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.

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.

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.

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).

> 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

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.

> 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.

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.

@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).

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?