> But any preference for renting here collides with a stark financial reality: National surveys show that in recent decades, Swiss homeowners have been better off, at least in terms of wealth.
This is poor reasoning. Land ownership wealth is ill-gotten zero-sum. More homeownership won't build more wealth, it will just distribute the land rents differently. Taxation can also redistribute land rent, and far more fairly than "mass homeownership" which isn't really a sustainable system anywhere.
> which is advantageous from a tax perspective because mortgage interest is tax deductible.
> Taxation can also redistribute land rent, and far more fairly than "mass homeownership" which isn't really a sustainable system anywhere.
A Georgist land value tax would do that job admirably, though it will probably never happen in any jurisdiction, since it would hurt wealthy landowners the most. That could be why "mass home ownership" is a more politically palatable flavor of the same base concept; both will spread land rents among more people.
I agree that is a good goal. But the most robust realization of goal is less homeownership, and boxing in landowners.
Looks like Switzerland is doing a good job of the former. The rent control is more important to make renting lower risk (avoiding rent increase risk and building land wealth are two different goals of homeownership, the first is much more laudable).
Curtailing rental incoming is similar to an LVT, except it doesn't have the incentives for densification. Europe could probably use a bit more of the latter so there is less immigration vs cheap housing going on.
The article could have mentioned the main cause for the recent crazy rise of house prices in Switzerland; the negative interest rate.
Lately the Swiss interest rate has gone up, although not as much as elsewhere, and the effect can already been seen, house prices are dropping.
One effect of this was that big companies and pension funds were desperate for some way to park their money. This lead to the situation that they would build lots of new appartment buildings in metropolitan areas that would remain empty for years, not returning any income, they were just a vehicle to park the money. At the same time, this development was detrimental for the towns, but the towns couldn't do much against it. In the towns, people would move from the old appartments in the center to the cheap new appartments in the outskirts, leaving behind a dead center. (There was an article about this effect in the "Tagesanzeiger" called "Die Huttwilisierung der Schweiz", worth reading.)
Shortly after I bought a house I started dating someone younger, about 32, and despite my older age she couldn't believe I'd done it. She said she called me "*** The Homeowner" to her friends. It really brought it home (no pun) to me how far the expectations of younger generations have fallen.
Frankly though, I rented for a long time and if the economics of it would have continued to work out for me, I could have done it for life, in principle.
That's if I thought I could afford to keep doing it rather than get squeezed with accelerating rent increases and decreases in service that have come to define every aspect of our economy over the last 4 years. But things are in a bad spiral.
Not that a mortgage paid-off home is free (especially a house--especially older, with land, etc.), but there does come a point for most people when the income coming in goes down, they still need to live someplace, and you have at least some control if you own a place. You still owe taxes and have some maintenance to coder but it's not quite like having a monthly bill that has to be paid no matter what and you're always exposed to a landlord just deciding to sell.
There are also non-financial tradeoffs but some degree of stability is probably desirable if there is no reason to think you'll want to pickup and move across the country.
Now look at real-world data for how many (few) residences are actually owned free and clear. I'm with you that there's a personal strategy of having a paid off house and the sense of security it provides, but people-in-aggregate don't seem to be pursuing that strategy.
It seems that what almost all homeowners actually do is take out long mortgages, reset their paydown clocks by refinancing, finance equity back out in second mortgages and liens, etc, never actually reaching the "no monthly bill" stage.
So if people are honest about probably being in the same cohort when the time comes for themselves, then there's not so much distinction between paying a landlord forever and paying a bank forever.
You may know better about yourself, and people may have other reasons to prefer homeownership, but it doesn't seem to be about security in retirement. At least not in practice.
I feel like I'm the only one who thought, "hey, I'll buy a modest house, pay it off, and then invest some money to hopefully retire one day". But I suppose my neighborhood is also full of those types of people (and some renters these days). Must be why they're so cool/nice.
Given that a typical US fixed rate mortgage is 30 year--and I'm assuming most people don't buy until maybe their 30s and don't pay off early--that doesn't see like a particularly low number? Presumably, especially these days, anyone with a fixed rate mortgage from even a few years back is not paying anything down early.
You're right, renting would have to remain economically viable throughout my life and retirement in order for me to be okay sticking with it. But I prefer renting otherwise, not being responsible for as many things. As long as my closest neighbors are under control I don't need a single family house and the freedom to customize it.
> accelerating rent increases and decreases in service that have come to define every aspect of our economy over the last 4 years. But things are in a bad spiral.
I wonder if this is true? It feels true to me as well, but I keep reading that the actual numbers tell a different story. I believe rents have actually decreased the last few months, for instance. My grim joke is that everything seems to be increasing faster than inflation.
HN loves to rip on Realtors, but what you are describing is a chunk of why we exist. Even in this higher interest rate environment, I've assisted multiple first-time buyers into houses - good houses. I can't speak for all states, but both WA and OR have really great downpayment assistance programs for first-time buyers. It is by no means easy, but if people aren't building a relationship to a lender and an agent, I'm not sure where they are getting real boots-on-the-ground guidance - so is it any wonder they don't believe they can afford a house?
> In their 70s, Swiss homeowners are 11 times wealthier than renters their age, according to a study by Ursina Kuhn at the Swiss Foundation for Research in Social Sciences in Lausanne.
> The catch is that in order to become a homeowner, “you need wealth to get more wealth,” as Ms. Kuhn put it.
We're approaching a Neo-Feudalism society where the only people who will be able to afford to buy homes are those whose parents and grandparents were able to buy homes.
Tbh if you replaced "Switzerland" here with "Canada" this article reads the same as many other articles I've read recently. This is becoming a very common problem in many jurisdictions.
I think the spiking costs of housing and incredible rent seeking is/will have really bad impacts on the economy as more and more wealth is devoted purely to housing and unavailable for anything else.
I'm lucky enough to have been able to buy property and to have stability of housing tenure, but as a result, despite posting this comment on an entrepreneurial tech forum, I couldn't imagine being able to create a startup right now or ever. Where would the money come from? All my money is going toward housing costs.
This is the big problem as rents (both from landlords and other oligopolies) take up a bigger and bigger share of people's income. No money for creating a new business, and no money for customers to spend at a new business. Everyone suffers.
The problem is also compounded by the fact that "Bricks and Mortar" are considered a middle class investment. And most of that investing class aren't really ok with accepting that a loss of money can also be part of having an investment. So consequently they create pressure with their political mass to stall all changes in policy that may be for the better.
I don't see a crash coming, I see stalling economies as all the well just locks itself up in housing for a generation.
I think the solution to this is an incremental shift towards property taxes + away from income taxes. Doing so would nullify the investment arms race that’s turning home ownership into a sick financial game.
If you’re paying 6%/year in property taxes, a home is no longer an “investment”, and the house hoarding (especially by the likes of investors buying single-family housing) will cease. People will buy homes to have a place to live, and the market will cool off.
This comes with the additional benefit of progressively taxing wealth instead of solely income. Wealth discrepancy is orders of magnitude worse than income discrepancy, and currently we’re doing almost nothing about that.
The even better variation on this is land taxes (see Henry George's Progress and Poverty, or the summary here: https://gameofrent.com).
There are heaps of advantages to this approach, like no capital flight (can't take land overseas with you), no economic inefficiencies (taxing land doesn't get rid of land, whereas taxing pretty much anything else reduces the supply of that thing, taxing land doesn't reduce house-building the way property taxes do).
Nonono, no more of these halfbaked tax reform ideas.
There's nothing in society that says we need to "compensate" new taxes by getting rid of older ones. If we as a society decide that someone's speculative actions are harmful, there is no good reason not to tax them into oblivion
There is no "we as a society decide". No one in their right mind would argue that the government widely acts in the favor of those who elect it, especially in terms of revenue collecting and spending. The government decides and the government mostly has its own agendas.
Yet now the correct choice is supposed to be made in regard to property ownership social "harm", using taxes as the specific tool to correct it?
If the government, or "we as a society", can't directly justify their goal being enforced via restrictive law then enforcing the goal via taxation isn't democratically justified (ie: an incentive provided for the tax collecting gov).
>no more of these halfbaked tax reform ideas.
Why would US citizens be in favor of tax reform? What a crazy idea that has zero historical precedent.
I have an even crazier idea, what if we just voted for straight up expropriation?
But I don't feel like having this discussion with someone who by all likely hood wouldn't be affected by this issue since they don't own any rental properties to begin with, wouldn't be affected by this in any way, and is just making an argument from an ideological reflex
Not every country is a corrupt failed state and plenty of western representative democracies have acted on behalf of their constituents best interests
If you dont make a good faith argument but instead throw your hands up saying "they're all crooks anyway" then what's the point of even trying?
I'm all in favor of progressive property taxes than ratchet up with the more properties you own. Generational home ownership is a good thing, and blanket taxing everyone basically ensures that poorer people who inherit properties can't afford to stay in them when prices go up.
> If you’re paying 6%/year in property taxes, a home is no longer an “investment”, and the house hoarding (especially by the likes of investors buying single-family housing) will cease.
It wouldn't accomplish that. The big investors would just shrug, keep buying houses and renting them out, passing your 6% to the renter to pay. Meanwhile regular people would be priced out of their home by taxes, reducing home ownership even further and those big investors would snap up those homes. Repeat cycle until those corporations own 100% of all properties.
You want to incentivize owning and living a home, so I would do 0% tax on primary residence (up to some value limit), maybe 5% on a second home and ratcheting steeply up from there on each additional property owned by a person or entity.
That would wipe out the corporations owning hundreds of homes since they would not be able to profitably rent them out if they're paying 100+% tax on each. Meanwhile regular people can live in the only home they own without tax.
I have, many times, since it always comes up. I'm still convinced LVT hurts the small individual homeowner the most, so it's basically the opposite of what I'd want which is to incentivize owning and living a single home instead of corporations hoarding them to rent out.
I would be happy extending these incentives to single homeowners, if we also extend similar or greater incentives to people living in condos or apartment buildings.
We want most people to affordably own a primary home (their primary address) may be have a vacation or side rental at higher property tax and heavily discourage investors sitting on an array of homes primarily for rent seeking.
You have the right idea of fixing the problem of housing appreciating faster then inflation and being an investment but you are proposing the wrong solution.
The correct solution is crush nimbyism and zone land and speed permitting to fulfill need rather than to create artificial scarcity. Japan and Germany, among other provide various flavors of this working. I prefer japans method of moving zoning to a national body (in north america this would be at stae or province level) and zoning for national interest, which means allowing lots more density than we have now and allowing substantially faster, easier, and cheaper permit approval. On the demand side we can get rid of subsidy programs like cmhc that provide a naive backstop to allow 5% or no money down buying.
> We're approaching a Neo-Feudalism society where the only people who will be able to afford to buy homes are those whose parents and grandparents were able to buy homes.
Prices of homes vary greatly. If your parents owned an apartment in a unappealing town, that won't pay your bay area house. Conversely, you may not be able to afford a house in the bay area while working there, but save enough in one year to buy a house somewhere else.
And even this story mentions Zurich, Geneva, and Bern that I notices. Switzerland is expensive overall (and home ownership is low overall) but that major thriving metros in countries are expensive hasn't exactly been a surprise for a long time. I suspect it's easier to live in cheaper areas--even relatively nearby some metros--that may just not be a convenient daily commute to those metros. The Bay Area is somewhat unusual in that living 60-90 minutes away from the city mostly doesn't help you much.
That's why I think remote work could be a great equalizer. While understanding that not everyone can work remotely, it should be employer's obligation to prove that work must be done on-premise (factory workers, most service workers and so on). The rest could spread into areas that have not been considered attractive from the employment point of view for the past 20+ years. This raises valuations of property in those areas, brings in businesses, while at the same time reducing valuations of metropolitan areas. If only elected governments felt any kind of responsibility to make equality a priority.
> We're approaching a Neo-Feudalism society where the only people who will be able to afford to buy homes are those whose parents and grandparents were able to buy homes.
Maybe I'm wrong, but I wouldn't be surprised if the parents and grandparents lived more frugally. Spending more than you earn will make you poor regardless of income.
> Many Swiss rely on perpetual refinancing to afford their homes. Switzerland is the land of luxury watches, fine chocolates — and lifelong mortgages. It’s not uncommon for borrowers to extend their loans until their deaths, which is advantageous from a tax perspective because mortgage interest is tax deductible. It also gives a lot of business to Switzerland’s vaunted banking industry.
Domestic aristocratic and industrialist families, Slavic oligarchs, Arabic sheikhs, Chinese dignitaries, foreign dictators and kings, organized crime, Tina Turner. The same in all DACH countries.
Afaik Social security companies actually own a lot of properties in switzerland and finance our social system trought this. Also there are quite a lot of cooperatives that own housing and sublet them for very fair prices. Some properties are owned by the state, or companies that are owned mostly by the state such as the sbb (railroad company).
Translated:
For the owner types of rental apartments, there are now cumulative results over three years (2019-2021). They enable analyses at cantonal level and for the six largest cities in Switzerland. At around a quarter (26%), the canton of Geneva had the lowest proportion of rental apartments owned by private individuals. In the cantons of Valais (68%) and Ticino (70%), on the other hand, this proportion was significantly higher. The owner category "Other limited company/ limited liability company/cooperative", which mainly comprises institutional investors such as insurance companies, pension funds or investment funds, accounted for half (50%) of all rental apartments in the canton of Geneva. In the cantons of Valais (23%) and Ticino (21%), on the other hand, less than a quarter of all rental apartments fell into this category. The Swiss average was 33%.
I’m from Switzerland and the article tells the truth. Buying is crazy expensive!
And there is one thing the article is not mentioning: if you own a house, there is a fictional “rent” income on your own property, which is “income” on to of your real salary income and gets taxed… there were many approaches to get rid of the law, but it never went through.
Also, in the last years the interest rates were crazy low for loans in Switzerland. 0.6% (!!) you read right was normal. It changed recently as the Swiss national bank increased its the reference interest rate to about 2.5% - still low compared to other countries. Which means, if you have 1m in load it meant 1m0.006 =6000/year of interest rate! Today 1m0.025=25000/year
Most banks have had advertisements bordering on scam and malpractice to explain why the SARON adjustable rate is better than locking in a fix rate.
I've literally had to explain to like 5 people the amount of risk they were taking on by holding on to a 0.8% Saron adjustable instead of getting something like 0.9-0.95% fixed rate for 15! years. It's unfortunate that most people simply don't intuitively understand that when interest rates go from 1% to 2% your payments double.
If you can manage the risk of rising interest rate, then SARON isn't a bad choice. At least in the past, sticking to LIBOR/SARON was the cheapest option on average. But of course, if you can't handle the risk of rate increases, you shouldn't do it. (One option to reduce the risk is to pay the difference between SARON and the current fixed rates onto a dedicated savings account.)
But of course, if had gotten the chance to get a <1% 15-year deal, I'd have done it :) I'm slightly late to the party.
Is this an imputed rent tax? That sounds like a good thing to me, not a bad thing. It has a similar effect to land value taxes or government-owned land leases, which are some of the most effective ways to reduce rampant property speculation and property value inflation.
It's a good thing until you realize that the remainder of the system around it encourages speculation.
1) Fully tax deductible mortgage interest
2) Full value of mortgage goes against your assets, essentially removing wealth tax for most people.
3) Within any given year, you can either take a 10% * Imputed rental income deduction for maintenance or a specific fully itemized amount against your tax bill. Except that nothing prevents you from taking the 10% and not doing any renovations, and then slamming all the renovations in one year and removing the add on entirely.
4) The first 66% of the home collateral value are under an interest only mortgage, so if you were smart enough to get the 15yr fixed rate you basically be getting a huge loan for like 1% interest payment per year to control a house which you need to live in anyway.
5) Last but not least, local tax offices have a lot of discretion in most cantons to determine what the imputed rent is. The legal requirement is that the imputed rent must be at least 60% of market rent, but there is basically no consistency between cantons as to what number they shoot through, anywhere from like 65 to 90%.
The end result is that high bracket earners are super incentivized to lever up and get the biggest house they can, since they would essentially be investing into a growth asset that reduces their tax income. Since Switzerland is a small country and not a lot of space the end result is that eventually the high earners overbid normal houses.
My wife and I managed to buy (half) a house (from the 1800s) this year, in Switzerland, considerably below 1M. It's in a rural area though (30 km from Zürich), and without central heating (tiled wood stove instead). I guess it depends a lot on your desired standards of living.
I'm American and I've never felt the appeal of homeownership. In fact for me the opposite has been true. I see it as something I want to avoid. I just don't see any of the upsides that so many people seem to.
It's unfortunate (for me) that owning a home is some key component of the American Dream. I see so many people who prioritize owning a home over everything else and it just doesn't make a ton of sense to me. The more people who see renting for life as a great option, the better our society would be, IMO.
Renting currently has disadvantages too (nothing's perfect), but I think a lot of people would have higher quality of life if they looked beyond home ownership. Think about all the people who claim they wish they didn't have to drive so much and how they wish they could walk more. They could easily do this if they hadn't bought a house in the suburbs! Rent a small apartment and walk wherever you want. It's great!
Another interesting article from the NYT on the topic of renting for life:
I'm fine with paying for someone else to own the roof over my head. I've just prioritized keeping that cost as low as possible so I can do other things with my money.
I guess this one is a matter of perspective. I don't see a house as an asset in my life.
> 2) your cost of living falls dramatically
My cost of living was dramatically lower the whole time leading up to the point where the drop-off occurs for the homeowner. They only start catching up after decades.
Well, I see my house as my home. But I do know that if things ever got rough I could sell it and live somewhere cheaper with a good chunk of money left over. So it is an asset, even if you don't think of it like that on a daily basis.
Whether renting is cheaper than buying varies. In the short term it often is, but not always. There is generally a long term point where buying is cheaper - but again, not always! If you can do something else with the money you save renting, then good for you.
To put this on context, to rent a house in my street is only a tiny bit cheaper than a mortgage on it. So it would not make long term sense to rent unless you had no choice.
> > The way I see it I'm going to be paying a mortgage either way. I'd rather it be my own than my landlord's.
> Why exactly?
Because if it is your mortgage, it has an end date. After that your housing costs drop dramatically. If you time it so that your housing costs drop dramatically near the time your income drops dramatically in retirement, it's a good combination.
I bought a house in a walkable neighborhood. (It's in a rust belt city, so it's plenty affordable.) A mortgage puts your rent payment into something you own, instead of into someone else's pocket. When you pay it off, you're not spending $thousands per month just for a place to live. (That's where I'm at now.)
I've prioritized finding the smallest and most affordable apartment I can in an area that I want to live in (very nice walkable/bikeable non-rust-belt city).
For the past ~12 years my rent has been less than 33% of the mortgage payments for the smallest home in my area (not including property taxes and other costs of homeownership).
Investment gains on what I've saved are good enough for me to feel like I can keep renting relatively comfortably until I die. What else do I need?
I will concede that if you're comparing renting and buying equivalent properties that buying generally makes financial sense. But that's not what I'm doing.
> I will concede that if you're comparing renting and buying equivalent properties that buying generally makes financial sense. But that's not what I'm doing.
If you concede that buying makes sense when comparing like for like, why not do that?
Buy a tiny studio apartment of the size you prefer and then you can own it.
If you're comparing rent on a tiny apartment to mortgage on a larger single family home, of course the tiny apartment is cheaper. It doesn't conclude that renting is cheaper, only concludes that a tiny apartment is cheaper than a house.
> When you pay it off, you're not spending $thousands per month just for a place to live.
Not everyone wants to live somewhere long enough to pay off a place though. It’s no different than other financial choices. The best decision for the individual isn’t always the most rational.
I wonder how much it is affected by psychological factors? Like in how much you enjoy seeing/hearing/smelling strangers/other people? Some people aren't bothered by close proximity to masses of humanity, and other are? I can also imagine that the number of children you have could play a factor in how small of an apartment you want to live in.
I grew up with a sibling and 2 parents in a house with 800ish square feet of living space in a very rural area. To some people that’ll sound like a lot of room and to some it’ll seem really tiny. To me it was just all I knew.
> Rent a small apartment and walk wherever you want.
That's a non sequitur.
You could rent a farmhouse out in the boonies where you can't walk anywhere or you could buy an apartment in the same area you live in and walk as much as the renter does.
I’m with you on renting instead of buying. I owned a home until a divorce. It wasn’t for me. I had to develop a whole network of unreliable contractors, which was time-consuming and the repairs and repairs to fix bad repairs all added up. Then our property taxes doubled in a year, raising a mortgage quite a bit and would continue to rise. I didn’t want to stay there for 30 years and while it did go up in value, there really wasn’t much of a guarantee that owning it would lead to actually owning a house out right in the future. Seemed to me like I was renting from the bank instead of owning but responsible for all the costs of ownership. For me now the flexibility of renting is priceless. I can move around and not feel tied down by someone else’s dream.
I lived in places where renting is unregulated/not protected, and in the places where it's well regulated.
IMO, being able to do a long term and safe rent is the biggest win for the financial planning and personal finance you can get:
- people can become independent as soon as they find their first job (living with a roommate is an option to get a bigger place -- valid even for decades if that fits ones lifestyle)
- high personal wealth liquidity (invest in financial markets, move to a cheaper place if the situation asks for it, move to a bigger place if the family grows)
- if the place that costs 2M to buy, an be rented for 3k, that's 50y of rent! (or even more, as the maintenance, tax & mortgage cost outperform the rent increase, not to mention a loss from not investing that money) and, think how the place will look after 50y...
But the renting must be very well regulated -- to make it a comfortable living. That's something worth (politically) fighting for.
I mean if you have regular safe long-term rental, then it shifts the burden onto the landowner. It means the don't make much in good times, and if there is a drought in terms of demand (plant closures, surplus building) they are left holding the bag.
Really, the answer is for things that need a delicate balance to be handled by an arms-length public corporation.
Who cares? What are you people dreaming of doing to buildings? I sleep, watch TV, shower, and cook dinner in my apartment. Doesn't take a lot to satisfy me, I guess.
> Constant fear of eviction for the flimsiest of reasons
A good argument for governmental protection of renters.
> No tax reduction on rent payments (but often on mortgage interest - a gobsmacking reality)
Don't care. My rent is so much lower than a mortgage that I don't mind missing out on the tax benefits.
> Arbitrary rules imposed on you long beyond your childhood years: Pets/no pets, smoking/no smoking, rug surface area requirements etc.
There's arbitrary rules imposed on nearly every aspect of modern life. I'm not particularly bothered by a few more.
Yeah I mean those are frustrations for sure. Nothing’s perfect and it’s certainly not worth spending hundreds of thousands of dollars on a house to fix to me.
Just emigrate to save for buying your home like everyone does, dummy Swiss! For example to a comet and once you collect enough rhodium and iridium, you're good to go... or stay there, it is likely cheaper than in Switzerland.
Wouldn't remote work improve this somehow? I guess everyone still wants to live in the best places instead of driving 30 minutes to the good supermarket...
Housing prices in rural areas in Switzerland aren't much more affordable. And that's usually where people buy, because almost no one can afford prices in the big cities
89 comments
[ 5.1 ms ] story [ 176 ms ] threadThis is poor reasoning. Land ownership wealth is ill-gotten zero-sum. More homeownership won't build more wealth, it will just distribute the land rents differently. Taxation can also redistribute land rent, and far more fairly than "mass homeownership" which isn't really a sustainable system anywhere.
> which is advantageous from a tax perspective because mortgage interest is tax deductible.
Not good! Especially given the high VAT.
A Georgist land value tax would do that job admirably, though it will probably never happen in any jurisdiction, since it would hurt wealthy landowners the most. That could be why "mass home ownership" is a more politically palatable flavor of the same base concept; both will spread land rents among more people.
That's fine. We'd rather have better distribution of the land and social wealth in general, than "building more wealth".
Looks like Switzerland is doing a good job of the former. The rent control is more important to make renting lower risk (avoiding rent increase risk and building land wealth are two different goals of homeownership, the first is much more laudable).
Curtailing rental incoming is similar to an LVT, except it doesn't have the incentives for densification. Europe could probably use a bit more of the latter so there is less immigration vs cheap housing going on.
Frankly though, I rented for a long time and if the economics of it would have continued to work out for me, I could have done it for life, in principle.
That's if I thought I could afford to keep doing it rather than get squeezed with accelerating rent increases and decreases in service that have come to define every aspect of our economy over the last 4 years. But things are in a bad spiral.
There are also non-financial tradeoffs but some degree of stability is probably desirable if there is no reason to think you'll want to pickup and move across the country.
It seems that what almost all homeowners actually do is take out long mortgages, reset their paydown clocks by refinancing, finance equity back out in second mortgages and liens, etc, never actually reaching the "no monthly bill" stage.
So if people are honest about probably being in the same cohort when the time comes for themselves, then there's not so much distinction between paying a landlord forever and paying a bank forever.
You may know better about yourself, and people may have other reasons to prefer homeownership, but it doesn't seem to be about security in retirement. At least not in practice.
It looks to be close to 38% in the U.S.?
https://financialcomplete.com/how-many-homes-are-paid-off-in...
https://www.forbes.com/sites/brendarichardson/2019/07/26/nea...
I wonder if this is true? It feels true to me as well, but I keep reading that the actual numbers tell a different story. I believe rents have actually decreased the last few months, for instance. My grim joke is that everything seems to be increasing faster than inflation.
> The catch is that in order to become a homeowner, “you need wealth to get more wealth,” as Ms. Kuhn put it.
We're approaching a Neo-Feudalism society where the only people who will be able to afford to buy homes are those whose parents and grandparents were able to buy homes.
Tbh if you replaced "Switzerland" here with "Canada" this article reads the same as many other articles I've read recently. This is becoming a very common problem in many jurisdictions.
I think the spiking costs of housing and incredible rent seeking is/will have really bad impacts on the economy as more and more wealth is devoted purely to housing and unavailable for anything else.
I'm lucky enough to have been able to buy property and to have stability of housing tenure, but as a result, despite posting this comment on an entrepreneurial tech forum, I couldn't imagine being able to create a startup right now or ever. Where would the money come from? All my money is going toward housing costs.
This is the big problem as rents (both from landlords and other oligopolies) take up a bigger and bigger share of people's income. No money for creating a new business, and no money for customers to spend at a new business. Everyone suffers.
I don't see a crash coming, I see stalling economies as all the well just locks itself up in housing for a generation.
If you’re paying 6%/year in property taxes, a home is no longer an “investment”, and the house hoarding (especially by the likes of investors buying single-family housing) will cease. People will buy homes to have a place to live, and the market will cool off.
This comes with the additional benefit of progressively taxing wealth instead of solely income. Wealth discrepancy is orders of magnitude worse than income discrepancy, and currently we’re doing almost nothing about that.
There are heaps of advantages to this approach, like no capital flight (can't take land overseas with you), no economic inefficiencies (taxing land doesn't get rid of land, whereas taxing pretty much anything else reduces the supply of that thing, taxing land doesn't reduce house-building the way property taxes do).
There's nothing in society that says we need to "compensate" new taxes by getting rid of older ones. If we as a society decide that someone's speculative actions are harmful, there is no good reason not to tax them into oblivion
Yet now the correct choice is supposed to be made in regard to property ownership social "harm", using taxes as the specific tool to correct it?
If the government, or "we as a society", can't directly justify their goal being enforced via restrictive law then enforcing the goal via taxation isn't democratically justified (ie: an incentive provided for the tax collecting gov).
>no more of these halfbaked tax reform ideas.
Why would US citizens be in favor of tax reform? What a crazy idea that has zero historical precedent.
But I don't feel like having this discussion with someone who by all likely hood wouldn't be affected by this issue since they don't own any rental properties to begin with, wouldn't be affected by this in any way, and is just making an argument from an ideological reflex
Not every country is a corrupt failed state and plenty of western representative democracies have acted on behalf of their constituents best interests
If you dont make a good faith argument but instead throw your hands up saying "they're all crooks anyway" then what's the point of even trying?
It wouldn't accomplish that. The big investors would just shrug, keep buying houses and renting them out, passing your 6% to the renter to pay. Meanwhile regular people would be priced out of their home by taxes, reducing home ownership even further and those big investors would snap up those homes. Repeat cycle until those corporations own 100% of all properties.
You want to incentivize owning and living a home, so I would do 0% tax on primary residence (up to some value limit), maybe 5% on a second home and ratcheting steeply up from there on each additional property owned by a person or entity.
That would wipe out the corporations owning hundreds of homes since they would not be able to profitably rent them out if they're paying 100+% tax on each. Meanwhile regular people can live in the only home they own without tax.
Can’t just property tax a fixed amount.
We want most people to affordably own a primary home (their primary address) may be have a vacation or side rental at higher property tax and heavily discourage investors sitting on an array of homes primarily for rent seeking.
The correct solution is crush nimbyism and zone land and speed permitting to fulfill need rather than to create artificial scarcity. Japan and Germany, among other provide various flavors of this working. I prefer japans method of moving zoning to a national body (in north america this would be at stae or province level) and zoning for national interest, which means allowing lots more density than we have now and allowing substantially faster, easier, and cheaper permit approval. On the demand side we can get rid of subsidy programs like cmhc that provide a naive backstop to allow 5% or no money down buying.
This doesn't mean anything. It just states the obvious, which is that people who can afford super expensive houses tend to be rich.
Prices of homes vary greatly. If your parents owned an apartment in a unappealing town, that won't pay your bay area house. Conversely, you may not be able to afford a house in the bay area while working there, but save enough in one year to buy a house somewhere else.
Maybe I'm wrong, but I wouldn't be surprised if the parents and grandparents lived more frugally. Spending more than you earn will make you poor regardless of income.
No one, apparently
> Many Swiss rely on perpetual refinancing to afford their homes. Switzerland is the land of luxury watches, fine chocolates — and lifelong mortgages. It’s not uncommon for borrowers to extend their loans until their deaths, which is advantageous from a tax perspective because mortgage interest is tax deductible. It also gives a lot of business to Switzerland’s vaunted banking industry.
How is this possible? I can't imagine any bank giving me a loan knowing there's a good chance I won't be alive to pay it back.
Some statistic about ownership: https://www.bfs.admin.ch/bfs/de/home/statistiken/bau-wohnung...
Also interesting: https://www.bfs.admin.ch/news/de/2022-0072
Translated: For the owner types of rental apartments, there are now cumulative results over three years (2019-2021). They enable analyses at cantonal level and for the six largest cities in Switzerland. At around a quarter (26%), the canton of Geneva had the lowest proportion of rental apartments owned by private individuals. In the cantons of Valais (68%) and Ticino (70%), on the other hand, this proportion was significantly higher. The owner category "Other limited company/ limited liability company/cooperative", which mainly comprises institutional investors such as insurance companies, pension funds or investment funds, accounted for half (50%) of all rental apartments in the canton of Geneva. In the cantons of Valais (23%) and Ticino (21%), on the other hand, less than a quarter of all rental apartments fell into this category. The Swiss average was 33%.
The most detailed table i found: https://dam-api.bfs.admin.ch/hub/api/dam/assets/20784986/mas...
It lists privat, public, Cooperatives, investors, separated investors returning most gains to the public again(social security, insurances, …)
And there is one thing the article is not mentioning: if you own a house, there is a fictional “rent” income on your own property, which is “income” on to of your real salary income and gets taxed… there were many approaches to get rid of the law, but it never went through.
Also, in the last years the interest rates were crazy low for loans in Switzerland. 0.6% (!!) you read right was normal. It changed recently as the Swiss national bank increased its the reference interest rate to about 2.5% - still low compared to other countries. Which means, if you have 1m in load it meant 1m0.006 =6000/year of interest rate! Today 1m0.025=25000/year
Is this essentially a Swiss equivalent of property taxes/council taxes?
I've literally had to explain to like 5 people the amount of risk they were taking on by holding on to a 0.8% Saron adjustable instead of getting something like 0.9-0.95% fixed rate for 15! years. It's unfortunate that most people simply don't intuitively understand that when interest rates go from 1% to 2% your payments double.
But of course, if had gotten the chance to get a <1% 15-year deal, I'd have done it :) I'm slightly late to the party.
1) Fully tax deductible mortgage interest
2) Full value of mortgage goes against your assets, essentially removing wealth tax for most people.
3) Within any given year, you can either take a 10% * Imputed rental income deduction for maintenance or a specific fully itemized amount against your tax bill. Except that nothing prevents you from taking the 10% and not doing any renovations, and then slamming all the renovations in one year and removing the add on entirely.
4) The first 66% of the home collateral value are under an interest only mortgage, so if you were smart enough to get the 15yr fixed rate you basically be getting a huge loan for like 1% interest payment per year to control a house which you need to live in anyway.
5) Last but not least, local tax offices have a lot of discretion in most cantons to determine what the imputed rent is. The legal requirement is that the imputed rent must be at least 60% of market rent, but there is basically no consistency between cantons as to what number they shoot through, anywhere from like 65 to 90%.
The end result is that high bracket earners are super incentivized to lever up and get the biggest house they can, since they would essentially be investing into a growth asset that reduces their tax income. Since Switzerland is a small country and not a lot of space the end result is that eventually the high earners overbid normal houses.
It's unfortunate (for me) that owning a home is some key component of the American Dream. I see so many people who prioritize owning a home over everything else and it just doesn't make a ton of sense to me. The more people who see renting for life as a great option, the better our society would be, IMO.
Renting currently has disadvantages too (nothing's perfect), but I think a lot of people would have higher quality of life if they looked beyond home ownership. Think about all the people who claim they wish they didn't have to drive so much and how they wish they could walk more. They could easily do this if they hadn't bought a house in the suburbs! Rent a small apartment and walk wherever you want. It's great!
Another interesting article from the NYT on the topic of renting for life:
https://www.nytimes.com/2023/05/23/magazine/vienna-social-ho...
The way I see it I'm going to be paying a mortgage either way. I'd rather it be my own than my landlord's.
I'm fine with paying for someone else to own the roof over my head. I've just prioritized keeping that cost as low as possible so I can do other things with my money.
1) you own a valuable asset. 2) your cost of living falls dramatically.
I guess this one is a matter of perspective. I don't see a house as an asset in my life.
> 2) your cost of living falls dramatically
My cost of living was dramatically lower the whole time leading up to the point where the drop-off occurs for the homeowner. They only start catching up after decades.
Whether renting is cheaper than buying varies. In the short term it often is, but not always. There is generally a long term point where buying is cheaper - but again, not always! If you can do something else with the money you save renting, then good for you.
To put this on context, to rent a house in my street is only a tiny bit cheaper than a mortgage on it. So it would not make long term sense to rent unless you had no choice.
But you do! You said you are paying rent, thus you attach value to having a place to live.
> My cost of living was dramatically lower the whole time leading up to the point where the drop-off occurs for the homeowner.
In the other response you acknowledged this is from comparing rent on a tiny apartment to mortgage on a house, which cannot be compared.
If you don't need a house you could buy a tiny apartment. That gives you the benefit of a low mortgage now and zero mortgage when you're older.
I mean obviously it’s an asset in that it adds value to my life b/c without it I’d be homeless. Thx for pointing that out.
> Why exactly?
Because if it is your mortgage, it has an end date. After that your housing costs drop dramatically. If you time it so that your housing costs drop dramatically near the time your income drops dramatically in retirement, it's a good combination.
I've prioritized finding the smallest and most affordable apartment I can in an area that I want to live in (very nice walkable/bikeable non-rust-belt city).
For the past ~12 years my rent has been less than 33% of the mortgage payments for the smallest home in my area (not including property taxes and other costs of homeownership).
Investment gains on what I've saved are good enough for me to feel like I can keep renting relatively comfortably until I die. What else do I need?
I will concede that if you're comparing renting and buying equivalent properties that buying generally makes financial sense. But that's not what I'm doing.
If you concede that buying makes sense when comparing like for like, why not do that?
Buy a tiny studio apartment of the size you prefer and then you can own it.
If you're comparing rent on a tiny apartment to mortgage on a larger single family home, of course the tiny apartment is cheaper. It doesn't conclude that renting is cheaper, only concludes that a tiny apartment is cheaper than a house.
Not everyone wants to live somewhere long enough to pay off a place though. It’s no different than other financial choices. The best decision for the individual isn’t always the most rational.
I grew up with a sibling and 2 parents in a house with 800ish square feet of living space in a very rural area. To some people that’ll sound like a lot of room and to some it’ll seem really tiny. To me it was just all I knew.
That's a non sequitur.
You could rent a farmhouse out in the boonies where you can't walk anywhere or you could buy an apartment in the same area you live in and walk as much as the renter does.
The point is that people don’t do the things they say they want to do.
IMO, being able to do a long term and safe rent is the biggest win for the financial planning and personal finance you can get:
- people can become independent as soon as they find their first job (living with a roommate is an option to get a bigger place -- valid even for decades if that fits ones lifestyle)
- high personal wealth liquidity (invest in financial markets, move to a cheaper place if the situation asks for it, move to a bigger place if the family grows)
- if the place that costs 2M to buy, an be rented for 3k, that's 50y of rent! (or even more, as the maintenance, tax & mortgage cost outperform the rent increase, not to mention a loss from not investing that money) and, think how the place will look after 50y...
But the renting must be very well regulated -- to make it a comfortable living. That's something worth (politically) fighting for.
(a happy renter)
Really, the answer is for things that need a delicate balance to be handled by an arms-length public corporation.
* Inability to make changes to the building
* Constant fear of eviction for the flimsiest of reasons
* No tax reduction on rent payments (but often on mortgage interest - a gobsmacking reality)
* Arbitrary rules imposed on you long beyond your childhood years: Pets/no pets, smoking/no smoking, rug surface area requirements etc.
> Inability to make changes to the building
Who cares? What are you people dreaming of doing to buildings? I sleep, watch TV, shower, and cook dinner in my apartment. Doesn't take a lot to satisfy me, I guess.
> Constant fear of eviction for the flimsiest of reasons
A good argument for governmental protection of renters.
> No tax reduction on rent payments (but often on mortgage interest - a gobsmacking reality)
Don't care. My rent is so much lower than a mortgage that I don't mind missing out on the tax benefits.
> Arbitrary rules imposed on you long beyond your childhood years: Pets/no pets, smoking/no smoking, rug surface area requirements etc.
There's arbitrary rules imposed on nearly every aspect of modern life. I'm not particularly bothered by a few more.
Air conditioner lacks any airflow in leading to huge CO2 levels? Too bad, you get the same one everyone gets.
Electrical outlets in insane places? Tough.
Take zero baths a year but still need to stand in one? Too bad, no real shower for you.