but they are arguably offset by an equivalent off-balance-sheet liability. it’s useful, as @kevinerdmann.bsky.social suggests, to decompose a homeowner into landlord + renter. as landlord ΔNW grows, and that typically appears on individual and aggregate balance sheets. 1/

but as renter, the same asset is a liability, only because of accounting conventions (it’s not a formally booked liability), individual and aggregate balance sheets omit that. for a homeowner whose intention is to not to downsize/downgrade housing, effective ΔNW is 0. 2/

(interestingly, the main change is the risk level the homeowner becomes capable of taking on. a person with no assets cannot put $1M at risk. nor can a person with a $100K home. no one will lend $1M. a person with 0 NW, net their short position in housing, but a $1.5M home can put $1M at risk.) /fin

probably the best way to think about it is an appreciated homeowner doesn’t really have 0NW because they have a valuable asset in the *option* to downgrade. just how valuable that is, net of the disutility or diswelfare they’d endure for downgrading, is very circumstance dependent.