You say "any intervention", but you've only mentioned interventions that give more money. Other interventions:

1. Encouraging developers to build new properties, particularly properties for low- and medium-income tenants

2. The government building low- to medium-income housing themselves.

The problem with any policy, of course, which aims to bring down the prices of houses makes everyone who's already bought a house very unhappy.

I might spend $100k on a house that I was going to live in for 20-30 years, even if I knew that at the end of that time it was going to be worthless. But I certainly wouldn't spend $500k+ on a house unless I knew I'd be able to sell it for more down the road.

But if you're putting in capital, you have to factor in the cost of money. There are far better things to do with $500k than to park it in an asset that doesn't appreciate.

And of course, you have to factor in the risk that the price will actually drop. Risk isn't free either: it doesn't make sense to take a risk that you may lose money, unless there's a counter probability that you will actually gain money instead.

Even if your monthly payment was less than your rent, you still might be better off doing something else. To get a good interest rate you need 75% LTV; which means on a $500k house you need to put up $125k up front. You might be better taking that $125k and investing it in an S&P500 index fund, and then paying rent, than taking that $125k and putting it into a house and making a mortgage payment. (Obviously you need to do the actual math here to see if it makes sense or not.)

<EDIT>And of course there's the diversification aspect too. If your net worth is $300k ($500k house + $50k other investments - $250k mortgage), it would normally be a really poor decision to have 166% of that ($300k / $500k) in a single asset, whose value could drop drastically for any number of reasons.

All that to say -- if your house isn't an investment, it had better be significantly cheaper than renting before it makes financial sense.</EDIT>

From a societal flexibility perspective, it's much better if most people rent; particularly poorer people who can't as easily from the economic shock of having their house lose all its value. If the bottom fell out of the economy in the city I'm in, and my house's price dropped by half, I could afford to cut my losses and start over. A lot of people are stuck.

I'm told that Germany is very different. It's not at all expected that people strive to own their own home; people rent the same place for decades and are perfectly happy. Because they've never had out-of-control housing prices (at least, not in the last few decades), they can keep things rational.

If the UK's policies suddenly looked like Germany's I'd probably take a massive haircut on the house I own. Personally, I'd be willing to do that if I knew it would make things better for other people; I'd be OK financially. But a lot of people wouldn't, so I understand why it's difficult to change.

We all need a place to live so a house serves a physical utility as well that other investments do not, in addition to being able to collect unlimited rent when the mortgage is eventually paid off eventually. I think there is a lot of upside to home ownership if it is financially feasible.

But was it ever an investment as an appreciating asset per se? I'm not aware of such a situation but I'd be interested to learn otherwise.

Sure, you can, but only if real estate in established neighborhoods is more expensive than housing in new neighborhoods, which isn't hyperlocally sustainable but might be sustainable over a broader region.

It's starting to happen in Austin: duplexes/fourplexes are getting built in some of the nicer, more central areas.

You forgot to mention zoning law which restrict the supply of housing a lot, much more than any wheeling and dealing cities may do with developers.

Supply is simply not allowed to increase in many areas. It is not a free market, it is government controlled and the priority is to preserve/increase the property values for existing home owners, and restrict where people can live by income. Talk of affordable housing does not come anywhere near making up for the restricted supply in cities due to zoning.

There are other countries that have a much different approach to zoning, there's ideas like land value taxes, etc.

We really need to reduce the population. It will help with carbon footprint reduction too.

If you're so concerned about carbon footprint reduction, you should be fighting as hard as you can to ban SFH policies and for pro-density policies, since land-use and long commutes are such massive contributors of climate change.

The reverse is also true. Their desire for affordable housing doesn't trump people's desire to not live near denser housing.

>If you're so concerned about carbon footprint reduction...

I don't have children or pets. I have worked from home for the last 20 years.

If I die (lowest footprint possible), it has almost no impact on society in terms of climate change. But if I change behaviors of many (through legislation...) then that is enormous in comparison.

Affordable housing that is also low on climate impact (higher density and close to places people need to go) should be prioritized over “I want 10 acres of land”.

Wait, what? Wouldn't it mean that a pool of prospective buyers that couldn't afford 20% but can afford 5% are now able to buy a house? That's a shift in the structure of the market rather than just a change being "priced in" for the same set of buyers.

>In hot markets, the prices rise quickly to reflect that and everyone is in the same position as before.

I would think this is the kind of question where we need data. I like to think I respect the exercise of thought experimenting more than your average person, but in this case, it seems to illustrate how thought experiments serve to answer questions by restating their core assumptions rather than exposing them to challenges in the way data would.

No. Real property doesn't work that way at all.

The effect of most of this kind of government intervention in the housing market is to subsidise developers.

In fact it's so bad that in the UK shareholders of such a developer are outraged because the uncapped bonus structure for executives at the developer means they get enormous (many times annual salary) bonuses essentially directly funded by central government which the shareholders of course think instead ought to all be profits assignable as dividends, not "bonus payments" for executives whose "performance" amounts to just sitting back and collecting free money from central government.

Like there's not even doubt there about what this government money does, it goes to the house builders, it can't and doesn't magically produce more homes, the argument is about who gets to keep the loot.

Government can intervene to actually build homes, and that would actually work, but NIMBYs hate it, so if a government doesn't actually care about housing people then a policy that can be headlined as support for home buyers but actually just puts money in the pockets of the wealthy is a good choice.

I carefully read through the rest of the comment after this sentence, waiting for the support for this claim, and feel as though I came away emptyhanded. I get that the shareholders anecdote is supposed to support it, but that came off as really fuzzy and unclear, and not something that directly engaged with my question. Are you saying there are no new buyers? Do you have any article that talks in more detail about the systematic relationship between shareholder expectation of dividends and their relationship to the switch from 20% to 5%? Or some elaboration on how the debate between shareholders vs executives relates systematically to the change in requirement for down payments in a way that clearly describes how it absorbs most of the gov funds?

I gotta lay my cards on the table, here. I feel like if any of this were true, I would have received a really simple, one sentence reply of "sure, here's a link!" that links to an article deep in comprehensive macroeconomic data, and not a weird meandering anecdote about developers carried not by any evidence, but mostly by the gravitas of emphatic personal assurance that just declares that "this is how it really works".

But if it wasn't clear I'll explain. The reason real property isn't like this ought to be entirely obvious at a very high level, the planet's surface area is independent of economic forces. If we've got twice as much money for smartphones, we can buy twice as many smartphones. But if we've got twice as much money for buying land in Ohio, there is still only the same amount of Ohio, and so the price just goes up.

Does that help?

Instead you are condescendingly lecturing me about the shape of the earth, and telling me the rest of it is so obvious you can't bother explaining it. But even I know we haven't run up against absolute geographical limits, and to to the extent that the shape of the earth is an influence, it one among many, in a process that is also mediated by additional influences, as well: constraints of availability of housing already built, the rate of new construction, changes in financing, population growth, people's savings, changes in how many people choose to stay at home, etc. I was waiting for some economically literate discussion of those kinds of elements.

Another factor is that people tend to think in terms of monthly payments, rather than overall price and interest rate. For example, I'm paying $1,500 in rent while saving $500/month for a mortgage. If the requirement for a down payment is removed, I may then think it makes more sense pay $2000/month for a house now with a low down payment than to keep trying to save a down payment while prices keep increasing.

FWIW, this is exactly what happened (with different numbers) when I bought my first house.

> prospective buyers that couldn't afford 20% but can afford 5% are now able to buy a house?

hence the measures are popular and very visible. Long term however (just as with subsidies and scolarships for education) all lead to pushing prices up.

Perhaps the buyers in the market could pay 10% but now that they only have to pay 5% the remaining 5% slowly (say over a few years) gets factored into the purchase price so that the down payment is the same as it were for 10%.

Are you proposing that the effect is to nearly double house prices in a few years?

If today’s price is $500K and buyers could pay $50K down, in a few years, that place would need to be $1M for the 5% down payment to be the same figure.

That's what I'm not understanding. In your example, the downpayment is wildly lower.

Guh... I don't feel like I'm the expert here, but even on this little quest of mine to get a straight answer I feel like I'm finding one obvious conflation after another after another, as is the case here. Why would we assume that increase in demand pushes prices back up? It might, instead, reveal that lower prices are more optimal because they bring in more new buyers and more revenue overall. It may be that lower prices result in a larger total pool of buyers willing to spend a larger total amount of dollars at the lower price, which turns out to be a more optimal price, which is also econ 101.

It's better to sell big macs for $3.99 to billions of people than to than to sell them for $9.99 to millions of people.

Areas with more supply than demand already have easy access to home ownership. If someone's goal is just to "own a home", then they can already get one for 0% down by moving to a rural area[1] or an impoverished metro[2]. Even with no capital requirements at all, these areas struggle to attract interested buyers.

Areas with more demand than supply are already building as much additional supply as feasible within the the localized constraints (which could be geographical/physical, or could be governmental/zoning). Decreasing upfront capital requirements from 20% to 5% increases the size of the demand pool, but the supply was constrained even before those new entrants. So the increased competition will just result in pricing appreciation, as the existing demand can use that 15% spread in additional capital they have to out-compete the new entrants to the market. While some constraints are artificial (such as zoning) and could be removed to increase the available supply, those empowered to do this are the existing residents of the area who are enriched by this price appreciation. So they're perversely incentivized to reinforce this imbalance in supply/demand, rather than to take action to correct it.

There are likely some localized markets with more supply than demand (or the ability to increase supply in the face of increased demand). And these would react as you expect, with lower pricing available to maximize that demand. But this situation is transient in nature, as the more developed an area becomes the more likely they'll run into natural supply constraints (or have artificial ones introduced). So it'll eventually lead to one of the above situations: they have too much supply and have to essentially beg people to move there, or too little supply and pricing appreciates in response to the new demand.

[1] https://eligibility.sc.egov.usda.gov/eligibility/welcomeActi...

[2] https://detroitmi.gov/Portals/0/docs/HousingAndRev/2018/Resi...

Assuming they had the same deposit available they would theoretically be able to pay 300% more. Of course they probably wouldn't be able to demonstrate their ability to service a loan that large.

Unfortunately banks won't loan what they see as small mortgages like that. This leaves the lower priced homes only available to landlords buying cash. I live in a home like this myself - all the banks would happily loan me $215,000 with $35k down, but no bank would loan me $15,000 to buy a $50k house. There's many people renting in my city that have decent credit that could easily afford one of these lower cost homes, but instead the houses stay empty or get turned in to rentals.

This seems like a made up problem. Those same banks would also gladly loan you $40k with $10k down, and you could have the remainder to fix the house up or make huge payments every month. Furthermore, if you already have $35k it shouldn't be too difficult to save another $15k and buy the house cash. If it is, you probably can't qualify for the mortgage payment on either property based on your income.

It benefits home owners, which (at least in Canada) makes up the majority of the voting base. Like GP said, it's at the expense of the next generation of buyers.

Except for the government's budget, right ?

If a large number of mortgages forclosed without the fed this would put a hell of a lot of downward pressure on prices. Economic carnage style. That hot market. It's getting pretty cold. Does that make houses more affordable for those frozen out? Or are they now unemployed with the zero intevention and/or unable to get a loan in that cold market making the benefit from the carnage nothing?

Whether it's the right thing to do for the overall economy and all in it, keeping house prices up is clearly something the boomers want so they can keep their very large gains from having got in early. Younger generations may look at this and see more than simple coincidence.