The Rate of Return on Everything, 1870–2015 (2019)
Long-run data on asset returns from 1870–2015 suggest residential real estate, once rents are included, has matched or exceeded equities with roughly 7% annual real returns, raising questions about housing’s dual role as shelter and investment. Commenters probe whether this outperformance is sustainable given slowing population growth, high leverage, and uncounted ownership costs, and contrast it with research (like Shiller’s) that finds flat price appreciation when rents are excluded. The conversation links housing returns to inequality (r > g), zoning and land scarcity, shifting household structures, and policy choices that favor property owners and may be driving both asset inflation and reduced housing affordability.
Housing as an Investment (Returns, Costs, and Tax Treatment)
- Many commenters read the paper as confirming that housing has historically matched or beaten equities in real total returns, especially when rents/imputed rents are included.
- Others stress that most casual comparisons ignore full ownership costs: interest, maintenance, renovations, property taxes, and time/effort (“trips to Home Depot”).
- Tax treatment matters: depreciation, 1031 exchanges, mortgage-interest deductibility, and capital-gains exclusions (or absence of tax on primary residences in some countries) all boost effective returns.
- Some argue housing’s strong returns are partly policy-driven (retirement via home equity, political protection of homeowners, zoning constraints).
Population Dynamics and Future Housing Returns
- One camp: global population is still growing (even at a slower rate), so housing demand and land scarcity will keep returns strong for our lifetimes.
- Another camp: fertility rates have fallen almost everywhere; global child counts may already have peaked; population could peak around mid–late 21st century, potentially undermining housing growth.
- Debate remains whether shrinking populations will actually lower prices, given preferences for more space, inheritance dynamics, and rental income.
Housing Costs, Affordability, and “Desirable Land”
- Several posts question how housing can outpace incomes indefinitely, noting a hard ceiling at 100% of household income.
- Responses:
- Housing quality and size have increased (more space, amenities, codes), so part of the “price increase” is quality.
- Desirable land (central, coastal, well-serviced) is limited, even if total land is not.
- Elastic demand: people adjust via roommates, living with parents, smaller units, or moving to less desirable areas.
- Some argue real house prices are usually stable long term, with gains concentrated in bubbles and rents, not prices themselves.
Urban Density, Suburbs, and Zoning
- One view: “density death spiral” — high prices in dense cities drive more density, which further increases land values.
- Counterpoint: construction cost per unit can be lower in dense buildings, but land cost and demand keep total prices high.
- Multiple comments point to zoning and land-use restrictions as key drivers of housing returns and inequality; relaxing zoning is proposed as a major lever, though there’s disagreement on whether any city has truly “built its way out” of high prices.
r vs g, Inequality, and Piketty
- The paper’s finding that returns on capital (especially housing) exceed economic growth is linked to rising inequality and political power of asset owners.
- Some note critiques: if housing is stripped out, capital returns may be closer to or below growth, implying housing policy/zoning is central to the r > g story.