A house that costs $20k(fastcoexist.com)
fastcoexist.com
A house that costs $20k
http://www.fastcoexist.com/3056129/this-house-costs-just-20000-but-its-nicer-than-yours
211 comments
They left out current building codes. I have a general contractor's licence. To build anything involves so many rules/codes it's rediculious.
Every year the building department in your town/city usually includes the latest codes, and prohibits so many things. It all sounds great until you are paying someone to build something. The various building code manuals take up at least two feet of space on my shelf.
Where I live, I couldn't build a cabin with wood stove. It would need a electric plug every 6'. I couldn't even use logs to build it without approved man made insulation. And forget the wood stove. They are illegial.
Every year the building department in your town/city usually includes the latest codes, and prohibits so many things. It all sounds great until you are paying someone to build something. The various building code manuals take up at least two feet of space on my shelf.
Where I live, I couldn't build a cabin with wood stove. It would need a electric plug every 6'. I couldn't even use logs to build it without approved man made insulation. And forget the wood stove. They are illegial.
I tried to build a nice, cheap small house and ran into these exact same regulations. Almost all of the regulations we hit were from the 'International Building Code' which covers a large part of the US. I'd say building a to code house here costs at least $50k - $60k. This is just bare minimum meet the code. To add to your list:
Where we were and what we were trying to do would have cost significantly less if we were allowed to use composting toilets [1] and grey water and avoid sewer. Many states are coming around to grey water laws, but as of now I don't think any allow no sewer/septic, even if you don't have anything draining into them. You have to have them for 'backup'
[1] http://www.sun-mar.com/
- composting toilets are allowed, but you still need a sewer hookup available, just in case
- heating had to be automatic (thermostat + gas/electric), wood stove/insert only is illegal
- outlets every 6' and even more in the kitchen
- stairs cant be steep, even to lofted areas and so take up more space, more $
- minimum square foot requirements
Where we were and what we were trying to do would have cost significantly less if we were allowed to use composting toilets [1] and grey water and avoid sewer. Many states are coming around to grey water laws, but as of now I don't think any allow no sewer/septic, even if you don't have anything draining into them. You have to have them for 'backup'
[1] http://www.sun-mar.com/
This is why tiny houses on trailers took off; it sidesteps building code due to them being classified as RVs.
Except you can't legally park and live in them in many cities. Sure you can relocate if you get caught, but how many times before they catch on and you get in big trouble? Its a more practical way to break the rules, but in most places you are still breaking the rules.
That's why a lot of the tiny houses are built on trailers. They're technically RVs then, and most of those regulations don't apply.
You really have to wonder how necessary some of these codes are.
Houses already last 60 or 70 years, which is plenty, by the time they're at a point where they need rebuilding they're hopelessly outdated.
I was helping my father with building a house over Christmas, some of the regulations are ridiculous, we had to build a massive retaining wall with 200 mm posts going 1.5 m down, just because the earth it was retaining could theoretically have a car drive down it at some point.
You have to seal the concrete ledge that bricks sit on with bitumen. It used to be that you had to seal it 50% of the width, but they've just changed it so that it has to be the full width of the ledge. How much difference does it really make?
You can no longer use nails for fastening down corrugated iron roofs, you have to use special screws. People have been nailing corrugated iron roofs down for literally hundreds of years without issue.
Houses already last 60 or 70 years, which is plenty, by the time they're at a point where they need rebuilding they're hopelessly outdated.
I was helping my father with building a house over Christmas, some of the regulations are ridiculous, we had to build a massive retaining wall with 200 mm posts going 1.5 m down, just because the earth it was retaining could theoretically have a car drive down it at some point.
You have to seal the concrete ledge that bricks sit on with bitumen. It used to be that you had to seal it 50% of the width, but they've just changed it so that it has to be the full width of the ledge. How much difference does it really make?
You can no longer use nails for fastening down corrugated iron roofs, you have to use special screws. People have been nailing corrugated iron roofs down for literally hundreds of years without issue.
Codes are largely reactionary. Sometime, somewhere, doing a certain thing caused a problem and somebody got injured or killed. Maybe the corrugated roof that got nailed down blew off under certain conditions and the investigation revealed that it wouldn't have happened if they used certain screws instead of nails. Hence, the code gets updated to require those screws.
It's mostly driven by the insurance industry. They don't want to pay out claims, so they write the codes to make the buildings as robust as possible.
It's mostly driven by the insurance industry. They don't want to pay out claims, so they write the codes to make the buildings as robust as possible.
It's also hard for me to see a serious problem with this. I mean, it can be annoying, but it seems I often wish decisions could be made by professionals (doctors, engineers, etc.) instead of politics and caprice and the IBC (and it's siblings for plumbing and electrical) is an example of laws that are actually thought out by someone who knows, rather than someone who thinks they know better. I imagine they are not perfect, but it still seems like an achievement.
My current residence was built in 1890 and I would not consider it 'hopelessly outdated' or in need of rebuilding.
The house I was renting last year had no insulation, no double glazing, no vapor barrier. No fireplace, and a single heatpump.
Borer all through the walls, and a hopeless design (rotated the wrong way so the kitchen got no sun) didn't help either.
Maybe it's survivors bias, those houses that are 125 years old now tend to be looked after and kept up to date.
Borer all through the walls, and a hopeless design (rotated the wrong way so the kitchen got no sun) didn't help either.
Maybe it's survivors bias, those houses that are 125 years old now tend to be looked after and kept up to date.
Similarly, my home is from the early 1800s and my parents house was first built in the 1600s, but most of the current part was built in the early 1700s.
Both of these houses are perfectly functional and warm, and barely use that much more energy than most modern houses (we've insulated them well and use efficient lighting etc). And yes they do have inside toilets ;)
I guess housing stock in the UK is just much older.
I guess housing stock in the UK is just much older.
Some of that is survivorship bias however. Crappy homes from the 1600s aren't around anymore. The longer an area has been built up the larger percentage of the houses are well built due to the poorly built houses constantly dying out by the well built houses sticking around.
True, I won't disagree with that, but in the small town I live in most of the houses in the middle of town are 100 to 150 years old - and there aren't many 'missing houses' that have been replaced with new ones since they weren't good enough to last (as far as I can see).
Even in London, the terraced house we own is about 150 years old, as are all the houses in the street and pretty much the area - very few of these needed replacing unless they were bombed in the second world war, or some other catastrophic event.
Even in London, the terraced house we own is about 150 years old, as are all the houses in the street and pretty much the area - very few of these needed replacing unless they were bombed in the second world war, or some other catastrophic event.
In America, 100 years is a long time.
In Europe, 100 miles is a long distance.
In Europe, 100 miles is a long distance.
Here's what looks like more info from the designers.
It's a really cool program. Each year they come up with a house design and BUILD it for <$20K.
http://www.ruralstudio.org/projects/20k-v8-daves-house
search the projects tab to see all of them back to 2005
It's a really cool program. Each year they come up with a house design and BUILD it for <$20K.
http://www.ruralstudio.org/projects/20k-v8-daves-house
search the projects tab to see all of them back to 2005
Where can I buy one though?
At least in the US, zoning and construction ordinances are incredible barriers to innovation and are part of the reason why the real estate market is out of control. These were systems put in place decades ago, often due to class warfare to keep the "riff-raff" out of desirable neighborhoods, that punish innovation and progress towards sustainable and affordable housing.
I cannot help but feel like a lot of the problems in the over-regulation of construction and real estate is due to public ignorance and apathy. If people cared more about how well built their homes were, we would not have needed tremendous government regulation to force builders to build safe houses. My father works construction and between the UCC being dozens of chapters long and every municipality having its own grandfathered in or exceptional bullshit make breaking ground a minefield of bureaucratic nightmare.
In hindsight, I wish we could have produced third party unaffiliated review boards for new construction so that builders could get their blueprints and finish products certified. We could have had an industry of competitive certification processes directed towards homebuilding, and the most trustworthy and reliable certifications would have gained name recognition builders would desire for well built property. Then we could avoid this entire trainwreck of bureaucracy, but understandably volunteer certification doesn't help the poverty stricken when being offered a "cannot be beat" deal on a derelict unsafe house, which is the root problem in all this. It is just generally a mess and as someone coming from a software background who has a father in construction to hear all the disasters from, wish there were a more obvious solution other than "try deregulating and hope you don't get the poor killed or screwed over in the process".
I cannot help but feel like a lot of the problems in the over-regulation of construction and real estate is due to public ignorance and apathy. If people cared more about how well built their homes were, we would not have needed tremendous government regulation to force builders to build safe houses. My father works construction and between the UCC being dozens of chapters long and every municipality having its own grandfathered in or exceptional bullshit make breaking ground a minefield of bureaucratic nightmare.
In hindsight, I wish we could have produced third party unaffiliated review boards for new construction so that builders could get their blueprints and finish products certified. We could have had an industry of competitive certification processes directed towards homebuilding, and the most trustworthy and reliable certifications would have gained name recognition builders would desire for well built property. Then we could avoid this entire trainwreck of bureaucracy, but understandably volunteer certification doesn't help the poverty stricken when being offered a "cannot be beat" deal on a derelict unsafe house, which is the root problem in all this. It is just generally a mess and as someone coming from a software background who has a father in construction to hear all the disasters from, wish there were a more obvious solution other than "try deregulating and hope you don't get the poor killed or screwed over in the process".
> due to class warfare to keep the "riff-raff" out of desirable neighborhoods
Actually, the exact opposite is the case: US zoning laws were created by the 1910s/1920s era "progressive" movement as a leftist social improvement project. The goal was to legally require that poor people would thenceforth all live in such conditions as the (mostly bourgeois) progressives deemed correct and "proper" according to middle class mores of the day, by making other conditions illegal.
See e.g. "Living Downtown" by Paul Groth for more info: http://publishing.cdlib.org/ucpressebooks/view?docId=ft6j49p...
https://en.wikipedia.org/wiki/Progressive_Era
Actually, the exact opposite is the case: US zoning laws were created by the 1910s/1920s era "progressive" movement as a leftist social improvement project. The goal was to legally require that poor people would thenceforth all live in such conditions as the (mostly bourgeois) progressives deemed correct and "proper" according to middle class mores of the day, by making other conditions illegal.
See e.g. "Living Downtown" by Paul Groth for more info: http://publishing.cdlib.org/ucpressebooks/view?docId=ft6j49p...
https://en.wikipedia.org/wiki/Progressive_Era
I wonder if this is a North American thing. I noticed in Sweden and the Netherlands the newly-built houses tend to have a more "solid feel" and sensible arrangements. Though I can't speak for their structural integrity since I'm no expert. They also seems to be less attached to faux-period styles and more readily embrace contemporary designs.
It is probably very American. A lot of zoning regulation emerged from racist white flight ideology where, as the middle class white families fled urban settings, they pushed new suburban townships and urban sprawl they caused to adopt extremely tight building regulations to push the cost of construction so high the "inferior" races couldn't afford to tarnish their beautiful communities.
And this isn't some long ago historical thing. This was the 50s and 60s.
And this isn't some long ago historical thing. This was the 50s and 60s.
That sounds as if it that would have insufficient opportunities for graft.
Agreed. I don't see anything particularly innovative or unique about this house. Manufactured homes cost roughly the same, and are roughly the same size and quality. There's not a whole lot of info really detailing what is so different or great about this home.
Manufactured homes in the US are typically high quality now because of the national safety standards it must meet for each state, in addition to holding up to things like high winds, heavy rains, tremors.
I didn't say it wasn't high quality, just that it's not necessarily innovative or new.
Same here - annoying to see the same 'corner angle' photography tricks that real estate agents use to hide shortcomings.
I want to know too; having somewhat recently bought a house, and I've started to upgrade it. I can see $20,000 going really fast for simple things.
Indeed, I bought a "handyman's delight" (i.e. money pit) for $43k just outside Atlanta during the recession in 2009, and to get it to roughly the same condition as my neighbor's house, I'd have to spend another $40k. It's mostly cosmetic work that it needs, but there are some structural and functional issues that need to be addressed as well. We're still debating whether we should hold onto it and fix it up (it currently appraises for $80k with the few improvements we've done, mostly due to the location) or just sell it for what we owe and buy a better house.
Might be worth talking to a realtor, or even going to look at a few houses for sale close by. Certain improvements can be literally profitable when you sell the house (e.g. $2K in painting nets you $10K in additional sale price).
If you go look at the comparable homes in the area (similar square footage, no. of bathrooms & bedrooms, etc) and they're nicer but selling for $120K+ than your home can likely be made to turn a huge profit by fixing it up before you sell it.
Just make sure you only fix/improve things which a buyer would care about, and not get bogged down in your own niche requirements.
If you go look at the comparable homes in the area (similar square footage, no. of bathrooms & bedrooms, etc) and they're nicer but selling for $120K+ than your home can likely be made to turn a huge profit by fixing it up before you sell it.
Just make sure you only fix/improve things which a buyer would care about, and not get bogged down in your own niche requirements.
My father has been in the Atlanta metro real estate market for 2 decades. Is an appraiser, agent, and licensed inspector. I'd be happy to pass his info if you're interested in a professional opinion.
This is starting from scratch, though. You have existing stuff that you have to work within.
Even from scratch, I considered building my own house. The cheapestimated possibly is to use cargo containers, but that requires a ton of welding and cutting. I'm curious how the designs here save on so much material. Also, having picked up wood working, I can say that wood isn't cheap.
Plus they explicitly said that it's going to cost more than $20,000...
It's more than $20,000 if you have someone build it for you. If you build it yourself, it's $14,000 (plus your time and labor).
One thing they didn't mention: land cost.
One thing they didn't mention: land cost.
The numbers are seemingly tossed about without all those pieces you need to add it up. It reads more feel good we got an investment to sell you than actual talk from a home builder. The costs completely ignores the costs of land and ongoing taxes as well. Besides issues with neighbors they are likely going to need to get all new zoning as this price point won't support larger lots.
I am all for good priced construction, groups like Habitat for Humanity would benefit too, but to ignore known savings and counter with "jobs" and such without quantifying it all comes across as a late night infomercial
I am all for good priced construction, groups like Habitat for Humanity would benefit too, but to ignore known savings and counter with "jobs" and such without quantifying it all comes across as a late night infomercial
Or what's the difference between this and a manufactured trailer? Those are very cheap and mobile, even.
It seems like just new marketing for old, low-income housing.
I wish someone would address that, at the root, this move to micro-housing is focused always on cost, and lack of available funds for young working people.
It seems like just new marketing for old, low-income housing.
I wish someone would address that, at the root, this move to micro-housing is focused always on cost, and lack of available funds for young working people.
Lifespan of a mobile home is estimated at 30-55 years depending on area and on how much upkeep the owner does. There's also a huge stigma around living in a mobile home, and serious logistics involved in hauling the mobile home to its final destination as it has to be delivered in one or two pieces on a long flatbed trailer.
I've also seen something years ago where a house is made from components that come from a manufacturing facility -- each one can be hauled in on a flatbed. But when they are all assembled, the result really looks and functions like a regular house.
Those are modular homes. And they can be just as well-built as traditional "stick-built" homes. The base pricing on them is really attractive, but the cost (and value) is in all the options.
Part of what makes them attractive is that the assembly on your lot goes really quickly, so the chance of exposure to damaging weather (and thieves/vandals) goes way down compared to traditional homes.
Part of what makes them attractive is that the assembly on your lot goes really quickly, so the chance of exposure to damaging weather (and thieves/vandals) goes way down compared to traditional homes.
They are starting to do this with commercial buildings. They pre-fab the apartments off-site and then "place" then in the building shell. Not sure how popular it will be but it is something people are considering.
It's also worth noting that the resale value of a mobile home is next to nothing, due to that stigma. Nobody wants a mobile home if they can avoid it, and even fewer want a used mobile home. One of the main benefits of owning your home is acquiring a valuable asset, but without the hope of resale, it's nothing but a money drain.
The $20k is an aspiration (read, total bs atm), the pictures you're seeing are for a house that cost $135k.
http://www.artsatl.com/2016/01/serenbe-rural-studio-artist-r...
It must be mentioned that houses carry a huge location premium, everyone knows this. You can buy a big beautiful home in the middle of nowhere for the cost of a studio in the middle of NY or SF.
Living isn't all that expensive, living close to where jobs are, or close to the 'heart' of a vibrant local culture, that's expensive, and it looks like the actual cost of building isn't the most significant part of that equation. Land is expensive, so you need to go up, and building up and space-efficiently (i.e. reasonably tall buildings with smart, space efficient units) is where a lot of these 'open-source plans for cheap rural houses with materials from Home Depot' completely do not apply.
It's a bit like building your own PC. Yeah you can build a much more powerful machine at a cheaper rate than a Macbook... but you're forgoing all kinds of factors like mobility which are extremely essential to many of today's consumers. Similarly, you can build a cheap rural home and completely forgo on extremely essential factors like proximity to jobs, culture and infrastructure.
It's great for some people, but not for most.
http://www.artsatl.com/2016/01/serenbe-rural-studio-artist-r...
It must be mentioned that houses carry a huge location premium, everyone knows this. You can buy a big beautiful home in the middle of nowhere for the cost of a studio in the middle of NY or SF.
Living isn't all that expensive, living close to where jobs are, or close to the 'heart' of a vibrant local culture, that's expensive, and it looks like the actual cost of building isn't the most significant part of that equation. Land is expensive, so you need to go up, and building up and space-efficiently (i.e. reasonably tall buildings with smart, space efficient units) is where a lot of these 'open-source plans for cheap rural houses with materials from Home Depot' completely do not apply.
It's a bit like building your own PC. Yeah you can build a much more powerful machine at a cheaper rate than a Macbook... but you're forgoing all kinds of factors like mobility which are extremely essential to many of today's consumers. Similarly, you can build a cheap rural home and completely forgo on extremely essential factors like proximity to jobs, culture and infrastructure.
It's great for some people, but not for most.
"pictures you're seeing are for a house that cost $135k"
yet
"Smith says they have priced materials for these homes, each under 550 square feet, at Home Depot, at about $13,000."
So it would be nice if they had detailed the real costs. As indicated, the material cost is relatively insignificant.
yet
"Smith says they have priced materials for these homes, each under 550 square feet, at Home Depot, at about $13,000."
So it would be nice if they had detailed the real costs. As indicated, the material cost is relatively insignificant.
The article doesn't mention this explicitly, but it sure seems as though this tiny house project is geared towards Appalachia and the rural South. Appalachia is generally the mountainous parts of Pennsylvania, West Virginia, Virginia, Kentucky, Tennessee, and North Carolina (maybe some parts of Ohio, too). It has its own culture and dialect. It is also the poorest region of the United States; Appalachia is a huge component of why the US is not like other first world countries.
In Appalachia, it is not uncommon for desperately poor families to live in shacks or horribly broken down mobile homes, on land that's been passed down for generations, sometimes predating US independence. So, this house helps to solve the safe, modern, cheap problem for housing in Appalachia. Also note that one of their goals is making it sustainable for contractors to build and providing lots of instructions--that's to help provide jobs. There aren't a lot of jobs in Appalachia.
So, this is why the house is not an apartment building. It's not built for Germany.
In Appalachia, it is not uncommon for desperately poor families to live in shacks or horribly broken down mobile homes, on land that's been passed down for generations, sometimes predating US independence. So, this house helps to solve the safe, modern, cheap problem for housing in Appalachia. Also note that one of their goals is making it sustainable for contractors to build and providing lots of instructions--that's to help provide jobs. There aren't a lot of jobs in Appalachia.
So, this is why the house is not an apartment building. It's not built for Germany.
My first thought when reading the article and seeing the pictures is that there's no way this design (as depicted) would work in Appalachia without enclosing and insulating around the bottom of the house. Otherwise, your pipes would freeze and the house would be way, way too cold during the winter. I was also disappointed that the article didn't go into the R-value of the house itself as that's going to be extremely important with regards to where the home could be built. I'm assuming it's probably pretty good, given that it's new construction materials, but I would not want to weather out an Appalachian winter in one unless it had been properly designed to withstand a harsh winter.
Auburn University is in Alabama. These houses are designed for the rural South. You don't have to dig down too far to reach the frost heave line (14" or less). The primary climate concerns are therefore summer cooling, storm drainage, and tornadoes. When there is a freeze warning, people let their faucets drip.
These designs could be used in Tennessee and North Carolina, but that's as far north as I'd be willing to try them.
But then again, it's a lot easier to dig deep holes for piers than a full basement, and you could insulate the underside of the house more thoroughly than is usually done.
These designs could be used in Tennessee and North Carolina, but that's as far north as I'd be willing to try them.
But then again, it's a lot easier to dig deep holes for piers than a full basement, and you could insulate the underside of the house more thoroughly than is usually done.
Appalachia also is what I would call the "center" of traditional American folk culture. It's no mistake that a big portion of the artists featured in the Anthology of American Folk Music come from there. Very fascinating area.
It even has a porch with rocking chairs. That is a clue.
Probably nice for the US, but in much of the rest of the world, it is the price of land which dominate the price. Any system that aims to reduce house prices really need to deal with limited supply of land to build on.
Even on Iceland which has vast amounts of space and tiny population, house prices are high because the areas where people want to live is in high demand.
Now if you could just build your house at any arbitrary location on Iceland then that would not be a problem. But people needs schools for children, hospitals, jobs etc. That limits the options.
The US has fairly cheap land because it is flat, it is easy to build infrastructure and there are a lot of roads everywhere which you can connect to. The city planning also space out things a lot leaving a lot of land for building.
Even on Iceland which has vast amounts of space and tiny population, house prices are high because the areas where people want to live is in high demand.
Now if you could just build your house at any arbitrary location on Iceland then that would not be a problem. But people needs schools for children, hospitals, jobs etc. That limits the options.
The US has fairly cheap land because it is flat, it is easy to build infrastructure and there are a lot of roads everywhere which you can connect to. The city planning also space out things a lot leaving a lot of land for building.
Icelander here, I'm more concerned how well does this house work in icelandic conditions? Does it handle earthquakes well? What about regular storms? Being wet for months end? Constant freezing and thawing? Can you put it in an active volcano? Does if float on magma? There are lot of questions here!
While I'm not really concerned about it, I doubt that it would live up to Danish building regulations. I'm mean we pressure test our homes... then install ventilation systems because living in a house that can parse the pressure test would be unhealthy. We then continue to get headaches and stuffed noses because the ventilation systems aren't any good either.
Anyway, it doesn't look like this house would fit the required amount of isolation.
Anyway, it doesn't look like this house would fit the required amount of isolation.
Does it float on magma?
Do houses in Iceland really do that?
Do houses in Iceland really do that?
Only briefly.
If you built a boat from SiC attached to enormous heat sinks radiating into empty space, it would float for longer.
But air-conditioning expense makes it cost-prohibitive.
Magma is pretty dense (it's molten rocks, after all), so many things float on magma.
Very interesting discussion on the subject :
http://www.wired.com/2012/01/can-you-walk-on-lava-falling-in...
http://www.wired.com/2012/01/can-you-walk-on-lava-falling-in...
I see this as an opportunity for existing land owners to replace a house.
Every summer, somewhere in Australia, we have whole rural communities razed by bushfire. Rebuilding is costly and time consuming and there's a threat that fire may return within decades.
Constructing something that is quick and cheap and with low insurance premiums in case of natural disaster may benefit communities where the expected lifespan of a dwelling may only be 40 years.
Every summer, somewhere in Australia, we have whole rural communities razed by bushfire. Rebuilding is costly and time consuming and there's a threat that fire may return within decades.
Constructing something that is quick and cheap and with low insurance premiums in case of natural disaster may benefit communities where the expected lifespan of a dwelling may only be 40 years.
Indeed. My house is 20 minutes away from the centre of one of the financial capitals of the world. You couldn't buy enough land to build one of those houses on for half a million. You wouldn't get planning permission anyway, and I doubt it meets the local building regulations.
The founder of WikiHouse (open source housing system, similar build cost) wrote a book on the topic: https://dl.dropboxusercontent.com/u/1850356/ARighttoBuild_CC...
The nice thing about a cheaper house is you then have more money to spend on a better plot of land.
> How do you design a home that someone living below the poverty line can afford
Why not rent a flat instead? Wouldn't that be much more economical (no property prices, lower heating costs, less maintenance work, less risk, not built on the cheap)?
I don't understand the fixation on owning a house / living in a single-family house many americans seem to have.
Why not rent a flat instead? Wouldn't that be much more economical (no property prices, lower heating costs, less maintenance work, less risk, not built on the cheap)?
I don't understand the fixation on owning a house / living in a single-family house many americans seem to have.
America is big.
Things are spread out in most cities and towns. When living in the city, one gets value in exchange for giving up the privacy of owning your own home and land. And, it is not realistic for people who are poor, or even middle class, to own a home in a major metropolis, and so they often do live in an apartment or townhome (a mini-house that shares walls with one or more other townhomes...somewhere between a condominium and a real house). I would accept that kind of lifestyle if living in a densely populated city. I wouldn't if living in most mid-sized cities in the US...but, housing is still expensive. A tiny house on a plot of land fits the bill perfectly for me. I don't need more living space than an apartment provides, I just need more space than having neighbors on the other side of the wall provides. I also want a garden.
Americans who grew up in rural areas have an even more extreme view of how much space is the right amount than I do (I grew up in the suburbs, and still hate apartments).
Also, I want to own where I live, by the time I get close to retirement age (which I'm still a few decades away from, but it's part of the usual retirement plans for most Americans, and they start working on it during middle age).
Things are spread out in most cities and towns. When living in the city, one gets value in exchange for giving up the privacy of owning your own home and land. And, it is not realistic for people who are poor, or even middle class, to own a home in a major metropolis, and so they often do live in an apartment or townhome (a mini-house that shares walls with one or more other townhomes...somewhere between a condominium and a real house). I would accept that kind of lifestyle if living in a densely populated city. I wouldn't if living in most mid-sized cities in the US...but, housing is still expensive. A tiny house on a plot of land fits the bill perfectly for me. I don't need more living space than an apartment provides, I just need more space than having neighbors on the other side of the wall provides. I also want a garden.
Americans who grew up in rural areas have an even more extreme view of how much space is the right amount than I do (I grew up in the suburbs, and still hate apartments).
Also, I want to own where I live, by the time I get close to retirement age (which I'm still a few decades away from, but it's part of the usual retirement plans for most Americans, and they start working on it during middle age).
>Americans who grew up in rural areas have an even more extreme view of how much space is the right amount than I do (I grew up in the suburbs, and still hate apartments).
Yep. To add to this. The right amount of space for me (raised rural) is so much that I can see neither see nor hear the neighbors unless I choose to. So, about 1/4 mile between us at a minimum. (Am currently working on purchasing property across the road from our home to avoid ever having neighbors.)
I think people forget just how incredibly massive this country is.
Yep. To add to this. The right amount of space for me (raised rural) is so much that I can see neither see nor hear the neighbors unless I choose to. So, about 1/4 mile between us at a minimum. (Am currently working on purchasing property across the road from our home to avoid ever having neighbors.)
I think people forget just how incredibly massive this country is.
Somewhere in the midwest?
One facet of it is cultural: For a lot of people, someone isn't seen as a "real adult" until he or she owns a residence. (Obligatory "if you have a mortgage you're just renting from the bank and have to fix the water heater yourself" line here.)
Another is financial: There are heavy tax incentives towards ownership, though this is lessened in the era of cheap money. (On the other hand, if a mortgage can be had for cheap, that puts upward pressure on house prices because fewer units of currency go towards borrowing costs.)
Still another is logistical: Most areas of the U.S. have very few renter protections. If your landlord wants you out and you're not under a current lease, you're out (property rights of the owner and all). This goes double for the desirable places to live. For those who can manage it, the stability of "my housing cost is a known quantity that varies only a little bit outside of my control" (obligatory "did you save for a new hot water heater?" goes here) outweighs the relative immobility of property ownership. Plus, a somewhat high price is put on the ability to paint one's own walls, have a pet, and do minor renovations without asking for permission. Witness the plethora of "home remodeling" shows and TV channels. In many rental units, doing this is not just frowned upon, it is actively forbidden by the lease.
As always, to stave off the inevitable replies of "but my rental experience has never been like that," your miles may vary. I lived in one apartment in Texas that let me do everything short of bulldozing my unit. I lived in another in Seattle that charged me $300 because I got a drop of orange drink on the carpet in a bedroom.
Another is financial: There are heavy tax incentives towards ownership, though this is lessened in the era of cheap money. (On the other hand, if a mortgage can be had for cheap, that puts upward pressure on house prices because fewer units of currency go towards borrowing costs.)
Still another is logistical: Most areas of the U.S. have very few renter protections. If your landlord wants you out and you're not under a current lease, you're out (property rights of the owner and all). This goes double for the desirable places to live. For those who can manage it, the stability of "my housing cost is a known quantity that varies only a little bit outside of my control" (obligatory "did you save for a new hot water heater?" goes here) outweighs the relative immobility of property ownership. Plus, a somewhat high price is put on the ability to paint one's own walls, have a pet, and do minor renovations without asking for permission. Witness the plethora of "home remodeling" shows and TV channels. In many rental units, doing this is not just frowned upon, it is actively forbidden by the lease.
As always, to stave off the inevitable replies of "but my rental experience has never been like that," your miles may vary. I lived in one apartment in Texas that let me do everything short of bulldozing my unit. I lived in another in Seattle that charged me $300 because I got a drop of orange drink on the carpet in a bedroom.
So, the US favours owning residences because renters have nigh zero legal protection?
Partly, yes. We also get to deduct interest paid on mortgages from our federal income taxes. This deduction can be used for primary and secondary homes.
The tax deduction alone is a massive incentive to buy a home. Particularly given the housing options available in most cities... we have massive tracts of suburban development where a mortgage typically costs a similar amount monthly as renting a large apartment downtown.
The tax deduction alone is a massive incentive to buy a home. Particularly given the housing options available in most cities... we have massive tracts of suburban development where a mortgage typically costs a similar amount monthly as renting a large apartment downtown.
On the other hand, the savings from the income tax deduction is easily nullified by local property tax, maintenance costs, and the differential between homeowners' and renters' insurance.
There are significant regional differences too. As other threads have pointed out, this house is designed for parts of the country where the land has very near zero value, and may have been in the family for over 200 years.
Contrariwise, I live in coastal California. When I first moved here, I paid USD 1000 per month to rent a large 1 bedroom apartment within walking distance of downtown (and only 400m walk from work!). To buy an apartment of similar size at the time was roughly USD 350 000 and it would be further from downtown.
Also, California has stronger renter protection laws, and the city I live in has a few more. For various reasons poor people may not wish to exercise those rights (arrest warrant, status as illegal immigrant, unpaid fines), so there are still a lot of shady dealings with renting, but a large fraction of those are already priced out of owning a home, even living with 3+ people per bedroom.
Contrariwise, I live in coastal California. When I first moved here, I paid USD 1000 per month to rent a large 1 bedroom apartment within walking distance of downtown (and only 400m walk from work!). To buy an apartment of similar size at the time was roughly USD 350 000 and it would be further from downtown.
Also, California has stronger renter protection laws, and the city I live in has a few more. For various reasons poor people may not wish to exercise those rights (arrest warrant, status as illegal immigrant, unpaid fines), so there are still a lot of shady dealings with renting, but a large fraction of those are already priced out of owning a home, even living with 3+ people per bedroom.
>"Still another is logistical: Most areas of the U.S. have very few renter protections. If your landlord wants you out and you're not under a current lease, you're out"
This sort of thing happens when you don't have a contract that enumerates what happens if either party wants out.
This sort of thing happens when you don't have a contract that enumerates what happens if either party wants out.
You can't get a contract like that - the terms are entirely dictated by the landlord in the absence of regulation because of the scarcity of housing.
I think this is also why home ownership is prized so highly in Britain - at least since the rental market was deregulated.
Part of it, here in Aberdeen at least, is that rental prices are extortionate, and if you can scrape together the money to buy, it's often much cheaper; I'm paying a little over half the rental cost of my flat in mortgage payments each month. Most other home-owners I know are in the same boat and save a lot by owning rather than renting. I realise there are added costs to owning, and it's not quite apples-to-apples, but I'm pretty sure we all still come out ahead at the end of the equation.
I realise I'm very fortunate to have been in the position to buy a place five years ago, and I'm grateful for the combination of fortuitous timing and hard-work paying off. That said, if I could have continued to rent affordably, I would probably still be renting today.
I realise I'm very fortunate to have been in the position to buy a place five years ago, and I'm grateful for the combination of fortuitous timing and hard-work paying off. That said, if I could have continued to rent affordably, I would probably still be renting today.
It goes back much longer. Thatcher's Right to Buy policy successfully tapped into this desire in 1980, and the rental market wasn't deregulated until 1988. Specifically, the properties covered by Right to Buy were strongly eviction-protected.
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Rent does not build wealth. Rent is the act of transferring wealth from the poor to the rich. Rent is, essentially, theft from society itself, it leaves everyone poorer when most people rent.
Rent in America today is identical to the serfs of old.
The post-WW2 thing the Government did with getting everyone mortgages so they would be home owners that caused the eventual economic collapse 10 years ago? They had the right idea, but the wrong execution.
Instead of making everyone homeowners, make everyone fiscally responsible so that getting a mortgage wouldn't be hard for them in the first place.
I don't entirely blame them though: building Freddy and Fannie was magnitudes easier than fixing the broken parts of American society and (lack of) education.
This is one of the large reasons why I'm supporting Bernie, he actually has spoken in depth about how to fix the underlying bullshit that keeps so many Americans renters instead of being homeowners and building their personal wealth.
It has been proven in at least one study that financial stress causes a measurable drop in IQ: literally, being poor makes you stupid. We need less stupid people, to put it frankly.
Edit: Don't downvote. Reply with your counter-viewpoint. HN isn't Reddit.
Edit 2: Bernie said it better than me: http://imgur.com/gallery/DaHIv
Rent in America today is identical to the serfs of old.
The post-WW2 thing the Government did with getting everyone mortgages so they would be home owners that caused the eventual economic collapse 10 years ago? They had the right idea, but the wrong execution.
Instead of making everyone homeowners, make everyone fiscally responsible so that getting a mortgage wouldn't be hard for them in the first place.
I don't entirely blame them though: building Freddy and Fannie was magnitudes easier than fixing the broken parts of American society and (lack of) education.
This is one of the large reasons why I'm supporting Bernie, he actually has spoken in depth about how to fix the underlying bullshit that keeps so many Americans renters instead of being homeowners and building their personal wealth.
It has been proven in at least one study that financial stress causes a measurable drop in IQ: literally, being poor makes you stupid. We need less stupid people, to put it frankly.
Edit: Don't downvote. Reply with your counter-viewpoint. HN isn't Reddit.
Edit 2: Bernie said it better than me: http://imgur.com/gallery/DaHIv
> Rent is, essentially, theft from society itself, it leaves everyone poorer when most people rent.
Not necessarily. It depends on whom you're giving the money to. If it's a profit-oriented company or investor or the like, then I'd tend to agree with you.
On the other hand, I'm renting my apartment from a housing cooperative that I'm also a member of. The cooperative releases a yearly financial report detailing that rents are for the most part used for maintaining the buildings owned by the cooperative, and to buy new land and construct new buildings.
I consider that model very sensible; it allows me to delegate all tasks relating to the maintenance of my apartment to people who are more competent in this area, and who can negotiate better rates with craftspeople.
It also gives me much of the social security that people usually associate with self-owned apartments or buildings since my lease contract literally states that the cooperative is not allowed to throw me out of the apartment (given that I obey the rules of the house, of course). But at the same time, I have the flexibility to easily move to a different apartment somewhere else in the city (or somewhere else entirely) without having to deal with selling the apartment and buying a new one.
Not necessarily. It depends on whom you're giving the money to. If it's a profit-oriented company or investor or the like, then I'd tend to agree with you.
On the other hand, I'm renting my apartment from a housing cooperative that I'm also a member of. The cooperative releases a yearly financial report detailing that rents are for the most part used for maintaining the buildings owned by the cooperative, and to buy new land and construct new buildings.
I consider that model very sensible; it allows me to delegate all tasks relating to the maintenance of my apartment to people who are more competent in this area, and who can negotiate better rates with craftspeople.
It also gives me much of the social security that people usually associate with self-owned apartments or buildings since my lease contract literally states that the cooperative is not allowed to throw me out of the apartment (given that I obey the rules of the house, of course). But at the same time, I have the flexibility to easily move to a different apartment somewhere else in the city (or somewhere else entirely) without having to deal with selling the apartment and buying a new one.
in my country this is the most common form of renting. the cooperatives benefit from legal protections which prevent for profits from entering the market. however it means there is no competition and prices are artificially high. also a huge amount of corruption scandals involving the higher-ups of housing cooperatives.
Interesting. Over here (Germany) the prices in housing cooperatives are actually ridiculously low, compared to the rest of the apartment market. As a student, I lived in a single-room apartment with separate kitchen and bath, 26 square meters total, for less than 200 euros (including utilities).
well here (netherlands) you have zoning. they are the only ones allowed to do anything in 'social housing' zones. the government asks higher prices (for land) in other zones. i needed to pay off the government for 30000 when i bought my place because it used to be in the social housing zone too. that 30k/unit needs to be factored in when comparing coops and others. i believe legally others are not even allowed to charge under 800.
But you kinda prove my point about artificially high prices. there is no reason for the prices here to be a lot higher than next door. I lived in a similarly sized 1 person appartment for years. it cost me 480 euros/mo. and that was the best deal anyone could ever get here (because in my case too, it was from the student's coop). here the 200 euro/month would get you absolutely nothing (not even a room).
But you kinda prove my point about artificially high prices. there is no reason for the prices here to be a lot higher than next door. I lived in a similarly sized 1 person appartment for years. it cost me 480 euros/mo. and that was the best deal anyone could ever get here (because in my case too, it was from the student's coop). here the 200 euro/month would get you absolutely nothing (not even a room).
Renting from a company that you own sounds like a really convoluted version of buying something. I'm guessing there are more shareholders than just the tenants? You basically have a full year timeshare from the sound of it.
I actually think you are right that the real challenge is spreading fiscal responsibility. However, it doesn't follow that everyone should own a home, or that rent is somehow evil.
If you rent, you pay rent. If you own, you pay interest on a loan[1] and maintenance costs. There is also a forced savings component in the form of mortgage principle payments. There are also less tangible benefits to both renting and owning. Renting is entirely flexible and allows you to relocate with ease. Owning gives more flexibility in customizing your home. Different people will ascribe different values to these benefits. Especially for someone who does not yet know where they want to settle long term, renting might be very attractive.
Because of the forced savings aspect of owning, renting will almost always be cheaper on a cash-flow basis. Therefore, if a person earns a middle class income[2] and is fiscally responsible, it provides an opportunity to put money into a diversified, low-cost investment portfolio. Eventually, that portfolio should grow to the point where purchasing a modest home is possible. What's more, it will hopefully start a habit that will continue through life, and eventually provide for a comfortable retirement.
So again, I absolutely agree with you that finding a way to better teach smart personal finance is critical. I just don't see at all how it follows that everyone must own a home (immediately).
[1] Or if you own outright, you pay the opportunity cost on funds that could be invested elsewhere.
[2] Obviously at a certain level of poverty, there simply is no additional money to put away, even after any discretionary spending is cut. That isn't an issue of affordability of homes though; it's an issue of poverty, which needs to be tackled directly.
If you rent, you pay rent. If you own, you pay interest on a loan[1] and maintenance costs. There is also a forced savings component in the form of mortgage principle payments. There are also less tangible benefits to both renting and owning. Renting is entirely flexible and allows you to relocate with ease. Owning gives more flexibility in customizing your home. Different people will ascribe different values to these benefits. Especially for someone who does not yet know where they want to settle long term, renting might be very attractive.
Because of the forced savings aspect of owning, renting will almost always be cheaper on a cash-flow basis. Therefore, if a person earns a middle class income[2] and is fiscally responsible, it provides an opportunity to put money into a diversified, low-cost investment portfolio. Eventually, that portfolio should grow to the point where purchasing a modest home is possible. What's more, it will hopefully start a habit that will continue through life, and eventually provide for a comfortable retirement.
So again, I absolutely agree with you that finding a way to better teach smart personal finance is critical. I just don't see at all how it follows that everyone must own a home (immediately).
[1] Or if you own outright, you pay the opportunity cost on funds that could be invested elsewhere.
[2] Obviously at a certain level of poverty, there simply is no additional money to put away, even after any discretionary spending is cut. That isn't an issue of affordability of homes though; it's an issue of poverty, which needs to be tackled directly.
When someone buys a house to let, they are making property prices more expensive for everyone. I do however agree with you, in essence. But I find it genuinly shocking you that you see a low cost portfolio as the road to ownership. Perhaps this is a uniquely American philosophy?
The point of contention in this debate, probably boils down to if you see access to housing as a social issue or an investment opportunity.
The point of contention in this debate, probably boils down to if you see access to housing as a social issue or an investment opportunity.
I'm Canadian, not American, but perhaps? I honestly (literally) don't understand what shocks you exactly. Save money -> invest money to grow savings -> time passes -> eventually you have enough to buy a home, if you want.
I'm guessing you're saying that homes are so expensive, most people could not reasonably afford one even with disciplined saving and investing. But at least as a long term state, that seems logically impossible. The reason being, if homes were that expensive, no one would buy them to rent out either; because, either they would have to charge rent sufficiently low that people could afford it, in which case they wouldn't make any return on their investment given the high cost of the house, or they would charge high enough rent to make a decent return, in which case no one could pay it.
Since the supposed problem is with home ownership rather than with finding decent places to rent (aside from special cases like San Francisco,) that doesn't seem to be the case though.
Now, special cases may certainly exist in some markets that causes housing to be scarce, but that will tend to make both prices and rents high. I agree that that situation (limited access to housing) IS an important social issue. But it is distinct from the ability to purchase a house, which doesn't seem necessary or wise for everyone to be able to do without first saving.
Edit: Perhaps you were just saying that given low interest rates, one would not expect to earn much on a conservative portfolio. If so, I agree; any appreciation would be a bonus, but the main thing is the savings side.
I'm guessing you're saying that homes are so expensive, most people could not reasonably afford one even with disciplined saving and investing. But at least as a long term state, that seems logically impossible. The reason being, if homes were that expensive, no one would buy them to rent out either; because, either they would have to charge rent sufficiently low that people could afford it, in which case they wouldn't make any return on their investment given the high cost of the house, or they would charge high enough rent to make a decent return, in which case no one could pay it.
Since the supposed problem is with home ownership rather than with finding decent places to rent (aside from special cases like San Francisco,) that doesn't seem to be the case though.
Now, special cases may certainly exist in some markets that causes housing to be scarce, but that will tend to make both prices and rents high. I agree that that situation (limited access to housing) IS an important social issue. But it is distinct from the ability to purchase a house, which doesn't seem necessary or wise for everyone to be able to do without first saving.
Edit: Perhaps you were just saying that given low interest rates, one would not expect to earn much on a conservative portfolio. If so, I agree; any appreciation would be a bonus, but the main thing is the savings side.
Like I said, I think we have a similar view. My objection if any, is based on the idea of a risk based portfolio. But it seems you actually mean more generally: savings. All these issues are of course very local. Being English I probably have a very different perspective on what the issues are regarding the affordability of houses, let alone what our specific views are. Primarily I see housing as a necessity rather than a financial opportunity. Do you think people who own a house should be allowed to buy a 2nd one and push first time buyers out the market?
What this means practically for me is that societies using these rental and Lordship systems, should give preference to those seeking to buy a house over those who have one already. The delivery and form of this preference is obviously complex and very tied to local variables like employment and banking structures. Generally I think the renting system exploits the renter and benefits the landlord - esp when the renter has no other option. This is a big issue in England as the gap between house prices and peoples average savings has rocketed in the last 50 years - especially for those in the lower average salary bracket. What does society do when the average working person cant even with savings get a mortgage? In this scenario renting fuels the inequality.
What this means practically for me is that societies using these rental and Lordship systems, should give preference to those seeking to buy a house over those who have one already. The delivery and form of this preference is obviously complex and very tied to local variables like employment and banking structures. Generally I think the renting system exploits the renter and benefits the landlord - esp when the renter has no other option. This is a big issue in England as the gap between house prices and peoples average savings has rocketed in the last 50 years - especially for those in the lower average salary bracket. What does society do when the average working person cant even with savings get a mortgage? In this scenario renting fuels the inequality.
I hadn't thought about first time home ownership in terms of access to the market like that. Possibly related (among other factors) in 2008 the US tax code gave $8000 tax credits to first time homebuyers. It was enough for me to jump from renting a little earlier, because I knew that money would be there to fund repairs and start chipping away at the mortgage principal. Of course this assumes prices are in reach and one has some savings ready to go for the opportunity, and I'm sure more people took advantage in rural areas to mid-sized cities than, say, SF or NYC.
The issue of rentals adding inefficiencies to the market is also quite complex and tied to local variables. If supply is ok, I think there's not such a premium on rentals. Where I live (Indianapolis) it's generally cheaper to own, but not by a lot. The overall value greatly depends on local pricing, interest rates, and definitely on not moving around and paying closing costs very often. In such an environment, renters may be enjoying the value of extra flexibility for not too much premium while landlords have to work harder to extract efficiencies in maintenance and management. Consider me as a homeowner looking up a few contractors or appliance servicers in the phone book vs. a landlord who has the experience and the rolodex to know who to call for the best price and service for each problem?
Also, less money goes to financial servicing when landlords pay cash. Without knowing how many pay cash vs. use leverage it's hard to say if there is an overall effect.
I see your point on the fueled inequality, though, and have no naive market analysis for that.
The issue of rentals adding inefficiencies to the market is also quite complex and tied to local variables. If supply is ok, I think there's not such a premium on rentals. Where I live (Indianapolis) it's generally cheaper to own, but not by a lot. The overall value greatly depends on local pricing, interest rates, and definitely on not moving around and paying closing costs very often. In such an environment, renters may be enjoying the value of extra flexibility for not too much premium while landlords have to work harder to extract efficiencies in maintenance and management. Consider me as a homeowner looking up a few contractors or appliance servicers in the phone book vs. a landlord who has the experience and the rolodex to know who to call for the best price and service for each problem?
Also, less money goes to financial servicing when landlords pay cash. Without knowing how many pay cash vs. use leverage it's hard to say if there is an overall effect.
I see your point on the fueled inequality, though, and have no naive market analysis for that.
You do understand that the $8000 tax credit just made houses more expensive right ?
Not when the tax credit is only for first time buyers and the majority of buyers are not first-time... This type of credit is an attempt to address the concern of @okc in providing preference to new home buyers over existing homeowners.
My parenthetical was admitting I don't know what other complexities were involved with the tax credit, but to the grandparent's point it was closed to landlords and perhaps lowered rents as some like me bought houses instead.
<Do you think people who own a house should be allowed to buy a 2nd one and push first time buyers out the market?>
To say, "you can't buy a second house" seems fundamentally contrary to American tradition.
On the other hand, whether second homes should be eligible for deductibility of mortgage interest and property taxes is another question altogether (present law = yes).
To say, "you can't buy a second house" seems fundamentally contrary to American tradition.
On the other hand, whether second homes should be eligible for deductibility of mortgage interest and property taxes is another question altogether (present law = yes).
> Being English …. Primarily I see housing as a necessity rather than a financial opportunity.
This is the opposite of what most English people seem to value, and vote in policies for. Is there any other country where property is treated so much as an investment?
This[1] system is a good way to have reasonable rent, essentially a housing association. But housing associations in England are only for poor people; not the case in other European countries like Germany and Scandinavia.
[1] https://news.ycombinator.com/item?id=11032936
This is the opposite of what most English people seem to value, and vote in policies for. Is there any other country where property is treated so much as an investment?
This[1] system is a good way to have reasonable rent, essentially a housing association. But housing associations in England are only for poor people; not the case in other European countries like Germany and Scandinavia.
[1] https://news.ycombinator.com/item?id=11032936
The point was that people have different perspectives on where the issue is, regardless of what they think about it. To wit: As an English person the debate in housing is heavily based on investment. As an individual I however feel housing is primarily a necessity. The underlying sentiment is that its a localised debate.
Though I disagree with you that most English people value and vote for the promotion of investment in housing. But then that could mean a million things; from stamp tax on buy to let mortgages, to freeing up green belts for development, to reforming housing benefit eligibility. It has always been and still is a massively divisive, sometimes violent and always complex issue in English society. Elections are won and lost on the nuances of these issues and politicians will often find a complex "3rd way" to attempt to appease everyone.
And that's without questioning your assertion that all English peoples values are dutifully represented by the political party currently holding majority in the house of commons. We also have a fairly unelected House of Lords having a final say in these matters - a notion that quite easily resonates with Serfdom.
Though I disagree with you that most English people value and vote for the promotion of investment in housing. But then that could mean a million things; from stamp tax on buy to let mortgages, to freeing up green belts for development, to reforming housing benefit eligibility. It has always been and still is a massively divisive, sometimes violent and always complex issue in English society. Elections are won and lost on the nuances of these issues and politicians will often find a complex "3rd way" to attempt to appease everyone.
And that's without questioning your assertion that all English peoples values are dutifully represented by the political party currently holding majority in the house of commons. We also have a fairly unelected House of Lords having a final say in these matters - a notion that quite easily resonates with Serfdom.
> Do you think people who own a house should be allowed to buy a 2nd one and push first time buyers out the market?
Just to address this, first, yes, I absolutely think people need to be able to buy a second house. There is also a natural impediment in place of investors buying up "too many" houses. The reason is, if there are more houses on the rental market than there is demand for rentals, it will drive rental rates down. Similarly, if there are not enough houses for sale to fill demand of all these investors as well as purchases for-self, it will drive house prices up. As those two things happen, the rate of return on an investment property will quickly become lower than that of other comparable investments, so people will not rationally keep buying investment properties until either prices go back down or more houses are built (which will also drive prices back down).
Obviously in the short term people don't always act rationally, but that situation can't logically persist indefinitely. (And while it does, renters get below-market rent, subsidized by owners. That was has been the case here in Canada for the past few years, and I happily rented for several of those years.) Long term though, investment owners will earn just enough return to make it worthwhile for them to provide the service of rental housing to people who want it. That's a good thing.
Now imagine if people couldn't buy second houses. It would be impossible to rent, because there would be no unoccupied homes. Yes, it would bring house prices down, but what if you were just starting out and didn't have the money to buy a home, even a cheap one? You would then have no options. I know you're not really advocating for outlawing second houses completely, but incentives for first-time buyers over investment buyers would have a similar effect to the lesser extent. You would be making first-time ownership cheaper, and renting more expensive.
Now, I don't think that some help for first time buyers is terrible policy. However, I think better policy would be to focus on helping young people in general. For instance, instead of a first time home buyers' credit, there could be a special reduced tax rate on the first $X (or £Y :P ) that a person earns after age 18. (Possibly varied on a means-tested basis.) That would help people get started, either saving up a down payment, or starting an investment portfolio, without skewing the housing and rental markets.
Of course I recognize that the problem with that plan is that many, or even most, people would waste that money instead of saving it. By tying it to house purchase, you force people to put it into an asset, and in turn, owning a home forces people to save (in the form of equity). However, we need to find a different solution to that problem, because we'll never be (or want to be) at the point where everyone is a home owner, and right now the people who most need that leg up early in life are the ones who aren't getting it. I don't know what the solution is, but there are certainly possibilities. For instance, a defined benefit state-backed pension plan can prevent people with no savings from being screwed in retirement. It could be made possible to borrow from one's state pension plan to buy a first home. In theory that should not skew prices vs rents as much as a straight tax break, because it's not free money. And it would be more equitable, because people who choose not to use it (or who aren't able to) will still get an equivalent benefit.
Just to address this, first, yes, I absolutely think people need to be able to buy a second house. There is also a natural impediment in place of investors buying up "too many" houses. The reason is, if there are more houses on the rental market than there is demand for rentals, it will drive rental rates down. Similarly, if there are not enough houses for sale to fill demand of all these investors as well as purchases for-self, it will drive house prices up. As those two things happen, the rate of return on an investment property will quickly become lower than that of other comparable investments, so people will not rationally keep buying investment properties until either prices go back down or more houses are built (which will also drive prices back down).
Obviously in the short term people don't always act rationally, but that situation can't logically persist indefinitely. (And while it does, renters get below-market rent, subsidized by owners. That was has been the case here in Canada for the past few years, and I happily rented for several of those years.) Long term though, investment owners will earn just enough return to make it worthwhile for them to provide the service of rental housing to people who want it. That's a good thing.
Now imagine if people couldn't buy second houses. It would be impossible to rent, because there would be no unoccupied homes. Yes, it would bring house prices down, but what if you were just starting out and didn't have the money to buy a home, even a cheap one? You would then have no options. I know you're not really advocating for outlawing second houses completely, but incentives for first-time buyers over investment buyers would have a similar effect to the lesser extent. You would be making first-time ownership cheaper, and renting more expensive.
Now, I don't think that some help for first time buyers is terrible policy. However, I think better policy would be to focus on helping young people in general. For instance, instead of a first time home buyers' credit, there could be a special reduced tax rate on the first $X (or £Y :P ) that a person earns after age 18. (Possibly varied on a means-tested basis.) That would help people get started, either saving up a down payment, or starting an investment portfolio, without skewing the housing and rental markets.
Of course I recognize that the problem with that plan is that many, or even most, people would waste that money instead of saving it. By tying it to house purchase, you force people to put it into an asset, and in turn, owning a home forces people to save (in the form of equity). However, we need to find a different solution to that problem, because we'll never be (or want to be) at the point where everyone is a home owner, and right now the people who most need that leg up early in life are the ones who aren't getting it. I don't know what the solution is, but there are certainly possibilities. For instance, a defined benefit state-backed pension plan can prevent people with no savings from being screwed in retirement. It could be made possible to borrow from one's state pension plan to buy a first home. In theory that should not skew prices vs rents as much as a straight tax break, because it's not free money. And it would be more equitable, because people who choose not to use it (or who aren't able to) will still get an equivalent benefit.
I generally follow the logic. Though, if salaries are not enough to support a mortgage application this model will trap people in a renting cycle. A precarious one at that.
The interesting part in the model you present is the use of investment portfolios to get on the housing ladder. Its as if working hard isn't enough, you need some extra device, with a degree of risk and luck to make the leap to home ownership.
Its great to imagine what would happen if people couldn't buy second homes, or being innovative over how a special tax rate could be applied to young people. No-one really knows the answers until it happens. My gut feeling is that renting is unethical - I know I couldn't bring myself to make money out of someone renting if I had my own house and enough money already. But that's it, none of these issues are based on isolated models.
My crude knee jerk ideas: A maximum cap on rental prices indexed to minimum wage.
A preference model where first time buyers get 1st picks.
A trusted simple well thought out online platform that makes buying and selling a house as easy as possible (replacing the trickery of estate agents).
And for Landlords: Absolutely robust laws always favouring the right of the tenant, so landlords are forced to acknowledge a social responsibility to their tenants - what bigger responsibility could you have for another human being then being a Landlord.
An online platform where tenants can request references on Landlords from old tenants.
Its great to imagine what would happen if people couldn't buy second homes, or being innovative over how a special tax rate could be applied to young people. No-one really knows the answers until it happens. My gut feeling is that renting is unethical - I know I couldn't bring myself to make money out of someone renting if I had my own house and enough money already. But that's it, none of these issues are based on isolated models.
My crude knee jerk ideas: A maximum cap on rental prices indexed to minimum wage.
A preference model where first time buyers get 1st picks.
A trusted simple well thought out online platform that makes buying and selling a house as easy as possible (replacing the trickery of estate agents).
And for Landlords: Absolutely robust laws always favouring the right of the tenant, so landlords are forced to acknowledge a social responsibility to their tenants - what bigger responsibility could you have for another human being then being a Landlord.
An online platform where tenants can request references on Landlords from old tenants.
@okc: Been following this conversation, and I really appreciate the honest exchange of ideas and viewpoints...
Regarding your ideas:
Rental cap indexed to minimum wage: Unfortunately, in the US, this would mean no rental properties in most of the developed cities in the country. We can't control what people earn, and price of building housing is not directly connected to what individuals make.
First time buyers get preference: As explained above, this is manged in various ways (again, in the States) by first-time homeowner loans that have reduced down payments and by tax credits for first-time owners, among other ways. (Good news, in other words!)
Easier buying/selling process: This is essentially a complaint about contract law/language, which has merit, but is a much broader problem/challenge. Still, parts of the States are getting better systems. Try using Redfin.com to look for housing in one of the states it is available for (try Seattle, Washington for example).
Tenant Rights: These are stronger or weaker in different parts of the States, but check out the Tenants' Union of Washington State for an example. Don't forget, however, to protect the rights of a landlord against deadbeat tenants who can occasionally refuse to pay rent, damage the property, or disrupt neighbors.
Landlord references: Love the idea - would need the support of communities, and a rental climate where landlords need to compete (e.g. probably not San Francisco, Seattle, or other boom towns).
Regarding your ideas:
Rental cap indexed to minimum wage: Unfortunately, in the US, this would mean no rental properties in most of the developed cities in the country. We can't control what people earn, and price of building housing is not directly connected to what individuals make.
First time buyers get preference: As explained above, this is manged in various ways (again, in the States) by first-time homeowner loans that have reduced down payments and by tax credits for first-time owners, among other ways. (Good news, in other words!)
Easier buying/selling process: This is essentially a complaint about contract law/language, which has merit, but is a much broader problem/challenge. Still, parts of the States are getting better systems. Try using Redfin.com to look for housing in one of the states it is available for (try Seattle, Washington for example).
Tenant Rights: These are stronger or weaker in different parts of the States, but check out the Tenants' Union of Washington State for an example. Don't forget, however, to protect the rights of a landlord against deadbeat tenants who can occasionally refuse to pay rent, damage the property, or disrupt neighbors.
Landlord references: Love the idea - would need the support of communities, and a rental climate where landlords need to compete (e.g. probably not San Francisco, Seattle, or other boom towns).
Yeah thanks, all these points are valid.
Re Landlord (and house) refs: references have lots of pitfuls. Ideally even in a boom town, being able to ref you landlord could warn you off the repeatedly terrible ones. The real problem is authenticity, it may get abused heavily by everyone.(imagine a hydrid anarchical version of all the rating problems inherent in eBay and TripAdvisor).
It seems a fair idea but difficult to implement. Would a simple message board based system be enough for a discerning reader? Any solutions for a system like this?
Re Landlord (and house) refs: references have lots of pitfuls. Ideally even in a boom town, being able to ref you landlord could warn you off the repeatedly terrible ones. The real problem is authenticity, it may get abused heavily by everyone.(imagine a hydrid anarchical version of all the rating problems inherent in eBay and TripAdvisor).
It seems a fair idea but difficult to implement. Would a simple message board based system be enough for a discerning reader? Any solutions for a system like this?
>so that getting a mortgage wouldn't be hard for them in the first place.
So, you think that paying massive amounts of interest to financial institutions, over decades, all while being tied to a specific physical location and having a disproportionate amount of your wealth tied up in a single asset class is "fiscally responsible"?
>We need less stupid people, to put it frankly.
The word you're looking for is "fewer".
>he actually has spoken in depth about how to fix the underlying bullshit that keeps so many Americans renters
I appreciate many of his views, but if his platform has anything to do with "turn renters into owners" then it demonstrates his lack of economic wisdom, and will be part of the reason he won't get elected.
So, you think that paying massive amounts of interest to financial institutions, over decades, all while being tied to a specific physical location and having a disproportionate amount of your wealth tied up in a single asset class is "fiscally responsible"?
>We need less stupid people, to put it frankly.
The word you're looking for is "fewer".
>he actually has spoken in depth about how to fix the underlying bullshit that keeps so many Americans renters
I appreciate many of his views, but if his platform has anything to do with "turn renters into owners" then it demonstrates his lack of economic wisdom, and will be part of the reason he won't get elected.
Can you not sell your house and refinance it under a new owner? You pay off your current loan with the bank money they take out to buy the house from you.
I think the fundamental point is simple - if you are renting, you are consuming. If you own, you are partially investing. On the other side of life, either you have purchased an asset or have nothing to show for a significant portion of your time.
I think the fundamental point is simple - if you are renting, you are consuming. If you own, you are partially investing. On the other side of life, either you have purchased an asset or have nothing to show for a significant portion of your time.
>Rent does not build wealth. Rent is the act of transferring wealth from the poor to the rich.
That's not a general rule. It really depends on rents, interest rates, and the cost to purchase housing. In a functioning market rents bring in just a tiny bit more than the monthly mortgage payment, including taxes and fees. There have been times in my area where you came out ahead renting, and times when you came out ahead owning.
The government makes a terrible mistake when it pushes home ownership for people who cant afford it. In the US home ownership is a characteristic of the middle class, not a cause. It's as much consumption as it is savings.
That's not a general rule. It really depends on rents, interest rates, and the cost to purchase housing. In a functioning market rents bring in just a tiny bit more than the monthly mortgage payment, including taxes and fees. There have been times in my area where you came out ahead renting, and times when you came out ahead owning.
The government makes a terrible mistake when it pushes home ownership for people who cant afford it. In the US home ownership is a characteristic of the middle class, not a cause. It's as much consumption as it is savings.
> In a functioning market rents bring in just a tiny bit more than the monthly mortgage payment, including taxes and fees.
Which means rent is still transferring money from the poor to the rich. If you have a mortgage, you're hopefully building up equity that can be released when you retire to somewhere smaller or in a cheaper location (which you can do, since you don't need to live near jobs and any kids will have moved out). If you're renting, you pay the same amount but the money that would've gone into equity instead goes to your wealthy landlord. Here in the UK, there's been a huge wave of rich buy-to-let investors buying up properties on mortgages and paying the mortgage off with rent payments.
Which means rent is still transferring money from the poor to the rich. If you have a mortgage, you're hopefully building up equity that can be released when you retire to somewhere smaller or in a cheaper location (which you can do, since you don't need to live near jobs and any kids will have moved out). If you're renting, you pay the same amount but the money that would've gone into equity instead goes to your wealthy landlord. Here in the UK, there's been a huge wave of rich buy-to-let investors buying up properties on mortgages and paying the mortgage off with rent payments.
I don't know if I agree with your parent that rent should generally cover mortgage payments, but it should at least cover mortgage interest and other expenses, plus a rate of return on top of that. You need to take into account the opportunity cost of ownership. In addition to the interest, insurance, maintenance expenses, and risk, there is an opportunity cost to the money tied up in home equity. In a functioning market, if two people start with the same amount of capital, one decides to purchase a home and the other decides to rent a comparable home and invest the difference in assets of comparable risk, they will expect to come out the same. There is a small net payment from the renter to the owner, but that is because the owner is being compensated for having their capital tied up in the home. (Or looked at another way, the renter is paying for the benefit of not having to have their own capital tied up in the home.)
It doesn't appear that way in practice, because in practice 1) the home owner generally started with more money, which is how they bought a home in the first place, and 2) ownership forces people to save money. A renter with the same income could save a comparable amount of money to an owner, but on average they don't because there isn't a mortgage payment forcing them to do so. So on average home owners tend to be wealthier than renters. But there's nothing special about ownership vs rent (besides forced savings) that causes that to be so.
Rent is not a wealth transfer from poor to rich; it is payment for a service.
Now, if house prices are depressed, like with any asset, it is possible that ownership will temporarily be a good deal. (And vice-versa.) In a situation where the market has taken a plunge, one might be able to buy in at a level where they could be cashflow positive from rent, even including un-rented periods, to an extent that over-compensates for the funds they have tied up in the house. However, in that situation, people will rationally buy investment properties, increasing demand, and returning prices to a more rational level. (Likewise if houses are overpriced, eventually people will stop buying them because they don't expect any return on the investment, which will cause prices to drop.)
It doesn't appear that way in practice, because in practice 1) the home owner generally started with more money, which is how they bought a home in the first place, and 2) ownership forces people to save money. A renter with the same income could save a comparable amount of money to an owner, but on average they don't because there isn't a mortgage payment forcing them to do so. So on average home owners tend to be wealthier than renters. But there's nothing special about ownership vs rent (besides forced savings) that causes that to be so.
Rent is not a wealth transfer from poor to rich; it is payment for a service.
Now, if house prices are depressed, like with any asset, it is possible that ownership will temporarily be a good deal. (And vice-versa.) In a situation where the market has taken a plunge, one might be able to buy in at a level where they could be cashflow positive from rent, even including un-rented periods, to an extent that over-compensates for the funds they have tied up in the house. However, in that situation, people will rationally buy investment properties, increasing demand, and returning prices to a more rational level. (Likewise if houses are overpriced, eventually people will stop buying them because they don't expect any return on the investment, which will cause prices to drop.)
>f you have a mortgage, you're hopefully building up equity that can be released when you retire to somewhere smaller or in a cheaper location
In other words, you're relying on the "Greater Fool Theory" of perpetually increasing house prices.
There is nothing special about real estate as an asset class.
In other words, you're relying on the "Greater Fool Theory" of perpetually increasing house prices.
There is nothing special about real estate as an asset class.
If I want oil, I can go find some and drill for it anywhere that makes fiscal sense.
If I want clay, I can go find a riverbed and start digging.
If I want the corner of Fourth and Chester for commercial traffic, my options are a bit more limited.
The problem with land is not about its scarcity, its about its situational utility. The value of land is often completely out of control of the property owner themself, and you cannot create new city centers or in-demand residential neighborhoods in private enterprise.
If I want clay, I can go find a riverbed and start digging.
If I want the corner of Fourth and Chester for commercial traffic, my options are a bit more limited.
The problem with land is not about its scarcity, its about its situational utility. The value of land is often completely out of control of the property owner themself, and you cannot create new city centers or in-demand residential neighborhoods in private enterprise.
This is true even without perpetually increasing house prices, so long as you're paying off the principal of the loan and not just the interest.
Err, no. Building up equity is not the same as appreciation. It's basically a savings plan. This assumes that the property values remain sane and rational, not that they will constantly grow.
If the house appreciates then you get that money at sale no matter how long you've paid into it or how much equity you have.
If the house appreciates then you get that money at sale no matter how long you've paid into it or how much equity you have.
Which means rent is still transferring money from the poor to the rich. If you have a mortgage, you're hopefully building up equity
Have you seen what percentage of your mortgage payment is equity early on? You're lucky if it's 5%. The rest is interest that goes to the "rich".
Not sure I see much difference between owning and renting when it comes to who gets the money.
Have you seen what percentage of your mortgage payment is equity early on? You're lucky if it's 5%. The rest is interest that goes to the "rich".
Not sure I see much difference between owning and renting when it comes to who gets the money.
5% is more than 0. And over time, it does grow.
Sure, your equity grows over time, but lets say you buy a house and live in it for 5 years. Add in the relator fees, title taxes, maintenance, property taxes and interest paid on the mortgage.
Now compare that with renting. In some situations you might be better off, but that usually requires appreciation in the value of your home. Often renting leaves you with more money in your pocket than buying does.
Now compare that with renting. In some situations you might be better off, but that usually requires appreciation in the value of your home. Often renting leaves you with more money in your pocket than buying does.
>Which means rent is still transferring money from the poor to the rich.
Suppose I start with nothing, get a mortgage on a house and then rent it out. Am I rich?
Suppose I start with nothing, get a mortgage on a house and then rent it out. Am I rich?
There are many good reasons to rent a house, just as there are many good reasons to own a house. However, there is no God-given right to own a house. If you want to own your own house, work hard, save for it, make a plan, have patience.
Renting gives people who already have a home incentive to build new housing.
It also allows you to live somewhere without (a) tying up all my capital + credit in some super-undiversified equity[1] and (b) buying a massive amount of downside risk on the local property market.
The comparison with serfs is, I think, an example of the worst argument in the world[2], paying someone for use of their property seems fine to me on the face of it, and yes it's something serfs used to do, but the things we don't like about serfdom were the violent coercion and the idea that the nobility got their property illegitimately, on the other hand if I built an apartment building and then I rent the apartments to people neither of the elements that cause me to hate serfdom exist here.
>Instead of making everyone homeowners, make everyone fiscally responsible so that getting a mortgage wouldn't be hard for them in the first place.
>I don't entirely blame them though: building Freddy and Fannie was magnitudes easier than fixing the broken parts of American society and (lack of) education.
Well, at least you don't blame them...
Saying something like "make everyone fiscally responsible" is not actionable, but offering people better terms on mortgages is actionable.
People also have risk preferences that just don't line up owning their own home, like wanting to live in property markets where they can't afford a home (like NY or SF), and no amount of fiscal responsibility will change that for most of these people, you either need to change their preferences (by making these place less attractive) or dramatically increase the supply of housing.
[1] Even worse, for a lot of people the value of their home is somewhat correlated with their income, like if the local property market tanks it's more likely that the local job market suffered a downturn also, so that it's more likely that they've also lost their jobs, so now you might have to default on a mortgage, and also you have no income.
[2] http://squid314.livejournal.com/323694.html
It also allows you to live somewhere without (a) tying up all my capital + credit in some super-undiversified equity[1] and (b) buying a massive amount of downside risk on the local property market.
The comparison with serfs is, I think, an example of the worst argument in the world[2], paying someone for use of their property seems fine to me on the face of it, and yes it's something serfs used to do, but the things we don't like about serfdom were the violent coercion and the idea that the nobility got their property illegitimately, on the other hand if I built an apartment building and then I rent the apartments to people neither of the elements that cause me to hate serfdom exist here.
>Instead of making everyone homeowners, make everyone fiscally responsible so that getting a mortgage wouldn't be hard for them in the first place.
>I don't entirely blame them though: building Freddy and Fannie was magnitudes easier than fixing the broken parts of American society and (lack of) education.
Well, at least you don't blame them...
Saying something like "make everyone fiscally responsible" is not actionable, but offering people better terms on mortgages is actionable.
People also have risk preferences that just don't line up owning their own home, like wanting to live in property markets where they can't afford a home (like NY or SF), and no amount of fiscal responsibility will change that for most of these people, you either need to change their preferences (by making these place less attractive) or dramatically increase the supply of housing.
[1] Even worse, for a lot of people the value of their home is somewhat correlated with their income, like if the local property market tanks it's more likely that the local job market suffered a downturn also, so that it's more likely that they've also lost their jobs, so now you might have to default on a mortgage, and also you have no income.
[2] http://squid314.livejournal.com/323694.html
"Renting gives people who already have a home incentive to build new housing."
I doubt that's something that's actually needed. There's already plenty of incentive for that.
I doubt that's something that's actually needed. There's already plenty of incentive for that.
They probably did the wrong thing with mortgages-for-all. They set up Fannie Mae and Freddie Mac as mortgage clearing houses that repackaged the loans into investments. So the net effect made all owners with a mortgage functionally equivalent to renters with a landlord, but with fewer obligations on the financiers. If you have a mortgage, you effectively have an absentee landlord with an agent on Wall Street, who doesn't even know your name.
They probably should have made mortgages secured by land property illegal to offer, except by credit unions serving a geographical region. That would severely limit housing options in less developed regions, but at least the money invested in housing there would stay there instead of getting siphoned off to international finance centers. If your mortgage payment goes to all your neighbors, you can get it back from them every month by offering them local goods and services. If it goes to a holding company, there's nothing you have to offer that it wants, other than cash. So that cash has to come from whatever it is that your region can export.
If the only thing Appalachia has for export is coal and whiskey, then everyone with a non-locally-owned mortgage is dependent on those industries to make payments.
They probably should have made mortgages secured by land property illegal to offer, except by credit unions serving a geographical region. That would severely limit housing options in less developed regions, but at least the money invested in housing there would stay there instead of getting siphoned off to international finance centers. If your mortgage payment goes to all your neighbors, you can get it back from them every month by offering them local goods and services. If it goes to a holding company, there's nothing you have to offer that it wants, other than cash. So that cash has to come from whatever it is that your region can export.
If the only thing Appalachia has for export is coal and whiskey, then everyone with a non-locally-owned mortgage is dependent on those industries to make payments.
>Rent in America today is identical to the serfs of old. Instead ... make everyone fiscally responsible so that getting a mortgage wouldn't be hard for them in the first place.
Replace rent with debt is your solution? Mortgages (banks) are the new feudal lords
Replace rent with debt is your solution? Mortgages (banks) are the new feudal lords
I dunno - I paid off my mortgage. Now I'm not beholden to anybody.
Renting is like slavery, mortgages are like indentured servitude.
When a section of society is forced to rent off a richer section of society, then you have a self perpetuating financial inequality - a poverty trap.
For people in poverty, house ownership isn't a financial option. Giving poorer people the option to own or rent, gives people empowerment over their future.
Judging from the name, I'd guess they're targeting rural areas. Rural land is dirt cheap, and it's not uncommon for even very poor families to have a decent plot that's been in the family for generations; but if there's a house on it at all, it's decrepit and crumbling.
This is the same group that Habitat for Humanity serves, for example. My mother helped build a Habitat house in Belize a while back; the land was a tiny scrap of muddy landfill in the middle of a slum, but the family owned it free and clear.
(These areas don't generally have apartments available at all. The economics don't support it.)
This is the same group that Habitat for Humanity serves, for example. My mother helped build a Habitat house in Belize a while back; the land was a tiny scrap of muddy landfill in the middle of a slum, but the family owned it free and clear.
(These areas don't generally have apartments available at all. The economics don't support it.)
As an Australian who has rented all his life, you live knowing that the rug can be pulled from under you at any point. I think in my state that the notification period to 'get out!' is 90 days, but it may be shorter. Owning your own home also means you can do what you like with it, have what pets you like, so on and so forth. The equation is more than comparing dollars out.
My experience is that owning is cheaper than renting in the long run. It makes sense in the broad context because when you rent you still have to cover all of the costs, but they just get hidden in your monthly rent, and additionally you need to pay the landlord--an expense you don't have with ownership. There is a modest benefit in spreading out the risk as well, if you have a major maintenance expense you won't be responsible for the cost up front, however homeowners can purchase insurance that does the same thing (but are usually a pretty bad deal IMHO).
There are some efficiencies to renting. The maintenance can be done by dedicated staff at negotiated rates instead of having to hire outside work. But the efficiencies don't really appear until you're living in a massive complex with lots of other customers to spread the cost around.
When I bought my first house my $1700/month rent for a 800 square foot apartment became a $1000/month mortgage for a 1400 square foot townhouse in a better part of town. And unlike renting I would eventually run out of mortgage after 30 years and have a big asset in my name, one that is likely to appreciate in value over the long term.
In the long term renting is a pretty bad deal for everybody but the landlord.
There are some efficiencies to renting. The maintenance can be done by dedicated staff at negotiated rates instead of having to hire outside work. But the efficiencies don't really appear until you're living in a massive complex with lots of other customers to spread the cost around.
When I bought my first house my $1700/month rent for a 800 square foot apartment became a $1000/month mortgage for a 1400 square foot townhouse in a better part of town. And unlike renting I would eventually run out of mortgage after 30 years and have a big asset in my name, one that is likely to appreciate in value over the long term.
In the long term renting is a pretty bad deal for everybody but the landlord.
> Why not rent a flat instead?
Flats usually suck because you have noise from neighbors. Of course, you can build flats with better sound insulation, but that obviously costs more, although I'm not sure how much more.
Flats usually suck because you have noise from neighbors. Of course, you can build flats with better sound insulation, but that obviously costs more, although I'm not sure how much more.
A lot of the poor, rural, families these low-cost homes are targeted at are living on land owned by the family for generations. They often do small-scale farming or large-scale gardening (depending on your definition) and hunting/gathering on the property for food.
In many cases, there will be multiple generations of the family living in separate houses on the same property. At least, these things were all true when I lived in family property in West Virginia in the 80's. We had four houses on about 200 acres in a valley, nearly an acre of garden, and other relatives would regularly stop by from nearby valleys on hunting trips, sharing what they managed to catch for what we managed to grow.
In many cases, there will be multiple generations of the family living in separate houses on the same property. At least, these things were all true when I lived in family property in West Virginia in the 80's. We had four houses on about 200 acres in a valley, nearly an acre of garden, and other relatives would regularly stop by from nearby valleys on hunting trips, sharing what they managed to catch for what we managed to grow.
They say it's nicer than my house, but apart from the price I don't see anything nice about it. Honestly it looks really bad.
$20,000 is impressively cheap, but like with the iphone making smartphones popular or the Tesla making electric cars popular, I think smartly built houses aren't gonna take off until their design and specs are top notch.
$20,000 is impressively cheap, but like with the iphone making smartphones popular or the Tesla making electric cars popular, I think smartly built houses aren't gonna take off until their design and specs are top notch.
This house is not for you. This house is for poor people who live in rural or urban decaying homes. Their roofs leak and collapse, their insulation in non-existent, their plumbing doesn't work. This is a big issue, and having worked with a number of situations like this, being able to get someone a new house for $20K that functions would be huge.
$20K (or even $30K) for a functional, well-designed, "tornado-resistant" house would be a big help to many in the rural and urban south.
$20K (or even $30K) for a functional, well-designed, "tornado-resistant" house would be a big help to many in the rural and urban south.
This house is not for you. This house is for poor people
Not everybody who earns a good income is required to spend it on pointless status-signaling. Some of us enjoy inexpensive, low-footprint, low-consumption living.
Not everybody who earns a good income is required to spend it on pointless status-signaling. Some of us enjoy inexpensive, low-footprint, low-consumption living.
Roof looks good to me. If its the same delta rib panels I installed, I had a choice of a 83 year warranty or a 100 year warranty. Snow load angle looks good also. They are off the ground and the roof extends out a bit so that the water stays off the side. I think they are built fine.
They were referring to poor people's homes.
Tornado resistance can be accomplished with a trailer home, some design tweaks, a big concrete pad and a lot of big lag bolts.
structural interior walls that act similar to the bulkheads of a ship) to prevent the structure from deforming and folding over/apart
structural interior walls that act similar to the bulkheads of a ship) to prevent the structure from deforming and folding over/apart
I love things like this, but also saddened that in the UK the land to put it on would cost at least ten times that amount. The planning system here is a disgrace.
UK housebuilding companies are sitting on (by various estimates) 400,000-600,000 plots of land which have planning permission, but they haven't built on. That's about 3 years' worth of new houses. The reason is to hold up prices, and because (with "ever-rising" prices) if they build in the future they will make more profit.
There are problems in the planning system, certainly, but at the moment we need an undeveloped land tax to stop this behaviour.
Sources: http://www.theguardian.com/society/2015/dec/30/revealed-hous... http://www.local.gov.uk/media-releases/-/journal_content/56/...
There are problems in the planning system, certainly, but at the moment we need an undeveloped land tax to stop this behaviour.
Sources: http://www.theguardian.com/society/2015/dec/30/revealed-hous... http://www.local.gov.uk/media-releases/-/journal_content/56/...
The government is not at all interested in fixing this, because it would probably crash the housing market. Which people (both politicians, many of the people who elect them, and perhaps most importantly all of the people who fund their campaigns) think would be a Very Bad Thing.
Seriously, it may be hard for young people to enter the housing market. But no-one wants to go for a solution that leaves the people who do own houses today with mortgages bigger than what their house is worth on the market. You don't help 10% of people by screwing over another 70%.
Seriously, it may be hard for young people to enter the housing market. But no-one wants to go for a solution that leaves the people who do own houses today with mortgages bigger than what their house is worth on the market. You don't help 10% of people by screwing over another 70%.
The government also now has a direct liability to a fall in the housing market through Help To Buy.
> The reason is to hold up prices...
Not just this but also because they still need capital to finance the construction process. Borrowing short term is a model that works for them when demand is high - they don't want to be sat holding empty properties after all.
Longer term finance, allowing houses to be built for rental, is one solution that's slowly gaining traction with pension funds and the like.
Of course, as you say, the status quo suits the major housebuilders just fine so there is a lot of inertia when it comes to adopting new and innovative business models.
Not just this but also because they still need capital to finance the construction process. Borrowing short term is a model that works for them when demand is high - they don't want to be sat holding empty properties after all.
Longer term finance, allowing houses to be built for rental, is one solution that's slowly gaining traction with pension funds and the like.
Of course, as you say, the status quo suits the major housebuilders just fine so there is a lot of inertia when it comes to adopting new and innovative business models.
I really hope housing becomes a key electoral issue for the next government. The current housing crisis in the UK is impoverishing an entire generation.
The trouble is young people don't vote. Old people do vote, and they get free bus passes, TV licences, ridiculous pension protections and planning laws to protect their house price windfalls.
The trouble is that young people don't believe the major political parties will fulfil their promises even if they do vote for them (and they're probably right).
A land tax in general may not be a bad idea:
https://en.wikipedia.org/wiki/Land_value_tax
https://en.wikipedia.org/wiki/Land_value_tax
A relative of mine is building a house right now. They bought a property and they need to start construction within 1 year, or else they loose that property. Not sure if it works that way everywhere in Germany.
The UK has time limits on planning permission too, but they are quite long - 3 years is the default. Also the limits only apply to the commencement of the work. You can (and people do) get around this by digging a hole or laying a small part of the foundations, and then they do nothing else. So with really a very small amount of effort, you can "land bank" indefinitely. The government shows no signs of wishing to fix this, since forcing up the price of houses to absurd new highs is policy.
The link does not support your assertion that there is planning permission on those plots. After the hand-waving about profits, there are nearly identical quotes from developers explaining that the bottlenecks are planning permission, skilled workers and building materials.
Try this source: http://www.local.gov.uk/media-releases/-/journal_content/56/...
Still no:
"The vast majority of the 475,647 homes quoted by the LGA are either on sites where work has already started, or where there is not a fully ‘implementable’ permission and where it is not legal for builders to commence construction"
http://www.theguardian.com/society/2016/jan/07/number-of-unb...
"To get to 475,000 unbuilt homes, the LGA have looked at every development scheme that has permission, and decided that, until the scheme is completed, the whole development should be classed as unimplemented – even if most of the houses are mid-construction, or even if they have been finished.
If you count houses that have been built as unbuilt, you are obviously going to end up seriously exaggerating from reality. I am writing this article from a flat that was finished 18 months ago; but another part of the development is still being built. According to these figures, I live in an unbuilt home."
http://www.citymetric.com/politics/according-lga-my-flat-doe...
Also, it's pretty bad form to ghost-edit your comment after it's been commented on.
"The vast majority of the 475,647 homes quoted by the LGA are either on sites where work has already started, or where there is not a fully ‘implementable’ permission and where it is not legal for builders to commence construction"
http://www.theguardian.com/society/2016/jan/07/number-of-unb...
"To get to 475,000 unbuilt homes, the LGA have looked at every development scheme that has permission, and decided that, until the scheme is completed, the whole development should be classed as unimplemented – even if most of the houses are mid-construction, or even if they have been finished.
If you count houses that have been built as unbuilt, you are obviously going to end up seriously exaggerating from reality. I am writing this article from a flat that was finished 18 months ago; but another part of the development is still being built. According to these figures, I live in an unbuilt home."
http://www.citymetric.com/politics/according-lga-my-flat-doe...
Also, it's pretty bad form to ghost-edit your comment after it's been commented on.
Also, if they don't build homes fast enough, the national government steps in and overrules the local planning process, allowing the companies to build on other, more desirable greenfield sites that they ordinarily would never have gotten planning permission for.
Looks like a PR piece.
http://paulgraham.com/submarine.html
https://www.google.com/search?hl=en&q=Rural%20Studio%27s%202...
http://www.prweb.com/releases/ruralstudiosept15/artfarmseren...
http://paulgraham.com/submarine.html
https://www.google.com/search?hl=en&q=Rural%20Studio%27s%202...
http://www.prweb.com/releases/ruralstudiosept15/artfarmseren...
It worked, the story is ranked 3 right now on HN.
Reads too much like an advertisement piece.
Building a 60 m2 wooden shack have always been cheap compared to a proper house.
Much of the cost of a house lies in the cost of land and the cost of connecting it to water and electricity.
These costs are high because of scarcity and the policies of cities. Policies that ensures that values of houses do not fall and people do not go under water in debt, that areas are filled with proper gentry, that there are nice open spaces, nature, farmland etc.
Even if you could build a house for 0 dollars many places would still have an affordability issue.
Building a 60 m2 wooden shack have always been cheap compared to a proper house.
Much of the cost of a house lies in the cost of land and the cost of connecting it to water and electricity.
These costs are high because of scarcity and the policies of cities. Policies that ensures that values of houses do not fall and people do not go under water in debt, that areas are filled with proper gentry, that there are nice open spaces, nature, farmland etc.
Even if you could build a house for 0 dollars many places would still have an affordability issue.
I think it's really impressive that they were able to build a house like that for only 20K.
The article mentions zoning laws and size requirements, which I found odd. Do many places not allow houses below a certain size to be built?
The article mentions zoning laws and size requirements, which I found odd. Do many places not allow houses below a certain size to be built?
It's extremely common in the US.
Huh, that doesn't make any sense to me. Smaller houses would make cities more walkable/livable and thus be better for people's health and the environment.
Do people want those kinds of laws in order to protect their "investment"? I mean, I guess maybe your house will be worth more if all the other houses nearby are large and thus expensive?
Of course, now in the digital age, I guess such laws seem sillier than they did earlier. You no longer need a huge amount of books, music records, train set, pinball machines, billiard table etc., since you can fit all those things in a small computer.
Do people want those kinds of laws in order to protect their "investment"? I mean, I guess maybe your house will be worth more if all the other houses nearby are large and thus expensive?
Of course, now in the digital age, I guess such laws seem sillier than they did earlier. You no longer need a huge amount of books, music records, train set, pinball machines, billiard table etc., since you can fit all those things in a small computer.
A lot of suburbs actively don't want to be cities - though that's changing now that this is negatively impacting house values.
I never understood suburbs - why not live in the country if you can't walk anywhere anyway?
I never understood suburbs - why not live in the country if you can't walk anywhere anyway?
In general, it's to prevent poor people or single people from moving into the neighborhood. The suburbs want middle class families, with children, and everyone else can FOAD.
They don't want to be walkable, because then the financial threshold of car ownership is not a requirement for getting there.
Extend the idea of a playpen to older kids, and that is an American suburban subdivision. The inconvenience and unaffordability are features, not bugs.
They don't want to be walkable, because then the financial threshold of car ownership is not a requirement for getting there.
Extend the idea of a playpen to older kids, and that is an American suburban subdivision. The inconvenience and unaffordability are features, not bugs.
Many cities and developers would either rather have bigger houses and the kind of people who can afford them, or squash as many people per square foot as possible by building up.
Zoning and construction regulation has obviously not kept pace with the changing social expectations of housing nor innovation in building construction. And you are right, a lot of it was enacted (especially minimum square footage zoning) in response to trying to keep "undesirables" out of areas in the aftermath of white flight from urban centers in the 50s / 60s and has remained ever since, since the children of the generation that enacted those laws grew up being preached to how bad non-conformance is and they are now the largest voting block in America.
I think the idea of approaching things like this from first principles is a great way to create change.
Everything we take for granted could potentially be made in a much better way for a lower price. It will be interesting to see applications of this thinking in other areas.
Everything we take for granted could potentially be made in a much better way for a lower price. It will be interesting to see applications of this thinking in other areas.
Material cost of houses is already 'cheap'.
But you also need a place to build it. In The Netherlands ground prices range from $100 - $500 per m².
Then you need sewage, electricity, gas, labor, and so on. I don't think you could make those much cheaper.
But you also need a place to build it. In The Netherlands ground prices range from $100 - $500 per m².
Then you need sewage, electricity, gas, labor, and so on. I don't think you could make those much cheaper.
Yes, but this is the state of Georgia in the United States. You could buy a nice sized lot plenty big enough for this house in a poor part of the city for $0.5-3K.
There was a company in Poland that was building houses like that - they went bust. The main problem is cultural. People look at it and see a shed and they want a "proper" house. "Can I retire here?" "Is it an investment?". What is more, there is a segway syndrome (you like a dork). You will be that weird guy that lives in this weird house. And there is a liquidity problem.
After surveying the house designs, I can't help but share this: http://inhabitat.com/magical-dome-house-in-remote-thailand-c...
$8000 for 3 room house with small pool, which is so fun that it looks like toy.
$8000 for 3 room house with small pool, which is so fun that it looks like toy.
It doesn't look very sturdy, which seems to be a wrong assumption on my part [1], but 20k for a decent house is nice...assuming you own the land already.
For comparison, how much do the Amish-houses cost (materials) and how long do they take to build them? I only know them from movies but they seem like low-cost/quickbuild type houses, too.
Edit: Building instructions for this could be a good application for a VR-based tutorial :)
[1]: "They're built more like airplanes than houses, which allows us to have them far exceed structural requirements. ... We're using material much more efficiently. But the problem is your local code official doesn't understand that. They look at the documents, and the house is immediately denied a permit simply because the code officials didn't understand it."
Edit: Building instructions for this could be a good application for a VR-based tutorial :)
[1]: "They're built more like airplanes than houses, which allows us to have them far exceed structural requirements. ... We're using material much more efficiently. But the problem is your local code official doesn't understand that. They look at the documents, and the house is immediately denied a permit simply because the code officials didn't understand it."
http://www.artsatl.com/2016/01/serenbe-rural-studio-artist-r...
> And $20,000 is still an aspiration. These two cottages and the deck between them cost $135,000 to build. Smith is hoping that if a contractor understands process, he can bring it in more cheaply. Smith will be able to test that hypothesis: Nygren is invested in the collaboration and the concept. He intends to build more cottages and will be raising funds to do so. He says,
This title is misleading. It is $67,500 / house and the costs are on par with new construction for a similar structure. :/
> And $20,000 is still an aspiration. These two cottages and the deck between them cost $135,000 to build. Smith is hoping that if a contractor understands process, he can bring it in more cheaply. Smith will be able to test that hypothesis: Nygren is invested in the collaboration and the concept. He intends to build more cottages and will be raising funds to do so. He says,
This title is misleading. It is $67,500 / house and the costs are on par with new construction for a similar structure. :/
Excluding all costs apart from material. Yeah, it doesn't cost 20k.
> How do you design a home that someone living below the poverty line can afford, but that anyone would want—while also providing a living wage for the local construction team that builds it?
Material is $14k.
Material is $14k.
The articles says "Originally, the project aimed for a house that would cost $20,000 in total, including construction, though they now believe that more money may be needed to provide a living wage for builders."
So more than 20k.
Plus land. How much does the land cost?
So more than 20k.
Plus land. How much does the land cost?
> Plus land. How much does the land cost?
According to the article[1], it's in a development area with "million dollar homes", so I'm guessing (based on similar developments near me, also in the Atlanta area) around $200k for a half-acre plot. So in reality, it's a $220k home for "poor people".
Granted this is the pilot program, but it's nearly impossible to find decent land in the right location and conditions to build a home upon for under $20k/acre, at least here in Georgia. So let's say you're lucky enough to find a five acre plot (the minimum for what this kind of home requires to comply with zoning laws near me) for $50k. You buy this kit for $20k, take a leave of absence from work for six weeks to build it (~$6k, if your blue collar job doesn't give you paid leave), hire a licensed electrician ($8k) and licensed plumber ($10k) to handle those jobs because it's not included in the kit and building permits require licensed work. Now we're at ~$94k for a home that will not be as nice as a traditional home that costs the same. Not to mention, $94k is at the upper end of what someone with a $50k/year income can afford.
I get the intention behind the program, but right now it's no different from any other "sustainable initiative" out there: It's a great theory but only applicable in near-perfect conditions or as a prototype.
All of that said, I'd love to tear down my house and build something like this, if only the zoning laws here would allow it.
[1] "The development near Atlanta might at first seem like an unlikely place to build the pilot homes—it's a lush planned community that includes million-dollar houses."
According to the article[1], it's in a development area with "million dollar homes", so I'm guessing (based on similar developments near me, also in the Atlanta area) around $200k for a half-acre plot. So in reality, it's a $220k home for "poor people".
Granted this is the pilot program, but it's nearly impossible to find decent land in the right location and conditions to build a home upon for under $20k/acre, at least here in Georgia. So let's say you're lucky enough to find a five acre plot (the minimum for what this kind of home requires to comply with zoning laws near me) for $50k. You buy this kit for $20k, take a leave of absence from work for six weeks to build it (~$6k, if your blue collar job doesn't give you paid leave), hire a licensed electrician ($8k) and licensed plumber ($10k) to handle those jobs because it's not included in the kit and building permits require licensed work. Now we're at ~$94k for a home that will not be as nice as a traditional home that costs the same. Not to mention, $94k is at the upper end of what someone with a $50k/year income can afford.
I get the intention behind the program, but right now it's no different from any other "sustainable initiative" out there: It's a great theory but only applicable in near-perfect conditions or as a prototype.
All of that said, I'd love to tear down my house and build something like this, if only the zoning laws here would allow it.
[1] "The development near Atlanta might at first seem like an unlikely place to build the pilot homes—it's a lush planned community that includes million-dollar houses."
6k = 12 working days for a builder skilled enough to do everything from working an excavator to hooking up hvac. So they're claiming a house that can be build in 12 day, by a single person, ready to move in? Clickbait.
I'm not sure where you're getting 'by a single person' from, or 12 days,
and us$500/day seems generous for a 1 man shop.
But given the cladding and roofing in the photo's, I'd imagine a 2 man crew could build a house in roughly that many working days. Probably less.
When I was working as a builders labourer, we'd show up on-site with the concrete pad already set. Take ~ 1 day to stand-up the frames. ~ another day to stand up the roof trusses, ~1-2 days to put the roof purlins and any internal gutters in (the buildings shown won't have those). And another day or two for putting tar-paper on the roof, tyvek around the frames, and general tidy up
A contractor would take ~2 days to put the roof on.
~1/2 day for the electrical pre-wire. ~1 day for the plumbers and drainlayers to pre-place everything
1-2 days to fit the windows and doors.
The style of exterior cladding shown is comparable to the roof, so another 2 days. (Most of the houses I worked on had brick cladding over a timber frame, which took ~4 days for a single story house)
Plastering, (2 days) Painting (1 day), electrical post (~1/2 day) plumbing post (~1/2 day). Cabinet work (1 day) carpet (2 days)
So ~19.5 days to build a conventional house.
We can eliminate the carpet straight off.
If we use structural insulated panels we can eliminate the cladding, roofing, papering, and time to install the purlins. That's ~7 days saved right off the bat.
The depicted houses are on concrete block stilts, which will need a day or 2 to build, and there needs to be some extra time allocated to building and insulating the elevated floor, but I don't really see why that has to be hugely expensive.
The depicted structure is small, and doesn't appear to have AC. the foundation, plumbing and drainage don't look like they require extensive use of excavators (although you will need some for the drainlayers at least).
So with 2 people, plus the drainlayer contractor and his baby excavator, I don't think they're all that far off a reasonable construction cost.
But given the cladding and roofing in the photo's, I'd imagine a 2 man crew could build a house in roughly that many working days. Probably less.
When I was working as a builders labourer, we'd show up on-site with the concrete pad already set. Take ~ 1 day to stand-up the frames. ~ another day to stand up the roof trusses, ~1-2 days to put the roof purlins and any internal gutters in (the buildings shown won't have those). And another day or two for putting tar-paper on the roof, tyvek around the frames, and general tidy up
A contractor would take ~2 days to put the roof on.
~1/2 day for the electrical pre-wire. ~1 day for the plumbers and drainlayers to pre-place everything
1-2 days to fit the windows and doors.
The style of exterior cladding shown is comparable to the roof, so another 2 days. (Most of the houses I worked on had brick cladding over a timber frame, which took ~4 days for a single story house)
Plastering, (2 days) Painting (1 day), electrical post (~1/2 day) plumbing post (~1/2 day). Cabinet work (1 day) carpet (2 days)
So ~19.5 days to build a conventional house.
We can eliminate the carpet straight off.
If we use structural insulated panels we can eliminate the cladding, roofing, papering, and time to install the purlins. That's ~7 days saved right off the bat.
The depicted houses are on concrete block stilts, which will need a day or 2 to build, and there needs to be some extra time allocated to building and insulating the elevated floor, but I don't really see why that has to be hugely expensive.
The depicted structure is small, and doesn't appear to have AC. the foundation, plumbing and drainage don't look like they require extensive use of excavators (although you will need some for the drainlayers at least).
So with 2 people, plus the drainlayer contractor and his baby excavator, I don't think they're all that far off a reasonable construction cost.
Prefab houses can be built in a single day. In fact in china they built a prefab skyscraper in 15 days.
Including plumbing, flooring, electricity, hooking up utilities etc. ? Please cite your sources because extraordinary claims require extraordinary evidence.
https://www.google.ca/search?q=china+skyscraper+15+days
It's been discussed on HN half a dozen times. "Extraordinary claims" is a context-dependent idea.
It's been discussed on HN half a dozen times. "Extraordinary claims" is a context-dependent idea.
Yes, I know about the skyscraper, I meant the 'build home in a single day' part.
Keep in mind they had several small armies working on it at the same time. They could throw bodies at the work and get it done quickly. The real challenge would be in coordinating all of that.
iirc the designer of that skyscraper admitted that the plumbing was not ideal.
People have been building homes cheaper than that for a long time now. What makes this different?
When I was a kid, I spent a lot of time on my grandfather's farm in southern Kentucky. I didn't realize it, but it was rural poverty. He didn't have electricity or running water (this was the early 1970s). But at least it was a wood house, with glass windows and doors and a decent fireplace and a coal-burning stove.
Back in the far back of the same property, up a dirt trail in the woods, an old black man lived alone in a shack. One room, walls made out of tar paper and corrugated steel. That's a house that can survive in that kind of terrain, and it cost a lot less than $20k. (Interestingly, my father treated that old man with great respect and deference. My father didn't respect anyone, so it boggled me, even as a small child.)
Around the world, entire neighborhoods of "shantytowns" arise around cities, made from the discarded junk of richer people. Shelter is shelter. People build it because they can't make a living wage and pay someone else to build a house for them...
When I was a kid, I spent a lot of time on my grandfather's farm in southern Kentucky. I didn't realize it, but it was rural poverty. He didn't have electricity or running water (this was the early 1970s). But at least it was a wood house, with glass windows and doors and a decent fireplace and a coal-burning stove.
Back in the far back of the same property, up a dirt trail in the woods, an old black man lived alone in a shack. One room, walls made out of tar paper and corrugated steel. That's a house that can survive in that kind of terrain, and it cost a lot less than $20k. (Interestingly, my father treated that old man with great respect and deference. My father didn't respect anyone, so it boggled me, even as a small child.)
Around the world, entire neighborhoods of "shantytowns" arise around cities, made from the discarded junk of richer people. Shelter is shelter. People build it because they can't make a living wage and pay someone else to build a house for them...
It's fascinating to see innovation in this space.
I am also curious to see how the mortgage and realtor industry responds to this type of demand in the future.
I am also curious to see how the mortgage and realtor industry responds to this type of demand in the future.
As noted in the article, the current mortgage situation isn't good at all.
I wanted to buy land a couple of years ago, to build a tiny house on. I went in willing/able to put a 30-40% down payment on the property, with plans to build my own tiny house completely self-funded over the next year or so. The banks were simply not at all equipped to address that. Despite my excellent credit (high 700s) and low debt, and the cash to make the down payment and good income, they made it clear that I would be able to get a loan on a regular sized house with much less money down, but would not be able to get a loan on just a piece of land with plans to put a tiny house on it.
They were also willing to talk about loaning money for the land, if I could show how I was going to afford to build a "regular" house on the property (requiring going through a builder and getting a loan on the future house). In short, the was no way, short of paying for the property entirely out of pocket I would be able to buy land and build my own tiny house on it.
It was incredibly frustrating. I mean, I'm talking to these folks and they are, with a straight face, saying, "Well, as a first time home buyer, you could put 5%-15% down and buy a house, with the bank loaning you the other ~$160,000." And, I'd say, "OK, but what if I put $25,000 down, and only borrow $50,000 from the bank, and buy a piece of land, and over the next year I build myself a house on that land." And, they'd reply, "That's just not gonna happen."
So, several banks would have been happy to loan me $160k with $16k down on a full-sized house, but no one was willing to loan me $50k with $25k down on land for a tiny house.
I gave up on buying at that time. Will save up and pay cash for a plot of land in another year or two, and build my tiny house then.
I doubt it will change any time soon. Home builders have no motivation to build smaller, banks have no interest in betting on self-built homes. Which is understandable to some degree...but, the sheer hardheadedness of the response was really surprising, to me. I'd always assumed I would have no trouble getting whatever kind of loan I wanted, as long as I brought enough cash to the table. But, for land-only deals, many banks want to see 50% or more down payment, which is silly.
So, tiny houses remain mostly the privilege of those wealthy enough to afford to buy land without a mortgage, or those who don't mind living in places where land is very, very cheap. It's also possible to park a tiny house in a trailer park or RV park (and I know some folks who do that), but that misses the point of home ownership, for me.
I wanted to buy land a couple of years ago, to build a tiny house on. I went in willing/able to put a 30-40% down payment on the property, with plans to build my own tiny house completely self-funded over the next year or so. The banks were simply not at all equipped to address that. Despite my excellent credit (high 700s) and low debt, and the cash to make the down payment and good income, they made it clear that I would be able to get a loan on a regular sized house with much less money down, but would not be able to get a loan on just a piece of land with plans to put a tiny house on it.
They were also willing to talk about loaning money for the land, if I could show how I was going to afford to build a "regular" house on the property (requiring going through a builder and getting a loan on the future house). In short, the was no way, short of paying for the property entirely out of pocket I would be able to buy land and build my own tiny house on it.
It was incredibly frustrating. I mean, I'm talking to these folks and they are, with a straight face, saying, "Well, as a first time home buyer, you could put 5%-15% down and buy a house, with the bank loaning you the other ~$160,000." And, I'd say, "OK, but what if I put $25,000 down, and only borrow $50,000 from the bank, and buy a piece of land, and over the next year I build myself a house on that land." And, they'd reply, "That's just not gonna happen."
So, several banks would have been happy to loan me $160k with $16k down on a full-sized house, but no one was willing to loan me $50k with $25k down on land for a tiny house.
I gave up on buying at that time. Will save up and pay cash for a plot of land in another year or two, and build my tiny house then.
I doubt it will change any time soon. Home builders have no motivation to build smaller, banks have no interest in betting on self-built homes. Which is understandable to some degree...but, the sheer hardheadedness of the response was really surprising, to me. I'd always assumed I would have no trouble getting whatever kind of loan I wanted, as long as I brought enough cash to the table. But, for land-only deals, many banks want to see 50% or more down payment, which is silly.
So, tiny houses remain mostly the privilege of those wealthy enough to afford to buy land without a mortgage, or those who don't mind living in places where land is very, very cheap. It's also possible to park a tiny house in a trailer park or RV park (and I know some folks who do that), but that misses the point of home ownership, for me.
If you're interested in knowing why, it's because mortgages are sold as securities these days (and have been since before the Big Collapse). If your mortgage is significantly not like the other mortgages, it can't be bundled and sold into the pool of other securitized mortgages. That means your lender has to carry the note itself and the overwhelming majority of lenders--banks and brokers--don't do that.
The other problem: banks need a property that, if foreclosed upon, can be sold to recoup their investment. A friend of mine is having this exact problem. He has a house that could withstand a bomb being dropped on it but it is built to his preferences and the banks he has visited to inquire about refinancing have all said that a sale would be difficult. Too risky to use as collateral since they can't be relatively certain of recovering against loss.
What you're looking for is a "portfolio loan," where the financial institution keeps your loan on its own books. Some credit unions do this (mine does) in situations like yours. The interest will be commensurate with the credit union's guess of how easy your property will be to resell (both in the opinion of the underwriter and of the outside, independent appraiser) to pay for the risk but it can be done.
The other problem: banks need a property that, if foreclosed upon, can be sold to recoup their investment. A friend of mine is having this exact problem. He has a house that could withstand a bomb being dropped on it but it is built to his preferences and the banks he has visited to inquire about refinancing have all said that a sale would be difficult. Too risky to use as collateral since they can't be relatively certain of recovering against loss.
What you're looking for is a "portfolio loan," where the financial institution keeps your loan on its own books. Some credit unions do this (mine does) in situations like yours. The interest will be commensurate with the credit union's guess of how easy your property will be to resell (both in the opinion of the underwriter and of the outside, independent appraiser) to pay for the risk but it can be done.
Thanks for the explanation, and it mirrors the explanation I got from the loan officer at my credit union.
On this point:
"What you're looking for is a "portfolio loan," where the financial institution keeps your loan on its own books. Some credit unions do this (mine does) in situations like yours. The interest will be commensurate with the credit union's guess of how easy your property will be to resell (both in the opinion of the underwriter and of the outside, independent appraiser) to pay for the risk but it can be done."
It was the credit union that said, "We could maybe get you a loan on the land if you can put 50% down." The bank I've been using for 20 years flat out said "no way, we only do land loans for businesses for new construction, and they have to have a plan and funding lined up to complete the construction".
It all seems vaguely rotten and corrupt, to me...but, well, I don't know the motivation for it. I'll just keep saving, and pay cash. Or maybe I'll buy land where it's cheaper. Maybe I won't always value living within biking distance of a city with good live music as highly as I do now.
On this point:
"What you're looking for is a "portfolio loan," where the financial institution keeps your loan on its own books. Some credit unions do this (mine does) in situations like yours. The interest will be commensurate with the credit union's guess of how easy your property will be to resell (both in the opinion of the underwriter and of the outside, independent appraiser) to pay for the risk but it can be done."
It was the credit union that said, "We could maybe get you a loan on the land if you can put 50% down." The bank I've been using for 20 years flat out said "no way, we only do land loans for businesses for new construction, and they have to have a plan and funding lined up to complete the construction".
It all seems vaguely rotten and corrupt, to me...but, well, I don't know the motivation for it. I'll just keep saving, and pay cash. Or maybe I'll buy land where it's cheaper. Maybe I won't always value living within biking distance of a city with good live music as highly as I do now.
Basically, as parent said, they're concerned that doing something oddball with the land will actually decrease its value or at least have some unknown effect on its value that they have no experience to evaluate.
Add to that, post-2008, most banks/credit unions are just going to err on the side of just not making the loan rather than making one which has some unquantifiable risk associated with it.
That said, it's all a bit arbitrary. I live in a relatively normal house on some very nice property but the house has enough quirks (it's very old) that I fully expect that whoever buys it some day will just build a new house.
Add to that, post-2008, most banks/credit unions are just going to err on the side of just not making the loan rather than making one which has some unquantifiable risk associated with it.
That said, it's all a bit arbitrary. I live in a relatively normal house on some very nice property but the house has enough quirks (it's very old) that I fully expect that whoever buys it some day will just build a new house.
It falls down to the value of your proposal, eg:
Land: $25,000 Resale at $20,000 to $30,000
Tiny House: $25,000 Resale at -$5000* to $35,000
Normal House: $100,000 Resale at: $75,000 to $125,000
* Next owners may want it removed
A $50,000 loan doesn't make sense / is too risky.
I know the above is grossly over simplified, and there's hundreds to thousands of factors going into a risk / valuation but currently banks aren't equipped to handle tiny homes, not to mention the market for them isn't as big yet to justify it.
Land: $25,000 Resale at $20,000 to $30,000
Tiny House: $25,000 Resale at -$5000* to $35,000
Normal House: $100,000 Resale at: $75,000 to $125,000
* Next owners may want it removed
A $50,000 loan doesn't make sense / is too risky.
I know the above is grossly over simplified, and there's hundreds to thousands of factors going into a risk / valuation but currently banks aren't equipped to handle tiny homes, not to mention the market for them isn't as big yet to justify it.
"Land: $25,000 Resale at $20,000 to $30,000"
I think you're assuming I was trying to get a loan to build the house. The loan was for the land itself, and I planned to self-fund the house construction. So, I was looking at property that cost around $75k, and was hoping to get a loan for $50k of that (with $25k down). The tiny house was not at all part of the equation on the loan (except in the sense that had I been planning to put a big house on the land and was contracting a home builder to do it, the bank might have treated it more like a regular house and been willing to loan me money).
But, yes, part of the problem is that land has much less predictable resale value than houses, and that was the usual answer I got when being told, "No".
I think you're assuming I was trying to get a loan to build the house. The loan was for the land itself, and I planned to self-fund the house construction. So, I was looking at property that cost around $75k, and was hoping to get a loan for $50k of that (with $25k down). The tiny house was not at all part of the equation on the loan (except in the sense that had I been planning to put a big house on the land and was contracting a home builder to do it, the bank might have treated it more like a regular house and been willing to loan me money).
But, yes, part of the problem is that land has much less predictable resale value than houses, and that was the usual answer I got when being told, "No".
Building something on land that isn't standard reduces the value of the land because it has to be removed as annoying.
Undeveloped land is risky to finance because you have no idea how the borrower will develop it. There are a lot of whacky people out there.
Undeveloped land is risky to finance because you have no idea how the borrower will develop it. There are a lot of whacky people out there.
That loan situation sounds incredibly frustrating. The banks are like, "come on man, it's cool, borrow more money from us," because that's in their interest ... but if you don't wanna play by their rules, then you get shot down.
Sorry to hear it -- both "sorry" in the sense that I wish it hadn't happened to you, and sorry because I myself have had pipe dreams of buying my own land and building on it, so here is some evidence against that being possible.
Sorry to hear it -- both "sorry" in the sense that I wish it hadn't happened to you, and sorry because I myself have had pipe dreams of buying my own land and building on it, so here is some evidence against that being possible.
>have had pipe dreams of buying my own land and building on it, so here is some evidence against that being possible.
It's certainly possible and people do it all the time. But it's more complicated and will usually require more cash in hand than a standard home mortgage will.
It's certainly possible and people do it all the time. But it's more complicated and will usually require more cash in hand than a standard home mortgage will.
Slightly off topic, but what would a modern looking pre-fab house cost? I've always wanted to buy a piece of land somewhere rural and have a house built so I can take mini getaway vacations with my dog.
I have always wanted to toy with this idea. I'd love to save up a nice chunk of change and build something like this.
I'd like a small house out in the middle of the country.
A bathroom with shower, a kitchen with a stove, and a single living space.
Solar panels, backup batteries, well with pump and filter, and a internet hookup (satellite/landline).
I was hoping to find that this article would talk about the prospects of building something like that, but unfortunately this article is not exactly what is in my "dream".
I'd like a small house out in the middle of the country.
A bathroom with shower, a kitchen with a stove, and a single living space.
Solar panels, backup batteries, well with pump and filter, and a internet hookup (satellite/landline).
I was hoping to find that this article would talk about the prospects of building something like that, but unfortunately this article is not exactly what is in my "dream".
I like the concept of small and cheap houses, unfortunately in my country, Europe/Germany this would not qualify as a house built to the newest regulations. It's just a shack.
I would be scared to buy a house that uses non-standard construction methods. Not because I don't trust the plans, but because even with cookie cutter houses, the construction people mess up a lot of things and you really have to pay an additional person to check the construction. Trying to get construction companies to build a house using novel techniques and do it without major errors is, I imagine, quite an undertaking.
Unless, perhaps, one of the advantages in these alternative construction techniques is that they're more construction-error-tolerant. That's, for example, one of the key advantages in suspension bridges: any individual support cable can be installed in a stupid out-of-tolerance way, because load is just redirected evenly to all the other cables. Usually, in fact, "cheaper to build" almost always means "because the materials and techniques used mean that even a sloppy construction process will still produce good results."
Well it sucks to be an early adopter but the students are currently on 20Kv20.
Hopefully after 20 iterations the designs are getting better each time, incorporating real world feedback from the people who built the previous ones.
Perhaps these 'novel techniques' over time might be adopted by industry.
Hopefully after 20 iterations the designs are getting better each time, incorporating real world feedback from the people who built the previous ones.
Perhaps these 'novel techniques' over time might be adopted by industry.
UK: we had big problems with 'system build' council housing in the UK in 1960s and early 1970s. Google 'Bison' and 'Ronan Point' for background.
I'd hope that we have (all) learned a bit about pre-manufactured sections and assembly since then and perhaps pre-manufactured units with quality control/JIT manufacturing techniques would be better than the current bricks on site based construction.
UK: the problem would be the land to build on anywhere near population centres and utilities by the way...
I'd hope that we have (all) learned a bit about pre-manufactured sections and assembly since then and perhaps pre-manufactured units with quality control/JIT manufacturing techniques would be better than the current bricks on site based construction.
UK: the problem would be the land to build on anywhere near population centres and utilities by the way...
But it cost nearly 7X that amount. From another article about the same property:
> And $20,000 is still an aspiration. These two cottages and the deck between them cost $135,000 to build.
http://www.artsatl.com/2016/01/serenbe-rural-studio-artist-r...
> And $20,000 is still an aspiration. These two cottages and the deck between them cost $135,000 to build.
http://www.artsatl.com/2016/01/serenbe-rural-studio-artist-r...
It seems like there are lot of comments about how this kind of house wouldn't work (yes, this won't work in downtown NYC). But it also seems like there are lots of communities - poor, displaced - that would benefit massively.
I'm a big fan of projects like this, even if they only serve to push the innovation of affordable housing further.
It's not nicer than mine. Maybe on dollar to metric niceness, but it's much smaller and offers fewer amenities.
I would love to see a bit more of these. I do wonder if they have a version with insulation that would work in a northern climate. This would be a great project for the reservation I work on simply because it is impossible to get a home loan on the reservation. It would be interesting to see mass production.
Aesthetically not really sure, but definitely a cool idea. Here's hoping they build some of these in the Bay! I can see people buying these in expensive areas to offset the cost of the land.
Kind of reminds me Modern Shed [0].
[0]: http://www.modern-shed.com/
Kind of reminds me Modern Shed [0].
[0]: http://www.modern-shed.com/
All other things aside, the cost of buying a home in densely populated region with situational amenities such as subsidized schools, hospitals, fire stations, zoned shopping districts, reliable power, water, sewer and communication network access is also largely about the real estate market in the area.
Terrible article... no mention of plumbing, toilets, heating, ductwork, or electricity, which are the main factors that dictate how normal houses are designed (which is why materials like cob aren't the game-changers that their devoted proponents claim).
20K? Would love to see the itemised material costs, labour cost, adminstration fees for building this. Also have a projected on-going maintenance costs as well.
At the end of the day, the aim of this house is "a home that someone living below the poverty line can afford."
At the end of the day, the aim of this house is "a home that someone living below the poverty line can afford."
The article pretty clearly states it's just material costs.
My point is what is the real cost of living in this house, can the folks living under the poverty live really afford to live in it?
14K for materials, 6K for labour was the goal.
Around where I live it's the land that costs you the most, so it doesn't really matter what the house costs. Hell, some people buy a property and give away the building for free to anyone that's willing to move it off their land.
Not of personal use for me, but they should just put the plans on github or even a blog. Couldn't find any detail on the site (http://www.ruralstudio.org/)
Historical weather records in the vicinity: http://en.tutiempo.net/climate/2015/ws-722286.html
"This House Costs Just $20,000—But It’s Nicer Than Yours"
later:
"In Serenbe, their first problem was a zoning issue: The houses were too small."
It sounds like this house is probably not nicer than mine. Titles like this really annoy me for some reason.
later:
"In Serenbe, their first problem was a zoning issue: The houses were too small."
It sounds like this house is probably not nicer than mine. Titles like this really annoy me for some reason.
So the location is in a small town somewhere so likely not many job around. That means either you are okay with a homestead type of living or are rich enough to buy this as a second home.
If you consider the cost of land (in Ireland) you'll still spend a fortune and end up with a pretty small place. For one / two this could work, imagine having a family in there!
The unfortunate thing about "modern prefab" is that it is so dang expensive when the minimalist designs with builds in a controlled environment should be inexpensive.
They said the actual cost for building the structure is $67,000. Not sure if that includes items like well and septic, etc which are 1000's of dollars.
Yeah, there's no way I'm clicking on this clickbait title.
Look, i'm more than supportive of innovative design and doing things cheaply, but for an article that was heavy on "the house is so cheap", and "its built kinda more like a airplane", and "it uses all this innovative stuff", there's a startling dearth of information.
Sqm, plans, insulation, facilities, utilities, safety? Is it a house I'd want to live in or build, or is it a $20,000 shed with furniture? I'm not being snarky, I really want to know!