The simple solution is if you purchase a property and are not living in it - i.e. its an investment property - you get taxed at a substantially higher rate. Both in property taxes and taxes on the profit made.
Why would it be desirable to encourage private citizens to use property as an investment? I mean, they'd perhaps need to be a one-time easing to ensure that people who have already planned their retirement around such a scheme aren't completely fucked over. But long term it seems to me that there's no downside to this being punished.
It would punish people who need/want to move now, but don't want to sell their current home at a loss or can't sell their home due to market conditions, etc.
Landlord(s)-by-necessity, if you will.
I don't think we should care if someone has to sell their current home at a loss due to market conditions because taken to its logical conclusion you're saying people shouldn't lose money which to have a functioning economy you have to reject.
But they are only selling at a loss because under the proposal they would be heavily taxed if they wanted to hold on to the house and rent it out while they wait for the market to get better.
> taken to its logical conclusion you're saying people shouldn't lose money which to have a functioning economy you have to reject
No, they are saying that you should let people decide when they want to sell instead of making them sell when they will take a loss. That doesn't mean they won't lose money when they sell. It just means they can decide based on market conditions when to sell--which is what you want if you want a well functioning economy.
Then don't sell, or don't rent it out, or just deal with it? I'm not sure why we should further subsidize homeowners.
> No, they are saying that you should let people decide when they want to sell instead of making them sell when they will take a loss. That doesn't mean they won't lose money when they sell. It just means they can decide based on market conditions when to sell--which is what you want if you want a well functioning economy.
Apply this same reasoning to stocks and let me know if you still agree with it.
I am an individual property investor. I'm a landlord of a single 2-flat up-down duplex. I don't make as much money as I COULD make if I had endlessly deep pockets. It was sold to me by another individual real estate investor who owned and maintained it for 25 years.
Do you know why he sold it? He wanted to buy a luxury property that he would make more profit on and require less maintenance.
Without individual investors with limited pools of money investing in lower margin properties, simply hoping to augment a retirement account or 401k...
Affordable housing would cease to exist.
Because the guy you bought it from would have torn down the valuable house and then the kit would be left empty forever?
That makes no sense. The unit would exist either way.
Now they want it back? They don’t want to own it. They want to flip it.
Rents (just to pay the mortgage) go up. The profit is in institutions pocket. The ongoing maintenance sits where it always has. Individual landlords.
And yes, if an institutional owner can't make 250k profit with a kitchen remodel and a couple buckets of slate grey exterior paint, they do tear it down. And replace it with a luxury unit at twice the local real estate price. It sits empty until the area gentrifies. Or they leave a vacant dirt lot for 10 years. See Chicago.
Institutions don't want to be in this business either. My wife works for one of the largest ones in the midwest, and trust me, they value the land and developments much more than the rents. Government subsidy is AN incentive to maintain the above services at the MINIMUM viable and provable state to get their handout, but they are NOT landlords.
Like McDonalds isn't a food company.
They are real estate developers.
And the experience of living in a 2-flat or a 4-flat is VERY different from a unit in a 500 person building.
The ONLY way institutions would be willing to provide affordable housing would be a constant squeeze on tenants and government and every lever possible to try to make the margins meet that of a luxury apartment. It never will.
And middle to low income families WILL SUFFER. A lot.
Read this, but replace "burgers" with "rent": https://1851franchise.com/why-is-mcdonalds-considered-a-real...
When given the option of direct cash payments to folks who need it, or giving that cash to an ineffectual corrupt business interest to fail to solve the problem in perpetuity... In America we always choose the later. Especially government.
Plenty of governments do want to be landlords. If yours doesn't then perhaps you should consider electing a different one.
> They don't want to have to orchestrate painting, drywall, gutters, electrical, plumbing, evictions, improvements, picking out tile.
Why not? Governments ultimately want to serve there electorate. If there electorate wants decent quality affordable housing, then why would a government not want to provide that. Conceptually it's no different to the government running say a police force.
> providing services that tenants grouped together with limited income might need like domestic abuse resolution and support, job training, food box distribution.
Then don't group together tenants with limited income! You don't necessarily even need to group together government owned/run properties at all. There's no reason why a regular house on a regular street couldn't be government owned/run, mixed in with others that are privately owned.
Why are you assuming that government properties or tenants of government properties would be any different to privately owned properties or tenants of private landlords? That's only the case when the government only provides housing as a last resort, but if the government took a wider role in housing many of those problem would go away as the tenants would just be the general population.
This model was tried in the 70's by institutional affordable housing real estate developers. IMHO this is a great model. Refugees and middle class engineers living side by side sharing schools and pot lucks. It is now anathema to the affordable housing model. I don't know why, but where large affordable housing portfolios had 100s of such properties in their portfolio, they now have 5. Don't know why.
The rent is what determines the value of the land and developments.
>Government subsidy is AN incentive to maintain the above services at the MINIMUM viable and provable state to get their handout, but they are NOT landlords.
This subsidy can directly be given to people as cash. No need for a middleman to take a cut.
You could also allow the state to step in as owners of rental housing where private landlords aren't making enough rental houses available. And if the state actually built houses for rental you likely wouldn't need as harsh taxation because the rental prices would drop purely through the increased supply.
Nobody would ever rent to tenants if there weren't profit in it. Take away the profit and all the tenants who need to rent are totally out of luck because nobody has any reason to rent to them. :(
Same as mortgages wouldn't exist if banks didn't make a profit off them.
How does that follow?
Take the situation as it exists today—X amount of "housing units" exist, and Y of those "housing units" are owned by investors as rental properties.
Now, change the situation so that it becomes unprofitable to own properties you are not occupying. All X of those housing units still exist. They won't be destroyed (well, maybe a few will, but not enough to seriously change the calculations), and if it's not profitable to rent them, it's going to be even less profitable to hang onto them sitting empty.
What happens in that scenario? Well, they should be sold.
Who would they be sold to? People who need a place to live (because no one's going to be buying them as investment or rental properties anymore).
How much are they going to be sold for? The amount these people are willing and able to pay. Why would they be sold for significantly more than they would be rented out for before? Sure, some current owners would be in denial and unwilling to accept that they'd lose a bunch of money on it (or maybe, as nicoburns suggests, there would be some kind of one-time bailout/incentive/whatever to make sure that the current owners would sell, and wouldn't lose their shirts). But while it would certainly change the economics of the situation somewhat from what they are today, and it would take our society a few years to reorganize around it, ultimately, I don't believe removing the middleman landlord class from the equation would harm the people who are currently renting in the long term. Indeed, I think it would benefit them, because instead of being in a situation where they're basically guaranteed to have a significant portion of their earnings siphoned off purely to be allowed to have a place to exist, they would be building up equity in something through those payments...and once they finished paying the purchase price, they would own the place, no longer have to make payments, and be able to sell it on when they decided it was time to move.
Exactly. They'll be sold to people who will live in them, and they won't be rented anymore.
So if you want to move to a city for two years for a temporary job contract and rent a house... you literally can't. Because nobody will rent to you, because all the houses are occupied by owners living in them. Which is a disaster for rental demand.
Remember that a lot of people want to rent. They prefer to rent instead of buy, for various reasons from flexibility to it just making more financial sense for various reasons.
This is why if you take away the profit from renting, people who want to rent will be out of luck.
That still doesn't follow.
The total amount of housing stock will not change, and nor will the total amount of people needing housing of whatever type (besides some movement on the margins of both).
There is no reason to believe that, in an environment where renting is no longer a viable option, everyone will just shrug their shoulders and say, "Well, I guess all of this is necessarily going to be long-term purchase property, handled exactly the same way we handled homeownership before this change—big closing costs and all."
Yes, obviously, by definition, if renting is not an option, people who want to rent will be out of luck—but that doesn't mean that the people who want to rent today would have no viable options for housing after such a change took place. I don't know exactly what the solution would look like, because it would depend heavily on what specific changes we made that made renting properties out no longer viable, but it's really not that hard to imagine them.
And that's exactly the problem. If you're not proposing a solution for how to continue providing rentals to the people who need them, then you're not proposing any workable solution at all.
Your solution was "convert it all to owner-occupied housing" and I was pointing out that doesn't work because it ignores the needs of renters.
Give me a specific proposal for how to break the rentier economy, and I can probably give you a specific proposal for how to solve the problems it raises.
Or you have social (government owned) rental housing.
I want landlords who are incentivized to keep their properties well-maintained and configured for what the rental market wants in terms of both functionality and aesthetic taste.
For-profit landlords do a vastly better job at meeting market demand than a government bureaucracy. Which is why, of course, we're a capitalist economy rather than a socialist command economy.
Government-owned rental housing sounds like a nightmare. The same nightmare as nationalizing industry in general.
Do you actually have evidence of this? Or is your only concept of "government-owned housing" racially-segregated ghettos called things like "The Projects"?
Because every renter I know rents from a for-profit landlord, and almost every single one of them has had massive problems with one landlord or another screwing them over either by neglect or by active malice. When there are more people looking for housing than there are housing units on the market—hey, look, another problem caused by allowing excessive numbers of vacant investment properties—all the landlords have to do is make sure the cockroaches don't scuttle by right in front of your face before you've signed the lease.
If the government is failing to properly maintain its rental properties, you have a recourse: the government legally answers to the people, which for-profit landlords do not, and if the problems are serious enough, you can vote in local government officials who will do something about it.
Yes, it's a basic tenet of economics that market economies meet consumer demand more effectively than government command economies. The entire 20th century is your evidence.
And for all of your anecdotes of terrible landlord stories, I can share all the great experiences of me and my friends. But at the end of the day, you kind of get what you pay for. E.g. renting a $1,500/mo. 1-bedroom vs a $3,500 1-bedroom in NYC will result in vastly different experiences with quality of maintenance and how responsive your landlord is.
But at the end of the day you're basically arguing for government ownership of the economy (because why stop at rentals?), and I don't really know what to tell you, except thank goodness that's not the country we live in.
It's a basic tenet of fairly extreme capitalist economics. A more balanced view would be that this is often the case but that it only really works when the market is competitive. And that it is hard for a market to be competitive when it's constrained by a limited resource (in this case, land in desirable locations).
As a counterexample to your tenet, municipal internet providers almost always provide better service and cheaper prices than private alternatives.
Is a nice way of saying "tax the hell out of it".
Second property should be taxed a little bit more. 3rd much more, 4th much much more etc.
> has the hell taxed out of that's going straight to the renter
That can be said about anything that has taxes on it: it goes back to punish the final consumer, but in the end it's worth trying to correct the market, be it cigarettes or homes for investment.
Good. Properties should not be investments.
There are plenty of legitimate reasons to rent a home.
Some people are also just unlucky on market timing.
Not if you exempt the value of the building from taxation and focus the tax exclusively on the value of the underlying land. This has been empirically demonstrated in multiple studies:
http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...
http://gameofrent.com/content/is-land-a-big-deal#is-land-a-r...
Relaxing zoning laws and allowing for significantly more supply IS very important -- but it's not sufficient by itself. (For the record, neither are Land Value Taxes sufficient). The true solution is to enact both:
https://progressandpoverty.substack.com/p/land-and-the-liber...
If you want to be able to consistently decouple housing value from land value, you'll need both of these policies.
That's just consequences of the artificial scarcity of real estate. Real estate should be a much smaller fraction of the economy, and land value too. Once real estate stops being an investment, mortgage debt will be just like car loans, an important segment of the credit markets, but by no means the gargantuan size that it is today.
And once land value drops from 1/3 to 1/10 of the real estate assets, then the difference between Georgism, Marxism and Neoclassicism will become academic (as it should be).
Also real estate investment is the basest, dumbest form of investment. It takes little to no intelligence to make money in residential real estate. I personally refuse to touch it on principle.
There are other countries who have laws that corporations cannot own residential property and legal residents are only allowed to own one residential property at a time. I do think there should be some relaxation of this law in the US so that folks can own a city property and a vacation cabin, or something, but I like the notion.
These homes are good investments because the area is in need of higher density and the land values will appreciate commensurate with that need. If property taxes are ratcheted up, it might make sense to just demolish the building and hold the land for its appreciation alone. Thus, further reducing housing stock and driving up rents.
Should renting be a privilege only for the rich?
What happens when you're <30 and moving around for school & to get your first few years of experience?
What happens when your credit is awful and no one will lend you money for a house even if housing is 3% cheaper because there's less investors elbowing you out?
Rental Yield is twice higher in London than in Prague.
BTW as a general rule any simple solution to a complex problem is always wrong.
If it never balances out - that is a sign that there are simply not enough houses, and they need to start building.
As long as taxes are the same between the two, the market will balance them.
Building is a separate issue.
That's like saying the government should be involved in making a call as to whether apples and oranges are too expensive relative to each other in the supermarket.
The benefits of living in the city are a lot less obvious. Some people perceive it as a cramped space where you're forced to endure the company of strangers.
If their lifestyle wasn't subsidized by city dwellers, and causing all sorts of negative externalities, I'd say "to each their own".
What is a "15-minutes city"? What is the outrage?
Edit: was an easy google. [1]
>While many cities have implemented policies along the 15-minute city concept, disagreement remains over whether the model benefits residents. Critics point out that the creation of dense, walkable cores like a 15-minute neighborhood often leads to gentrification and displacement. Further, price increases, like those associated with gentrification, could be harmful to marginalized groups like people with disabilities, forcing move-outs.[53] Similarly, as the concept's origin is largely European, critics have argued that implementing the model could be colonialist and perpetuate harm to marginalized communities.
Yeah, the "outrage" is a gaslighting exercise.
Not too many days ago there is an article showing that productivity in home construction has been almost nil for decades because the government inefficiency overpowers any construction gain.
(To be clear I am not saying this is right or wrong, I’m asking. I have used renting to increase my flexibility and to live places I couldn’t afford to or wouldn’t want to own for fun / access to jobs. I can see not wanting someone that doesn’t intend to stick around long term in your neighborhood I suppose).