by doing things like making low-interest no-junk-fees allowed first time homebuyer FHA government-backed loans available, letting you deduct mortgage interest on your taxes, etc. Home ownership is stabilizing for a society and is the #1 wealth generator for families. Making home ownership attractive, worthwhile, and lowering the barrier for entry is the right take. Calling it welfare is just trying to create resentment .
>Calling it welfare is just trying to create resentment .
It's the opposite. It's trying to break through to the privileged elite who think they "do it all on their own through merit", as opposed to the poor who "get handouts because they don't work hard enough".
Pointing out that people with means get tax incentives (aka tax expenditures), which is akin to welfare expenditures, helps make them realize that they took get support (just less visible), and that it's not a value judgment of who is better or who works harder. It is a tradeoff of how we apply public funds. Then, you can unemotionally evaluate whether the net social benefit of home ownership outweighs the net benefit of reducing hunger, etc as we apply our limited resources as a society.
As long as those tax expenditures are not part of our conversation, natural biases will draw focus to regular expenditures and will distort the overall cost benefit evaluation. And the people who react with resentment are exactly the people we need to educate.
>It's trying to break through to the privileged elite
Looks like you fell for the bad framing.
Home ownership rate in the USA, those benefiting from mortgage interest deductions, is about 65%.
Those are your "privileged elite" benefiting from the "welfare" system.
I'm not saying they're the only ones who benefit from it. I'm saying that they assume government support does not apply to them, and default to the frame of "welfare bad".
Also, you just linked one agency and one part of a report explicitly looking at first-time and minority home buyers. The study in this post looked at multiple countries, and programs not limited to first-time and minority home buyers.
Why would calling it welfare create resentment?
Read the other comments. Might not explain why, but you can see that it does.
EDIT: Hah. Actually, the resentful comments have been deleted after I posted. It's because the framing of the paper casts helping and incentivizing people to become homeowners as welfare making it sound like a wealth giveaway to wealthy people.
The government subsidizes, through the tax deduction for interest payment, the provision of shelter for those who can afford to buy a home. It does NOT subsidize shelter for renters. My view. Do both, or do neither.
Wait until you figure out what we do for "family farmers."
More context on those poor and struggling "family farmers".
https://www.heritage.org/agriculture/report/what-you-should-know-about-who-receives-farm-subsidies
The Purdue family, the Tyson family, the Jimmy Dean family...
They are just barely gettin' by folks.
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tell me more
The catch is that it is much more difficult now to take the mortgage interest deduction and lower your taxes, thanks to the changes in the standard deduction combined with the principal caps on the mortgage interest deduction itself. It's down to under 18% of home owners now who can actually take the deduction and lower their taxes.
The real subsidy, which is what the paper is referring to, is the tax exemption for imputed rent. When you pay rent, your landlord pays income tax on that rent you pay. A homeowner pays no tax on the imputed rental income of the house, which they functionally pay to themselves by owning the home.
Ah, thanks.
I don't think renters would find it so hard to get their own home if there were less landlords so it would be more the solution to tax landlords to pay to construct affordable housing for local workers, than to give the landlord a tax break on their owning extra houses. I don't see the argument that it would be 'fairer' to anyone to tax homeowners on a hypothetical income if they were renting.
Imputed income is a nonsense concept that seeks to destroy natural incentives to invest in tangible, concrete ways to make one's life sustainable and affordable. It's morally the same as taxing you for raising your own children instead of sending them to daycare, or plunging your toilet instead of calling a plumber. It's essentially a tax on agency and non-participation in ultra-consumerism.
You inspired me to read more of the article. My unschooled opinion is that taxing imputed rent takes away all, or most of the motivation for owning. I guess that is the point. The same logic can be applied to cars. I own a home because I can't get what I have by renting. And it's a cost of housing stabilization system. I hate home ownership. It's a pain. I suppose, if I paid taxes on imputed rent, I would be able to deduct all of my repairs.
I am glad to hear that mortgage susidies have declined.
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> When you pay rent, your landlord pays income tax on that rent you pay. A homeowner pays no tax on the imputed rental income of the house
Sure, but the homeowner also does not get to deduct operating expenses or depreciation in the way a landlord does.
Looking only at imputed rent as untaxed income without looking at building maintenance as offsetting expenses is fundamentally misrepresenting the comparison between homeowners and landlord+renter pairs.
> It's down to under 18% of home owners now who can actually take the deduction and lower their taxes.
Yup, and even that 18% are seeing a much smaller benefit than before.
Previously, an expensive ($1.5M) house could increase overall deductions by $40k+:
Now, even an expensive house like that might get 1/10th the benefit from itemizing:
The tax changes in 2018 more-or-less killed the mortgage interest deduction in the USA. (Which isn't necessarily a bad thing.)
Do you mean that the renters should get the interest component of their rent, assuming the landlord is mortgaged on that property, deducted from their tax?
I kind of think landlords should not be able to borrow just for buy to let and maybe their should be rent controls. I could be confused about what they mean here, especially with imputed rent.
I don't have a plan as to what the renters subsidy be. It would be tricky.
As far as imputed rent goes, it's hard for me to imagine.
who lets them borrow and how?
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if it's that easy you go do it
I think they borrow to buy other properties using other ones as collateral.
But there are individual home owners who have bought a second home to rent out so that the renter essentially is paying off the mortgage.
i was under the impression you get smashed with taxes though on anything after your first home
The government incentivizes home ownership, making it more affordable to buy and hold onto a home.
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>It does NOT subsidize shelter for renters. My view. Do both, or do neither.
The point isn't subsidizing shelter, it's incentivizing and enabling home ownership. That's a good thing for everyone, in some respects even the people that don't own experience benefit.
https://www.midcityredevelopment.org/blog/increasing-homeownership-decreases-violent-crime
Does homeownership reduce crime? A radical housing reform in Britain
Closing the Gaps: Building Black Wealth through Homeownership
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Whether non-owners should get their shelter subsidized is a worthy and important discussion (cliff notes: my answer is yes and there are lots of palatable options to me including UBI). But it's not the same discussion and lumping it in with home ownership is missing the important differences between mere shelter and ownership in people's lives.
There are important differences beyond just the money.
Some people buy a home cheaply as a labor of love. They see a transformed environment largely through their sweat, and in three years, their home is worth 3 times what they Paid for it. Well, their imputed rent goes up. I guess they would get to write off the cost of materials. And the labor. What rate will they get?
I am not economist enough to say whether this makes sense intellectually. It's a practical nonstarter
Because when the word “welfare” is used in the US, people associate that with transfer payments. Tax incentives are not considered “welfare” by most people because the government is not sending you a payment, you are just keeping more of your own money.
Because calling something welfare, or subsidy, is a politically loaded thing, claiming that one benefits at anothers expense.
By way of example, if I point out that children's school books are subsidised, when I am referring to them being VAT free with that word, subsidy, that's an odd way to frame it. As if they are getting help they don't deserve, especially as no rational person can define the absence of tax as subsidy, which has always been referred to simply as a tax break, for example.
Whereas in this case it seems pretty clear that renters need help, not that home owners don't.
There's no direct connection to home owners getting help and renters not getting it. The shortfall, if one wants to consider it that, comes from the general pot. You could just as easily, and more appropriately, point out legal tax avoidance loopholes where people aren't paying any or very little taxes through off-shore tax havens and various ways of hiding things in trusts, or the tax-free foundations of Billionaires, which have everything as much to do with the tax burden on the renters to make up the shortfall, if not more, because that is the class accumulating properties pushing up demand, which feeds onto the house sale price, which loops back around to the average rents that landlords can charge even on a property that long ago paid for its purchase.
So all economic incentives are welfare?
This is a silly stretch of the definition to make it look bad.
That will cause resentment.
Yes all economic incentives are welfare. Its not the fault of the rest of the world that america hates poor people.
It would only create resentment in people who believe that welfare is a negative thing.
Head on over to antiwork and propose a welfare state for homeowners and see if you can feel out whether there are people ignorant enough to feel resentment with this misleading framing.
I have no interest in that sub at all.
I’m just pointing out that it is common to call any financial support from the government for anything “welfare”.
But it's incredibly disingenuous to deny that welfare is commonly used to imply handouts. Usually by the right but also whenever the left wants to villify a group they disapprove of.
Imagine if we all used words the way the right does, to confuse and confound rather than convey meaning.
Providing financial support is different from a reduction in tax obligation. The first is welfare, the second is not. Deciding not to take a chicken leg off your dinner plate is different from cooking you chicken for dinner.
That’s your opinion, but the bottom line is that subsidies of all kinds are called welfare.
It's not an opinion that those are qualitatively different sorts of interactions a government is having with persons / entities.
It is my opinion that acknowledging that difference is useful and improves clarity of thinking.
Did you just ignore that the title SPECIFICALLY said INCUMBENT homeowners? Meaning someone who already owns a home. The most difficult part is breaking in to home ownership in the first place. After that it's gravy. Your mortgage stays the same while rent increases exponentially for others.
>Countries intentionally incentivize home ownership
This is about people who already own a home.
> first time homebuyer FHA government-backed loans available
This is about people who already own a home.
>lowering the barrier for entry is the right take.
This is about people who already own a home.
Why should someone who already owns a home get taxpayer subsidies?
>Did you just ignore that the title SPECIFICALLY said INCUMBENT homeowners?
Haha. You're awfully worked up for someone that didn't make it past the reddit post title. Did you notice that the title of the post isn't the title of the paper, by chance? On that note, did you know there is a whole article on another site behind the reddit title?
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>This is about people who already own a home.
I assure you it's not (exclusively), as it deals with topics like "value-added tax on newly built dwellings"
At any rate, my confused non-reading fellow, my point is that things like FHA loans (unmentioned) and mortgage interest deductions belong in the same bucket. That bucket is, in intention and in de facto consequence, about promoting home ownership. It's not about creating a welfare state for the wealthy as the paper would like to frame them.
>Why should someone who already owns a home get taxpayer subsidies?
It's an incentive to purchase and makes it less difficult to continue owning. Whether tax incentives should be considered subsidies is oddly contentious. IMO it shouldn't be since you're not subsidizing anything by not taking things away. But to answer your question about why home ownership should be incentivized and made easier: it's because home ownership is good for society, and we should want as many people to be able to purchase and keep their homes as possible.
Responds to raw data with "Dumb take."
Tells me just about all I need to know about you.
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Why do u think amazon is buying all the houses
>Yours truly
>Fay Lewis
It's because we've created such a warped set of incentives that a home--what should be a depreciating asset--is being seen more and more as not just a place to put money, but an investment (and a pretty good one at that). Of course, it's not the house that is bringing in the big bucks, it's the appreciation of the land.
We should be implementing a tax on the land itself (not including the structures built on it). To encourage productive use of it. Whether it's more housing or industry. You should not be able to hold onto land indefinitely waiting for the price to go up.
Because we're making new people but not new real estate*.
You should learn the difference between an investor being on the cap table of a company and another company that the investor owns a portion of owning the company in question. They're pretty different ideas.
*Save for a few cute examples like in NYC.
Exactly, it's an incentive. I suppose you can label every tax incentive "welfare", but that seems disingenuous.
The worst form of welfare is having a job. It creates false incentives to take on student loan debt for kids, and unfairly stigmatizes those who don’t work. Really the only way to escape the stigmatized imputed class war is to engage in irregular gig economy until placed in government developed housing on a long term basis with a simple job like making license plates.
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Hold on, saying housing should be the number one wealth builder for families is exactly the problem. Prices increasing faster than inflation means housing gets more and more unaffordable indefinitely. It's not sustainable, something is going to break somewhere.
I didn't say it should be, I said it is. But also, it's going to be a huge wealth builder for someone, so having that be true for as many people as possible is good thing. We make more and more people, we don't generally make more land, and people need land to live on. Real estate value, on average, will go up based on this principle.
Additionally, real estate value is a store of wealth. It's not just the price going up that makes it a wealth builder, it's that you pay off the mortgage, own it, and it holds value. You can borrow against it's value in troubled times. It's valuable. We want lots of people to be able to access that value.
wait you can write off your mortgage interest from your bank on taxes?!
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is there a cap? wife and i are starting to read up on how to buy a house and everything
Yep, sure can. Google home mortgage interest deduction. Yes, there is a cap. If you have to ask, you're unlikely to hit it.
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