Do all want affordable homes? No! Some millions of homeowners could think that's not in their best interest.

Every day we read about the need of affordable homes. And the desired promise of it, is exploited by politicians in many ways shapes or forms. 

E.g., recently I read in Financial Times that Zohran Mamdani, in 2020, told a reporter, “What I’ve seen in my work is, it’s not tenant versus homeowner.” The affordability crisis is, rather, “tenant and homeowner versus financial speculator and investment bank portfolio”. Really?

Just ask the approximately 86 million U.S. homeowners, representing a homeownership rate of approximately 65 percent, what they think of their piggy banks turning “affordable”. (November 2024, Donald Trump won with little more that 77 million votes)

2028 I wrote in Washington Post: “Do we want affordable homes or houses as investment assets? There’s no easy answer, because going back to just homes would also cause immense suffering for all those believing they have, with their houses, built up a safety net.”

The challenge that described remains valid. Just imagine a politician during a special interest rally offering a tempting: 

“In the quest for Affordable Homes, I promise to minimize as much as possible the sufferings that could cause to you who already own a home.” To top it up he could add: “I promise to help you leave as much as possible to those you want to inherit you, for those you have built up a mountain, or at least a little hill.” 

And that during that rally, the attendants would hear, over and over again, Peter, Paul and Mary singing “The House Song” and giving it perhaps a whole new meaning.

I believe that to be able to bridge the so dissimilar and emotional laden interests between house buyers and home owners, in a reasonably amiable way, without too many tears, the best way, the only way, is by fully understanding how we got here. Why that’s not discussed, Ill’ leave to you.

Since the 1990’s regulators decided that banks needed to hold more capital against risky loans to small businesses and entrepreneurs than against “safe” residential mortgages. What had to happen? More financing of houses and less of that which can help create the job incomes people need to afford buying houses. 

If you do not want to take my word for it, read the answer ChatGPT and Grok gave when dialoguing with them on this issue. A Nobel Prize winner in Economic Sciences should of course have been able to understand that and alerted us. Sadly, truth be told, none of these laurates ever did.

Who’s going to help avoid a class war among house buyers and home owners from degenerating into an undeclared civil war conflict? The US Congress? 

No wonder the attendance to churches is reported to have increased.

#AI #OpenAI #ChatGPT What are the tax implications if your house burns down?

I asked ChatGPT: 

"If a natural disaster causes e.g., your house to burn down, is the loss of that tax deductible?

Do you have to go on paying property taxes based on the last assessment of its value?"

ChatGPT answered:

Here’s a breakdown of the answers to your questions:

1. Is the loss of your house due to a natural disaster tax-deductible?

Before 2018: If your home was destroyed in a natural disaster, you could claim the loss as a casualty loss deduction on your federal income taxes. The deductible amount was the lesser of:The decline in the property’s fair market value (FMV) as a result of the disaster, or

Your adjusted basis in the property (generally the purchase price plus improvements).

Post-2017 (current rules under the Tax Cuts and Jobs Act): Casualty losses are only deductible if the loss occurs in a federally declared disaster area. This means:The disaster must be declared by the President as eligible for federal assistance.

Your loss must be reduced by any insurance or other reimbursement you receive.

Additionally, the loss must exceed 10% of your adjusted gross income (AGI), and you must itemize deductions.

It's important to document your loss thoroughly and consult with a tax professional for specifics.

2. Do you have to keep paying property taxes on a destroyed house?

General Rule: Yes, property taxes are typically based on the assessed value of the property as determined by the local tax authority, regardless of the property's condition after a disaster.

Relief Options: Many jurisdictions offer temporary relief or reassessments in cases of natural disasters. You might:Apply for a temporary reduction in assessed value due to the damage.

Be eligible for a refund or waiver of property taxes if your property is uninhabitable or destroyed.

Find specific programs in disaster-prone areas that provide tax relief, such as California's disaster relief reassessment program.

You should contact your local tax assessor’s office to inquire about the options available to you. Each jurisdiction has different rules and procedures for granting tax relief in disaster situations.

I said: Thanks!

It said: You're welcome! 😊 If you have any more questions, feel free to ask. Stay safe! 🌟

I asked ChatGPT: 

"Yes! Is there any way you could recover all those property taxes you paid before your house burned down?"

ChatGPT answered:

Recovering property taxes you paid before your house burned down is generally not possible because those taxes were assessed and paid for services and infrastructure provided by your local government during the time you owned and used the property.

However, here are a few scenarios where you might get some relief:

1. Pro-rated Refund for Unused Portion of Taxes

In some jurisdictions, if a property becomes uninhabitable or is destroyed mid-tax year, you might be eligible for a pro-rated refund for the portion of the year after the disaster.

Example: If your house burns down halfway through the year, some areas allow you to claim a refund for the remaining portion of the year because the property is no longer usable.

What to do: Contact your local tax assessor or collector to see if this type of relief is available.

2. Retroactive Reassessment

Some states and local governments offer disaster-related reassessments where they adjust your property’s value retroactively to account for damage or destruction.

If they lower your property’s value retroactively, they may issue a refund or credit for the overpaid taxes based on the new assessed value.

3. Claim Through Legal or Insurance Mechanisms

Insurance reimbursement: If you had property insurance that included coverage for loss of use or damage, it might cover property taxes (or their equivalent) as part of the compensation.

Lawsuits: In rare cases, if a third party was responsible for the disaster (e.g., a utility company causing a wildfire), you might recover property taxes as part of a settlement.

4. Tax Credits or Incentives

If rebuilding or recovery involves certain government programs, you might qualify for tax credits or property tax deferrals that offset prior payments.

5. Hardship Programs

Some municipalities offer hardship programs where you may apply for partial forgiveness or deferral of property taxes based on financial strain caused by the disaster.

Key Step:

Reach out to your local tax assessor’s office or county treasurer to understand your options. They might have programs for disaster relief that are specific to your area.

Let me know if you'd like assistance finding details for a specific location! 🌟

I said: Thanks again!

It said: You're very welcome! 😊 I'm glad I could help. If anything else comes up, don’t hesitate to reach out. Wishing you all the best! 🏡✨

Note: The answers are copied exactly from those given to me by OpenAI

A good way to fight the reigning Bureaucracy Autocracy is with a Citizens’ Democracy, empowered by Artificial Intelligence.

ChatGPT - OpenAI: Getting to know you!

 

There are two de facto class wars, which seemingly shall not be named

One between those working with salaries defined by minimum wages, and those looking for any job.

Another between those who own houses as investment assets, and those who just want to be able to afford a home.

On these where do you stand? Do you take a side, or do you prefer to conveniently ignore it?

Many of our young will be without jobs, and will have to live in the basement of their parent’s houses, as a direct consequence of abominable bank regulations

Fact: The financing of house purchase is usually, with reason, perceived by bankers as much safer than financing entrepreneurs.

Fact: That means that, on their own, unregulated, banks would be expected to finance the purchase of houses more, and at lower risk adjusted interest rates, than financing entrepreneurs. 

Fact: But then bank regulators in 1988 doubled down on the same ex ante perceived risk and introduced risk weighted capital requirements. 

Fact: In those capital requirements (2004, Basel II) regulators assigned a much lower risk weight to the financing of houses (35%) than to the financing of entrepreneurs (100%).

This means regulators allow banks to hold less capital when financing the purchase of houses than when financing entrepreneurs. 

This means banks can now leverage their equity more when financing the purchase of houses than when financing entrepreneurs. 

This means banks can now obtain higher expected risk adjusted returns on equity when financing the purchase of houses than when financing entrepreneurs. 

This means that banks will even more prefer financing the purchase of houses, at even lower interest rates, than the financing of entrepreneurs.

This means easier, regulatory subsidized, access to house financing, causing higher house prices. How much of the easier  financing conditions when purchasing houses do we now have to finance when financing a house purchase?

This means a lesser, taxed by regulations, access to credit for entrepreneurs, causing less job creation and a slower growing real economy.

So, compared to what would be the case in the absence of these risk-weighted regulations this means:

For the young: Fewer possibilities of jobs and of buying their own houses. 

For house owners: They are sitting on assets that at current real valuations will not find buyers in the future.

For the aging: Lesser possibilities of taking care of their future needs.

For social peace: The young might revolt and shout: “Parents we’ve been cheated out of our future by crazy bank regulators, and you said nothing! So now you move down to the basements and we move upstairs!”

PS. Those more interested in providing our young affordable housing than in helping our young to afford the houses, which is of course not the same thing, are as I see it just some other vulgar redistribution profiteers.

PS. Here a brief aide memoire on the major mistakes with the risk weighted capital requirements

Oxfam, how do you redistribute wealth already created, without risking making the poor poorer?

Felix Salmon, when commenting on Oxfam’s “Reward work, not wealth: To end the inequality crisis, we must build an economy for ordinary working people, not the rich and powerful” writes: 

“The world’s billionaires – the richest 2,000 people on the planet – saw their wealth increase by a staggering $762 billion in just one year. That’s an average of $381 million apiece. If those billionaires had simply been content with staying at their 2016 wealth, and had given their one-year gains to the world’s poorest people instead, then extreme poverty would have been eradicated. Hell, they could have eradicated extreme poverty, at least in theory, by giving up just one seventh of their annual gains.”

That particular paragraph is spoken like a true redistribution profiteer 😞

First: Where do those “one-year gains” originate? If from criminal corruption, if from skewed central banks stimuli, if from exploiting monopoly and similar forces, then a reduction in that wealth increase would be absolutely justified and good… but, if that wealth increase came from true wealth creation, or even from heritage, then a reduction of it could have very negative consequences for all, especially for the poor.

Second: If that wealth has already been created and is consequently represented by assets, how does one liquidate those assets so as not to affect the value of those assets, or in other ways put markets at risk? One of those 2.000 billionaires is probably he who bought Leonardo da Vinci’s “Salvator Mundi” for $450 million. He, de facto, like with a sort of voluntary tax, froze $450 million of purchasing power on a wall, or in a safe box. How on earth does one go about to reconvert that into $450 million of new purchase power that could be handed over to the poor?

The Oxfam report contains many correct statements. I totally agree with that wealth should not be created by criminal and unfair behavior, or derived from crony statist relations; and I also agree with that wealth should not be used to abusively increase the influence of the wealthy in our societies.

But when the report states “To end extreme poverty, we must also end extreme wealth” I disagree. First because whether one likes it or not, wealth, as it is invested in assets, has de facto already been redistributed… like in the previous case to those who received the $450 million paid for the “Salvator Mundi”… to those who sell a luxury yacht… to those who sell handmade shoes in Milan… to governments by buying public debt… to markets by buying shares.

On the report Jeffrey Sachs comments: “Sometimes the super-rich call out Oxfam and others for ‘stoking class warfare’ but the truth is that in many societies, including my own, the United States, many of the super- rich have in effect declared war on the poor.”

That sounds precisely like what Chavez preached and now Maduro does in my Venezuela… and look where that has taken our poor country… with asset values and salaries totally destroyed over some very few years… a whole generation of Venezuelans growing up severely malnourished… and the Bolivarian revolutionaries blaming it all on the war declared on them by The Empire. 

Oxfam, a multinational confederation of NGOs, having issued this report, has now a moral obligation of explaining, once wealth has been created, how it can be redistributed without running the risks of making the poorest poorer. And, if it can’t, it should stop creating false expectations.

PS. Legend holds it that when Otelo Saraiva de Carvalho, chief strategist of the 1974’s Carnation Revolution in Lisbon, told Sweden’s Olof Palme: “In Portugal we want to get rid of the rich”, Palme replied, “how curious, in Sweden we only aspire to get rid of the poor”

PS. Here are some tweets on this thorny issue.

Expropriate it!